Will US sanctions on Rosneft, Lukoil force Reliance to rethink its Russian oil bets?

Reliance Industries Ltd may need to recalibrate its Russian crude oil imports after the United States imposed sweeping sanctions on Rosneft and Lukoil, two of Russia’s largest oil companies, PTI reported on Thursday, citing industry sources.

Public-sector refiners, which buy almost all of their Russian crude through intermediary traders, are unlikely to immediately halt purchases, according to the report.

“Recalibration of Russian oil imports is ongoing and Reliance will be fully aligned to Government of India guidelines on the extent of recalibration,” Reuters quoted a Reliance spokesperson as saying.

How exposed is Reliance to Russian crude?

Reliance, India’s largest buyer of Russian crude, accounts for about half of the country’s 1.7 million barrels per day (bpd) imports from Moscow.

In December 2024, it signed a long-term supply deal with Rosneft for up to 500,000 bpd of oil for 25 years, while also purchasing through spot trades.

The US Treasury’s Office of Foreign Assets Control (OFAC) on Wednesday sanctioned Rosneft and Lukoil, accusing them of helping fund the Kremlin’s war in Ukraine.

The two firms export around 3.1 million bpd, with Rosneft alone accounting for nearly half of Russia’s oil output.

Will India’s Russian oil imports be hit immediately?

India emerged as the top buyer of discounted Russian crude after Western nations shunned Moscow following its 2022 invasion of Ukraine.

Russian oil is purchased by private refiners such as Reliance and Rosneft-backed Nayara Energy, as well as state-run Indian Oil Corp, Bharat Petroleum Corp, Hindustan Petroleum Corp, Mangalore Refinery and Petrochemicals Ltd (MRPL), and HPCL-Mittal Energy Ltd.

State refiners have no term deals with Russian producers and typically buy through tenders involving traders based in Europe, Dubai, or Singapore, none of whom are currently under US sanctions.

Why the muted market reaction?

“The measures by the Trump administration are half-hearted,” PTI quoted an industry source as saying. “The ones who do bulk of the trade are out of its net.”

"If sanctions were so impregnable, international oil prices would have jumped at least USD 5-10 per barrel on news of such large volumes going out of the market. Instead what we saw was just a USD 2 per barrel increase, implying the market believes not all of the oil that is exported from Russia is going anywhere,” said another source.

The Indian government has not so far given any instructions to refiners on stopping or reducing Russian oil imports, according to people familiar with the matter.