New Delhi: The fresh sanctions imposed by the United States (US) on Russia is likely to impact India and its crude oil imports from the country after two months, said a senior government official on Monday. The official said that oil cargoes already in transit will come to India, so there will be no immediate impact, but there will be some disruptions thereafter. He added that the worst case scenario for India would be that it will have to procure oil at market prices and will not be able to avail discounted oil from Russia. “The impact of the US sanctions on Russia for us is that oil will be available to us without discounts and at the market price. That’s all,” said the senior official.
“We will not judge the impact of the sanctions based on two days’ rates. The impact of sanctions on the market will unfold slowly. The market is still digesting what it actually means. It is still very early for us to jump to any conclusions. Yes, sanctions have come. It does make some things difficult in terms of transportation but the impact it will have on the market will unfold slowly,” he added.
While admitting that there will be disruption, the top official added that the disruption will not be visible immediately because there is a wind-down period. “So, cargoes that are already in transit will come to us. We will not see an immediate disruption. Not for the next six-to-eight weeks. This eight-week duration is a window for everybody, producers as well as buyers, to work out alternate arrangements,” said the source.
The official still exuded optimism about the availability of crude oil to India because it is the third-largest consumer in the world. Commenting on possible scenarios for the future, the source stressed that the availability of oil supplies will not be a problem even as two oil producers of Russia have been sanctioned by the US. He said that even if Russia has been sanctioned, there are several new producers who have entered the market, like Guyana, and old producers with spare capacity, like OPEC, US, Canada etc.
“Supply is not the problem. There’s enough supply. The only thing which changes is how much one pays for the supply. How much one is paying for the supply is a function of two factors. One, potential discounts foregone, second, overall crude price. If the overall prices go up, then even with discounts, things will not be comfortable (for India). If the overall prices are low, and the discounts reduce or they are no longer available, then we will still be okay,” he added. He also remarked that with a regime change slated to take place in the US, there could be a change in the situation. “India is the third-largest consumer of oil, so, I am optimistic that the product will find its way to the market,” he said.
Russia has been India’s top oil supplier for the last three years. Russia has been offering oil to India at lucrative discount since the US imposed sanctions on the former in the aftermath of its invasion of Ukraine in 2022. Despite international pressure, India has pledged to continue procuring oil from cheapest available sources to meet its burgeoning energy demand and to keep energy prices affordable for the country.
Last week, the US imposed sanctions on Russian oil producers Gazprom and Surgutneftegas, and 183 vessels that have shipped Russian oil. The official said that while one of these two companies does not supply oil to India, the other is only a ‘significant’ supplier and the imposition of sanctions will not have a substantial impact on India. He added that the price cap at which oil can be sold by Russia has not changed.
Crude oil prices touched four-month high on Monday and surged past USD 81/barrel amidst supply concerns after the fresh imposition of sanctions on Russia by the US on January 10.
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