Russia's oil business is shaky: India is worried about new sanctions!

Russia continues to plan to expand its oil business despite international sanctions to finance the war in Ukraine. These measures come in the context of the serious sanctions imposed on over 180 vessels, oil traders, oilfield services, insurance companies and energy officials on January 10, 2025. These sanctions, considered the most serious against Russia's energy sector, could cost Russia billions of dollars a month at a time when major trading partners such as India are increasingly withdrawing.

India has emerged as one of the largest buyers of Russian oil after the 2022 invasion of Ukraine, with monthly trading volumes of nearly $3 billion, equivalent to about 1.85 to 1.95 million barrels per day. However, Indian financial institutions are now adopting a cautious strategy and blocking payments for Russian crude oil due to new US sanctions targeting major Russian oil companies and ships.

Withdrawal of Indian refineries and market shifts

State-owned banks in India, such as the State Bank of India and the Punjab National Bank, are concerned about possible secondary sanctions and have announced that they will no longer accept Russian oil from sanctioned tankers. Indian refiners are already looking for alternatives and have reached agreements to buy crude oil from Oman and the United Arab Emirates. Currently, around 20 percent of Russian oil exports to India go to companies that are under sanctions.

The global oil trading environment is also changing. Experts such as Matt Wright, senior freight analyst at Kpler, expect the new sanctions to significantly reduce the fleet of ships available for Russian oil transport and increase freight costs. Over 143 of the newly sanctioned ships are oil tankers, which handled over 530 million barrels of Russian crude oil last year - around 42 percent of Russia's total crude oil exports by sea. The shift in trade in Russian oil to Asia, particularly China and India, has led to rising prices for oil from the Middle East, Africa and Brazil.

The Ukraine war is significantly financed by Russia's oil exports, underscoring the importance of crude oil trade in this context. Tightening Russian supply has already pushed oil prices to their highest in months, and global oil prices rose to over $81 a barrel for Brent crude following the announcement of the new sanctions.