The latest round of US sanctions on Russian oil producers and the vessels has stirred concern in India’s oil market, although some media reports believe it will not result in an immediate threat to India’s crude supply. However, these sanctions are expected to lead to higher costs for Indian refiners, as they will likely need to diversify their crude sourcing. This shift is anticipated to come at a premium compared to Russian crude, which has been one of the most essential part of India's oil import strategy.

The sanctions target major Russian producers like Gazprom Neft and Surgutneftegaz, alongside 183 vessels linked to the transport of Russian oil. These sanctions aim to limit Russia’s revenue stream, which is used to fund its ongoing war with Ukraine. According to industry experts, around 13-14% of India’s Russian crude imports are likely to be impacted by the new restrictions.

While there is no immediate risk of a crude oil shortage, media reports warn that Indian refiners will face increased costs due to the need to replace the Russian oil with some alternatives from regions such as the Middle East, Africa. For instance, Urals crude, which has been sold at a discount to Brent, will be replaced with more expensive oil, thus raising operational costs for Indian refineries.

The sanctions could also affect freight costs, as the tightening capacity of shipping vessels is expected to raise shipping rates. It was suggested that the rise in freight costs, exacerbated by the sanctions, could further increase the overall cost for Indian refiners

Despite these challenges, industry stakeholders remain cautiously optimistic that Russian oil will continue to flow into India. A senior government official indicated that the sanctions would not disrupt Russian crude supplies within the next two months, as the sanctioned tankers are permitted to discharge oil until March 2025. The optimism is rooted in the expectation that Russia may find ways to circumvent the sanctions and keep the oil supply flowing.

In conclusion, while the US sanctions on Russian oil are likely to lead to higher prices and logistical challenges for Indian refiners, there is no immediate threat to supply. However, Indian refiners will need to adapt to rising costs, both in terms of raw material and freight, as they diversify their crude oil sources. The impact on India’s oil import strategy will continue to unfold as global supply chains adjust to these new sanctions.