Indian banks have started blocking payments for Russian oil following stricter U.S. sanctions, creating significant challenges for Russia’s energy sector. India, which became Russia’s second-largest oil importer after China in 2022, is now reconsidering its energy supply sources amidst mounting geopolitical and financial pressures.
Impact of Sanctions on Indian-Russian Energy Trade
As reported by EnergyIntel, the sanctions introduced on 10 January by the Biden administration targeted over 180 tankers in Russia’s “shadow fleet,” as well as major energy firms such as Gazprom Neft and Surgutneftegas.
Indian banks, including state-owned institutions like the State Bank of India and Punjab National Bank, have interpreted these sanctions conservatively, restricting transactions related to Russian crude. Private banks, however, have adopted a less stringent approach.
India’s refineries, which rely on Russian oil for about a third of their crude imports, have been forced to reassess their procurement strategies. In 2024, Russia exported 1.7 million barrels of oil per day to India, nearly half of all its maritime shipments.
However, the recent sanctions have disrupted March 2025 delivery negotiations, pushing Indian refineries to secure agreements with alternative suppliers, including Oman, the UAE, and Saudi Arabia. Additionally, discussions are underway with suppliers in West Africa.
Shifting Dynamics: India’s Growing Interest in U.S. Energy
India is increasingly turning its attention to the United States as a viable energy partner. According to Reuters, U.S. President Donald Trump’s recent announcement to maximise energy production has piqued India’s interest.
Trump’s energy strategy includes declaring an emergency in the sector, boosting production, and expanding exports of oil and gas globally. During his recent speech, Trump referred to America’s energy reserves as “liquid gold” and emphasised their role in bolstering the country’s economic strength.
Indian Petroleum Minister Hardeep Singh Puri acknowledged this shift, stating,
“The potential for increasing energy imports from the U.S. is very real. Growing U.S. energy supplies in the global market is a positive development.”
India, the world’s third-largest oil importer, heavily depends on imports to meet its energy needs, making diversification a key priority.
Middle Eastern Supplies to Bridge the Gap
As sanctions tighten on Russian oil, India has already begun diversifying its crude sources. Shipments from Oman and the UAE have been secured, and additional agreements with Saudi Arabia are being negotiated. This marks a return to traditional suppliers in the Middle East, which were sidelined in recent years as India increased its reliance on discounted Russian oil.
S&P Global Commodity Insights estimates that Russian firms Gazprom Neft and Surgutneftegas accounted for approximately 20% of Russian oil exports to India before sanctions. Meanwhile, U.S.-blacklisted tankers were responsible for transporting around 450,000 barrels of oil per day to India, representing a quarter of all Russian shipments.
India’s government has announced that sanctioned tankers will be barred from its ports after 12 March 2025, the end of a grace period set by the U.S. Treasury to wind down transactions with sanctioned entities.
Challenges and Opportunities
Indian refineries, already grappling with global price increases and elevated freight costs, are now facing additional hurdles due to the sanctions. Despite these challenges, India’s strategic pivot towards U.S. and Middle Eastern energy suppliers signals its commitment to ensuring energy security amidst geopolitical uncertainty.
For Russia, the loss of a key export market like India represents another blow to its energy sector, already strained by reduced European demand. As India diversifies its energy portfolio, the U.S. stands to gain from increased exports, while Middle Eastern producers are likely to solidify their market presence.
