The situation has shifted significantly after the United States and the European Union (EU) implemented new sanctions on purchasing oil and gas from Russia. Until recently, Indian banks were reluctant to handle any transactions linked to the Russian oil trade. Now, however, they are showing renewed interest, with strict conditions.
According to multiple people familiar with this matter, banks are willing to offer financial support if the oil is purchased from Russian suppliers who are not on the US or EU banned lists, and if the entire transaction adheres to rules that fall outside the scope of existing sanctions.
With Washington increasing pressure, global attention has turned to where and how India is sourcing its oil. Even as sanctions on Russia tighten amid the ongoing Ukraine conflict, the US is simultaneously pushing for diplomatic dialogue to resolve the crisis. This complexity has positioned India as one of Moscow’s largest customers.
At the same time, adequate supply in the global market has enabled domestic refineries to explore alternative oil sources, although at comparatively higher prices.
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Sources indicate that banks have now established a compliance framework to support Indian refineries in importing Russian oil. These transactions may be conducted in UAE dirhams or Chinese yuan.
Despite this flexibility, strict scrutiny remains. Banks and refineries are exercising increased caution in verifying the origin of the oil, the history of the ships transporting it, and whether the tankers are linked to any sanctioned entities. Ship-to-ship transfers, in particular, are being closely examined to rule out any association with blacklisted organisations.
Following the latest US sanctions on Russian oil, most Indian refining companies refrained from placing orders for December-loading cargoes. Restrictions on major Russian firms such as Rosneft, Lukoil, Gazprom Neft and Surgutneftegas have severely disrupted trade, even though this segment had expanded rapidly after Russia’s 2022 invasion of Ukraine, when India emerged as the biggest buyer of Russian oil.
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Meanwhile, sanctions have pushed up the discount on Russia’s key Urals crude grade to around $7 per barrel against the Brent benchmark, up from the earlier $3. In offering steep price cuts, Moscow aims to lure Indian refiners back into the market.
The key question now is whether India will resume purchasing from non-sanctioned Russian companies to take advantage of these discounts.
However, even a minimal link to entities facing US sanctions can create complications—ranging from payment delays to transaction disruptions and the risk of secondary sanctions. This risk continues to shape the cautious, closely monitored approach that Indian banks and refineries are now adopting.
