Russia’s energy trade with India could be strained amid fresh sanctions, report says

• New US sanctions on Russia may make its oil trade with India more difficult, sources told Reuters.
• The curbs will add to freight costs, diminishing the discount Moscow can offer on its crude oil.

Washington's latest sanctions on Moscow are sparking grimmer outlooks for Russia's energy trade with India, sources told Reuters.

The three anonymous industry sources outlined growing concern among Indian refineries about the new restrictions. Institutions worry that it may become harder to find vessels to transport Russian crude, as well as adding to freight costs.

Such factors could eventually shrink the discount on Russian oil, diminishing the appeal of the trade. Cheaper barrels were a key reason India became the biggest buyer of Russian seaborne crude last year, importing 1.66 million barrels per day in 2023.

Though sanctions are nothing new to Moscow since its 2022 invasion of Ukraine, the US applied an extensive batch last Friday, marking the war's second anniversary and penalizing Russia for the death of Alexei Navalny, an preeminent opposition leader in the country.

Among targets was Russia's leading tanker firm, Sovcomflot, on accusations that it violates the Group of Seven's $60-a-barrel price cap on Russian crude. 14 tankers tied to the group were also targeted, adding to a growing list of sanctioned vessels.

While the price cap was introduced in December 2022, the US and its allies have taken to stricter enforcement in recent months.

As Indian state refineries negotiate the next annual deal with Russia's Rosneft company, they're already seeing a thinner discount, sources told Reuters.

Under current terms, Rosneft offers an $8 to $9 discount per barrel to Dubai prices. But it has limited its offer to a $3 to $3.50 discount for the future term.

Indian oil companies are primarily focused on securing the cheapest crude available, the country's Minister of Petroleum and Natural Gas Hardeep Singh Puri previously said. It's why flows from the Middle East, its traditional source of energy exports, hit a record low last year.

Separately, however, he's noted that Indian trade will shift away from Russia if sanctions are violated. This occurred in January, further incentivized by Saudi Arabia's own discount on exports.

"When Russian prices don't conform, we buy from Iraq, the UAE, Saudi Arabia," Puri then said.

Apart from straining the energy trade, a harder line from Washington is taking a toll on Russia elsewhere. Deputy Treasury Secretary Wally Adeyemo recently cited that financial flows to Moscow have withered, as global institutions fear losing access to the dollar.