Indian refiners to buy more crude from Middle East, US to replace Russian oil

New Delhi: Indian refiners are preparing to increase crude oil purchases from the Middle East, Latin America, and the United States to offset a likely decline in Russian supplies following fresh sanctions imposed by Washington on Moscow’s top energy producers.

On October 22, the US government announced sanctions on Russia’s two largest oil companies, Rosneft and Lukoil, prohibiting American citizens and entities from doing business with them. The sanctions also extend to non-US firms that continue to trade with the targeted companies or their subsidiaries, potentially exposing them to secondary penalties. The US Treasury Department directed that all existing transactions involving the two producers be concluded by November 21.

Russia currently accounts for about one-third of India’s crude imports, averaging around 1.7 million barrels per day (mbd) in 2025. Of this, nearly 1.2 mbd originates from Rosneft and Lukoil, with private refiners Reliance Industries Ltd (RIL) and Nayara Energy being the primary buyers, alongside smaller allocations to state-owned companies.

According to Sumit Ritolia, Lead Research Analyst (Refining and Modelling) at energy analytics firm Kpler, Russian crude flows to India are expected to remain in the range of 1.6–1.8 mbd until November 21. However, volumes from Rosneft and Lukoil are likely to fall sharply thereafter as Indian refiners move to avoid any potential sanctions-related risks.

Reliance Industries, which has a 25-year term contract to purchase up to 5,00,000 barrels per day from Rosneft, is expected to take early steps to reduce exposure. “Reliance may be among the first to adjust its buying pattern,” said a source familiar with the matter. Nayara Energy, on the other hand, faces a tougher challenge, as it currently relies almost entirely on Russian crude following disruptions in non-Russian supplies due to earlier European Union restrictions.

“Nonetheless, refiners will continue sourcing Russian grades through third-party intermediaries, which remain unsanctioned, though with heightened caution,” Ritolia noted. To bridge the gap left by reduced Russian inflows, Indian refiners are likely to step up imports from the Middle East, Brazil, Latin America, West Africa, Canada, and the United States. However, Ritolia warned that “higher freight costs could erode arbitrage opportunities and limit large-scale substitution.”

Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings at ICRA Limited, said the pivot away from Russian oil would increase India’s import bill. “The sanctions by the US on certain Russian crude oil producers are likely to impact India’s purchases, as these suppliers accounted for about 60 per cent of the volumes purchased,” he said. “While India can substitute these with suppliers from other regions, the import bill for crude oil would increase. On an annual basis, the replacement by market-priced crude would lead to an increase in the import bill by less than 2 per cent.”

Russia exports roughly 7.3 million barrels of crude and refined fuels per day, accounting for about 7 per cent of global oil consumption, according to the International Energy Agency. With Rosneft and Lukoil now under sanctions, the majority of firms shipping Moscow’s oil to overseas markets are effectively blacklisted.

Ritolia observed that state-owned oil refiners, traditionally more risk-averse, have already minimised direct Russian purchases and are expected to further scale them back. “They will likely continue indirect purchases through intermediaries, but only where feasible, to mitigate exposure to secondary sanctions affecting shipping, insurance, and financial transactions,” he said.

Reliance Industries faces the most immediate challenges. With its long-term Rosneft contract now affected, RIL is expected to reconfigure its sourcing and financial arrangements to comply with the US Office of Foreign Assets Control (OFAC) regulations while maintaining operational continuity. “The company is expected to front-load liftings as much as possible before the November deadline, then pivot to third-party spot buying structures,” Ritolia said.

He added that direct Russian imports could sharply drop in December before gradually recovering by mid-to-late first quarter of 2026 through new intermediaries and trade channels. “More diversification is expected from the world’s most complex refiner,” he said.

Nayara Energy, which is already under sanctions, is expected to continue sourcing Russian crude as usual. “It is effectively fully dependent on Russian oil already, and unless the Indian government intervenes directly, its sourcing pattern is unlikely to change,” Ritolia noted.

with agency inputs