India seeks alternative oil exporters amid US sanctions on Russia
India's crude oil trade with Russia is facing challenges due to stricter enforcement of US sanctions, causing refineries to explore alternative suppliers, as reported by The Economic Times. Although Russia remains India's primary oil source, refiners are increasingly importing from other countries, such as Saudi Arabia, whose overall imports to India have surged by 22% this month compared to January. The US has imposed economic sanctions on Russia due to geopolitical tensions arising out of the prolonged conflict in Ukraine.
Discount margin now lower for Russian crude oil
Indian refiners are keen to purchase more Russian oil, but need US approval for such transactions to increase. The Russian crude oil is now only $2-$4 a barrel cheaper than supplies from other countries in the Middle East. Following Russia's 'special military operation' in Ukraine in 2022, the discount had surged to $30 per barrel. Reliance Industries, India's top private refiner, recently procured its highest volume from Saudi Arabia since May 2020, as reported by Kpler.
Payment in yuan and competition from China
Russia is considering accepting yuan payments for its oil exports to India due to heightened scrutiny by some banks over the use of dirhams for trade settlements in recent months. Significant discounts on Russian oil are also unlikely to reappear due to competition in demand from China. This rivalry has substantially reduced the price gap between Russian and other oil supplies. However, Russia still accounts for almost 40% of India's crude oil imports.
CAATSA — America's sanction regime against foreign nations
In 2017, US passed a legislation to enforce economic sanctions against nations that it considers hostile toward American interests. This legislation, known as the Countering America's Adversaries Through Sanctions Act (CAATSA), is presently imposed on Russia, Iran and North Korea.
