India stares at crude sourcing challenge after US sanctions Rosneft, Lukoil

Indian refiners are likely to hold off on new Russian crude import deals due to US sanctions on Rosneft and Lukoil, yet flows are unlikely to come to an abrupt halt as sourcing alternative feedstock for existing volumes poses a significant challenge, said leading refining sources and oil industry officials.

While US President Donald Trump has made it clear that India would be giving up its affinity for Russian oil only gradually, Indian refiners remain optimistic about having sufficient time to seek alternatives. India's imports from Russia, its largest supplier, averaged 1.75 million b/d during January-September.

"Mandatory compliance means all the payment channels will be firmly closed. When the US imposed sanctions during Trump's first term on Iran, no country, including India, had any scope for imports from Iran, which continues until now. The same will be the case during these US sanctions on Russian companies. We have to wait for the formal presidential order and further guidelines and methodology of implementation," said DLN Sastri, former director of oil refining and marketing at the Federation of Indian Petroleum Industry on Oct. 24.

The US imposed sanctions on Rosneft and Lukoil late Oct. 22, while the EU on Oct. 23 issued full transaction bans on Rosneft and Gazprom Neft, as well as sanctions on Lukoil subsidiary Litasco and the trading arm of China's largest energy company, PetroChina. The sanctions, which follow similar measures from the UK on Oct. 15, mark a significant escalation in Western efforts to degrade Russia's ability to fund its war in Ukraine, with US Treasury Secretary Scott Bessent stating the moves respond to Putin's "refusal to end this senseless war."

Flows and market impact

Crude futures settled higher Oct. 23 as the US and EU imposed sanctions on Russian oil companies and trading counterparties over Russia's ongoing war with Ukraine. NYMEX front-month crude rallied $3.29 to settle at $61.79/b, while ICE front-month Brent rallied $3.40 to settle at $65.99/b. Rosneft and Lukoil have not publicly responded to the US sanctions, which give companies until Nov. 21 to wind down operations.

Despite tightened sanctions and increased US trade tariffs on India, imports of Russian-origin crude into India averaged 1.75 million b/d from January to September 2025 -- only 85,000 b/d, or 4.6%, lower than 1.83 million b/d recorded during the same period in 2024, according to data from S&P Global Commodities at Sea.

"This latest round of sanctions targeting Rosneft and Lukoil represents an escalation by President Trump, aimed at encouraging key Russian crude importers, particularly refiners in India, China, and Turkey, to accelerate their diversification away from Russian crude. The key to watch now is what will be India's alternative plan," said Benjamin Tang, head of liquid bulk at CAS.

Refining sources believe that while India would abide by the sanctions, the government would maintain dialogue with Washington, as sourcing around 1.75 million b/d of alternative crude could significantly impact prices not only for India but also for major importers globally.

"Term barrels from other major traditional supplies and some US and WAF grades will backfill, but at a higher landed cost. That implies a modest Brent risk-premium, firmer OSPs from traditional suppliers, and tighter freight and insurance spreads," said Shrikant Madhav Vaidya, former chairman of Indian Oil Corp.

"New Delhi's diplomatic task is to secure a glide path that preserves energy affordability while avoiding a rupture with Washington, and to signal to Moscow that any pullback reflects sanctions mechanics, not a strategic pivot," he added.

The latest sanctions could also impact crude flows to Rosneft-backed Nayara Energy, which is already under EU sanctions.

Sastri had told Platts earlier that Reliance Industries could be exploring long-term "frame contracts" for Russian crude, which typically allow significant flexibility regarding volumes and pricing. Reliance has never officially confirmed any term deals with Russia.

"We are looking at all the options," said a Reliance spokesperson on Oct. 23, reacting to whether the refiner would reduce or halt sourcing Russian crude for its Jamnagar refinery complex after Trump's latest announcement that India would cut crude imports from Russia.

Diversification to play key role

A former CEO of an Indian refiner said Oct. 23 that the immediate impact on Indian refiners would be a reduction in gross refining margins since most of the refiners have been enjoying around 40% Urals crude diet, with hefty discounts.

"The opportunity post winding down window of course will be to explore routing discounted barrels through the other non-sanctioned producers -- other than Rosneft and Lukoil -- using shadow fleet and prevailing banking and insurance arrangements," the source added.

Indian refiners diversified their crude import baskets in the third quarter by importing larger volumes from Colombia, Canada and the Middle East, while inflows from Russia dipped amid growing international pressure to cut purchases from the biggest non-OPEC supplier. India's Russian crude imports in Q3 averaged 1.68 million b/d, a 13% decline compared to Q2, while inflows from suppliers such as Colombia showed robust growth, CAS data showed.

"Going forward, it is not just the Russian barrels that we are going to look at. We have already started looking at other crudes that will be available at a discount. I am confident that we will be able to sail through," said one official at Mangalore Refinery and Petrochemicals Ltd.