China Overtakes India as Top Buyer of Russian Oil Amid Fresh U.S. Sanctions

Russian crude oil exports to China have exceeded shipments to India for the first time since December 2023, as fresh U.S. sanctions on Russian oil trade disrupt flows. In the first 10 days of March, Russian crude oil loadings for India stood at approximately 590,000 barrels per day (bpd), significantly lower than the 1.11 million bpd shipped to China, according to data from commodity market analytics firm Kpler.

Despite the decline in shipments, analysts suggest that Russian oil supplies to India could pick up later in the month. However, the current shift in trade dynamics signals potential challenges for India, which has been heavily reliant on discounted Russian crude to manage its import bill.

India’s Russian Oil Dependence Faces Setback

India has emerged as the largest buyer of Russian crude since early 2022, accounting for around 30% of its total oil imports—an increase from a mere 0.2% before the Ukraine war. The surge in imports has been largely driven by deep discounts offered by Moscow as it sought alternative buyers following Western sanctions.

However, the latest U.S. sanctions, imposed on January 10, have complicated India’s procurement of Russian crude. These sanctions targeted key Russian oil companies, including Gazprom Neft and Surgutneftegaz, along with approximately 180 oil tankers that facilitate Russian oil shipments. The move was aimed at curbing Moscow’s revenue, which is allegedly being used to finance its military operations in Ukraine.

In response, Indian oil marketing companies (OMCs) such as Indian Oil Corporation (IOCL), Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL) have been cautious about their Russian crude purchases. They have confirmed that they are avoiding crude from sanctioned entities to prevent scrutiny from global regulators.

OMCs Seek ‘Clean’ Russian Oil Amid Sanctions Scrutiny

India’s largest state-run refiner, IOCL, stated in late January that it is looking to buy only “clean” Russian crude. This implies that the entire supply chain—including the supplier, shipping insurance, and tanker providers—must be free from sanctions. BPCL and HPCL have also adopted a similar approach in securing Russian crude oil deals, leading to a temporary decline in shipments.

Despite these efforts, securing Russian oil at discounted rates remains a priority for Indian refiners. BPCL revealed in February that it is negotiating for deeper discounts in the range of $5–6 per barrel under a long-term supply agreement with Russian suppliers. However, no formal term deal has been finalized yet.

India’s Oil Import Costs Set to Rise

The drop in Russian crude shipments to India could have significant economic implications, especially for India’s oil import bill. Russia has been a major supplier of Urals crude to India at competitive prices, helping the country manage its energy expenses amid volatile global oil prices.

With China now receiving a larger share of Russian crude, India may face increased costs if it turns to alternative suppliers in the Middle East or Africa, where prices are generally higher.

According to Sumit Ritolia, a senior oil refining analyst at Kpler, the current dip in Russian shipments to India may be temporary. “The low Russian crude loadings for India in the first 10 days of March could be a one-off event, and shipments may pick up in the coming weeks. However, if the trend persists, India will have to explore alternative options to maintain its supply security,” he noted.

China Strengthens Its Position in Russian Oil Trade

China has been a key buyer of Russian oil, but until recently, India had surpassed China in terms of Russian crude imports. However, Beijing’s recent increase in purchases has reshaped the trade dynamics.

In February, Russian crude oil shipments to India stood at 1.6 million bpd, compared to 1.1 million bpd for China. However, the trend reversed in March, with China’s intake surpassing India’s for the first time in over two months.

China has been able to maintain steady oil imports from Russia despite U.S. sanctions, as it relies on independent refiners, also known as “teapot” refiners, to process Russian crude. These refiners operate with fewer regulatory constraints compared to state-run entities, allowing them to continue purchasing discounted Russian oil.

India-Russia Oil Trade and the Future Outlook

Since the beginning of the Ukraine war, India has spent approximately €112.5 billion (₹1.5 lakh crore) on Russian crude oil imports, according to a report by the Centre for Research on Energy and Clean Air (CREA). During the same period, China purchased Russian crude worth €170 billion, reinforcing its position as the largest buyer.

While India has been negotiating long-term supply agreements with Moscow to ensure price stability, challenges remain. The primary hurdle is the mode of payment, as Western sanctions have restricted transactions in U.S. dollars, forcing India and Russia to explore alternate payment mechanisms, including rupee-ruble trade and transactions in Chinese yuan.

Additionally, as Russia diverts more of its oil to China, India may need to enhance its energy diversification strategy by securing additional supplies from Iraq, Saudi Arabia, and the UAE, which remain among its top crude suppliers.

Highlights from the Latest Russian Oil Export Trends

• China overtakes India in Russian crude imports for the first time since December 2023, with shipments reaching 1.11 million bpd, compared to 590,000 bpd for India in early March.
• U.S. sanctions on Russian oil firms and shipping fleets have disrupted trade, prompting Indian refiners to avoid crude from sanctioned entities.
• Indian OMCs are prioritizing “clean” Russian crude oil, ensuring suppliers, insurers, and tankers are not under sanctions.
• BPCL is negotiating for deeper discounts of $5–6 per barrel under a potential long-term crude supply deal with Russia.
• India’s crude oil import costs could rise if alternative suppliers such as Saudi Arabia and Iraq replace discounted Russian oil.
• China’s independent refiners continue to absorb Russian crude, giving Beijing an advantage in securing discounted oil despite sanctions.

While India remains a crucial market for Russian crude, the latest trends suggest that China is strengthening its position. The coming months will determine whether India can regain its lead in Russian oil imports or if it will have to look elsewhere to fulfill its energy needs.