India is developing a sanctions-proof supply chain for Russian oil to ensure continued imports despite stricter US sanctions. Refiners are collaborating with merchants, shippers, and intermediaries to restructure supply networks. These networks involve new sales entities, tankers, and insurance providers not blacklisted by Washington. Some are existing companies unaffected by sanctions, while others are newly formed to replace those now prohibited.

Since restrictions were imposed, major Indian buyers like Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, Mangalore Refinery & Petrochemicals Ltd, and Reliance Industries Ltd have been purchasing discounted Russian crude, increasing from a negligible amount to about a third of total imports. However, in January, Washington intensified its efforts against vessels and entities assisting Moscow, sanctioning nearly 160 tankers.

This round of sanctions led to Indian and Chinese buyers scrambling, resulting in state refiners and Reliance missing 18 to 20 cargoes of Russian crude for March loading, equivalent to 20 million barrels or 14% of India’s monthly imports. While still hoping to fill the gaps with Russian supplies, India is working to address issues related to unsanctioned ships, insurance reconfiguration, and payment processing. Russia has been able to adapt due to the rapid mutation of trading entities. New Dubai-based trading entities like L-Oil and Sccton have emerged in the spot market to offer Russian cargoes to Indian buyers, replacing firms such as Black Pearl, Guron Trading, and Demex Trading, which were previously targeted by US sanctions.

Additional options for Indian refiners and entities marketing Russian crude involve using onshore storage tanks to disguise the origin of the oil. For example, Russian oil discharged into an onshore tank in Fujairah can be reloaded onto a new ship as UAE-origin cargo, rebranding it for wider trade. Ship-to-ship transfers are already a common strategy used by Chinese buyers looking to mask Iranian crude.

Despite calling for continued discounts from Moscow, Indian Oil Minister Hardeep Singh Puri has stated that India has multiple crude sources and options. Russian First Deputy Energy Minister Pavel Sorokin has asserted that Russia will continue to supply oil to India economically and legally, and that sanctions should not impede energy trade. Sorokin added that sanctions are illegal and have taken a toll on the global economy, creating uncertainty and increasing costs.

Reporting by Bloomberg