Indian State Refiners Stop Russian Oil Imports As Trump Threatens Penalty: Report

Indian state refiners have stopped buying Russian oil due to shrinking discounts and U.S. tariff threats, shifting to alternative sources from the Middle East and West Africa.

Indian state refiners have stopped buying oil from Russia in the last as the discounts on Russian crude have reduced significantly, and U.S. President Donald Trump has cautioned countries against buying oil from Moscow, Reuters reported, citing sources.

India, a major player in the global oil market, ranks as the third-largest importer of oil worldwide. It is also the leading buyer of seaborne Russian crude, which is a crucial source of revenue for Russia amidst its ongoing conflict in Ukraine.

Impact on Indian Refiners

The country's state-owned refiners, including Indian Oil Corp, Hindustan Petroleum Corp, Bharat Petroleum Corp, and Mangalore Refinery Petrochemical Ltd, have not sought Russian crude in recent days. Four sources familiar with these companies' purchasing strategies shared this information with Reuters.

These refiners typically acquire Russian oil on a delivered basis. However, they are now turning to spot markets to secure alternative supplies. They are primarily sourcing from Middle Eastern grades like Abu Dhabi's Murban crude and West African oil.

Private Refiners' Position

In contrast, private refiners such as Reliance Industries and Nayara Energy continue their annual agreements with Russia. These companies are significant buyers of Russian oil in India and have strong ties with Russian entities like Rosneft.

The shift away from Russian crude by Indian state refiners coincides with shrinking discounts that are now at their lowest since 2022. This reduction is attributed to decreased Russian exports and consistent demand.

Economic Considerations

With the narrowing price advantages on Russian crude, India's economic justification for importing from Moscow has diminished. As a result, India is increasingly looking towards alternative sources like Middle Eastern and West African oils to fill the supply gap.

However, economic factors aren't the only considerations at play. On July 14th, Trump issued a warning about imposing 100% tariffs on nations purchasing Russian oil unless Moscow agrees to a significant peace deal with Ukraine.

US Tariff Threats

On the other hand, Trump announced a 25% tariff on goods imported from India starting August 1st but mentioned that discussions were still ongoing. He also hinted at possible penalties for countries buying Russian arms and oil.

This development follows Trump's renewed threats of punitive tariffs on countries buying oil from Moscow. With discounts now at their lowest since 2022 due to lower exports and steady demand, India's rationale for importing from Russia has weakened further.

The revised tariff rates for US importers are set to take effect before the August 1 deadline for trade agreement negotiations. These tariffs vary by country and are listed alphabetically. Some countries, such as Brazil, face additional tariffs on top of the reciprocal ones.