US ban on Russian oil may not have instant impact
NEW DELHI: The recent sanctions imposed by the US on the Russian oil are unlikely to have an immediate or direct impact on India’s oil supply. Any major effects are expected to be felt in next two months, as per a senior official in the petroleum ministry.
The official said, on condition of anonymity, the worst-case scenario of the sanctions on Russian crude would be that India will no longer receive discounted or cheaper crude and will have to purchase crude at the market price. “In the next two months, we don’t see major problems. It is too early to say,” said the official.
The US imposed sanctions on Russian oil producers Gazprom Neft and Surgutneftegas on Friday, along with 183 vessels. The purpose of sanction is to disrupt revenue stream Moscow uses to fund its war with Ukraine. Many of these tankers have been used to ship oil to India and China, as Western sanctions and the price cap imposed by the Group of Seven (G7) countries in 2022 shifted flow of Russian oil from Europe to Asia.
Some of the vessels carry oil from Iran, which is also under sanctions. However, the official maintained that he was hopeful that within next two months, new market dynamics would evolve. Indian refineries will study the market and subsequently buy crude from wherever they can get it at the cheapest price.
The official said there would be no disruption as oil supply is not a concern and there are sufficient alternative suppliers. He pointed out that any shortfall in supply could be addressed by OPEC, which has spare capacity. Outside of OPEC, countries like Guyana, the USA, Canada, Brazil, and Suriname could step in to meet India’s needs. As per the official, while one of the sanctioned entities was not a major supplier to India, the other supplied a major amount of crude.
“There will certainly be disruption, but it will not be immediate. This is because there is a transit period. For example, cargo already in transit will still reach us. The key is to have a window of six-eight weeks, during which current shipments can arrive. This six-eight week period provides time for buyers and producers to find solutions. It is possible that a producer might be willing to sell at a discounted price,” the official added.