Indian Oil removes Russian, Kazakh crudes from tenders on sanctions, insurance risks

Indian Oil Corp. has asked its crude suppliers to stop offering Russian and Kazakh crudes to avoid any payment and insurance risks caused by international sanctions on Russia after its military invasion of Ukraine, company officials told S&P Global Platts.

"This has been communicated to the traders taking part in spot tenders," said a company official who did not wish to be identified. "The basic reason behind this step is to avoid international sanctions and payment delays."

The country's largest state-owned refiner informed traders that crudes like Russia's Urals and ESPO, along with Kazakhstan's CPC Blend, will no longer be accepted on a free-on-board basis, sources said.

India, the world's third-largest crude importer, imported less than 1% of its crude imports from Russia in 2021.

Earlier this month before Russia invaded its neighbor Ukraine, IOC had contracted 2 million mt of high sulfur Russian Urals grade for April delivery.

Sources attributed the development as an outcome of a stand taken by insurance companies to skip cargoes carrying Russian commodities, including crude.

Government-owned State Bank of India will not process any transactions coming under the purview of a US, EU or UN sanctions, a trader said.

India's import basket from Russia include crude, natural gas, coal, minerals, pearls, precious or semi-precious stones, nuclear reactors, boilers, machinery and mechanical appliances, electrical machinery and equipment, and fertilizers.

Sanctions

The US and its allies have blocked some Russian banks from accessing the SWIFT international payments system, among a package of financial sanctions, which could make it harder for trading companies to transact with counterparties.

These increased financial measures against Russian banks have already forced many refiners and trading houses to reassess their business with Russian oil companies, with some already opting for alternative oil supplies.

The Ukrainian and Russian waters in the Black Sea and the Sea of Azov were placed under a high risk category by the Joint War Committee of the Lloyds Market Association Feb. 15, as the Russia-Ukraine crisis escalated.

"It is clear there is enhanced risk and uncertainty in the future. With the increased naval activity, the possibility for a miscalculation is definitely there," Neil Roberts, head of Marine and Aviation at Lloyd's Market Association, told Platts.

"It is part of the Joint War Committee's role to advise the market and give it the ability to react. Having taken the situation into account, it was decided that a precautionary notification should be issued so that insurers and shipowners will be able to properly negotiate their risks and be able to assess their exposure as it develops."