Indian refiners review Russian oil deals after Trump sanctions Rosneft, Lukoil: Here's how punitive measures work

Indian state-owned refiners have begun reviewing their Russian oil trade documents to ensure no supply is coming directly from the recently sanctioned Russian oil giants — Rosneft and Lukoil. A source with direct knowledge of the matter spoke to Reuters on Thursday.

The move comes after US President Donald Trump on Wednesday imposed Ukraine-related sanctions on Russia for the first time in his second term. The sanctions target Rosneft and Lukoil in a bid to increase pressure on Russia to agree to a ceasefire, Reuters reported.

The US Treasury Department has issued a winding-down period, setting the deadline of 21 November for companies to stop making transactions with the Russian oil producers, according to a release on the sanctions on Wednesday.

Compliance checks by state refiners

In response to the deadline, major Indian state refiners, including Indian Oil Corp, Bharat Petroleum Corp, Hindustan Petroleum Corp and Mangalore Refinery and Petrochemicals, are scrutinising bill of lading documents for any Russian crude arriving after the deadline. The goal is to confirm that shipments are not coming directly from Rosneft or Lukoil, Reuters reported.

Indian state refiners rarely buy Russian oil directly from Rosneft and Lukoil. Instead, intermediaries typically facilitate these transactions, providing a layer of separation from the directly sanctioned companies.

India's reliance on discounted oil

Since Western nations suspended their purchases following Russia's invasion of Ukraine in February 2022, India has become the top importer of discounted Russian seaborne oil.

Data from January to September shows India imported approximately 1.7 million barrels of Russian oil per day, with private refiners Reliance Industries and Nayara Energy taking the majority of these imports.

The US administration has imposed a steep 50% tariff on most Indian imports, effective 27 August. This action comprises a 25% reciprocal tariff and an additional 25% penalty due to continued purchase of Russian crude oil.

How do US sanctions work?

The United States enforces actions through the Office of Foreign Assets Control (OFAC), which blocks the property and interests of designated individuals or entities. It prohibits US persons from engaging in transactions with them unless specifically authorised by the government body. The agency also restricts entities that are 50% or more owned by sanctioned individuals or organisations.

The release on sanctions claims that if any foreign financial institution is found to conduct or facilitate transactions or provide any service involving Russia’s military-industrial base, or the blocked companies, they can also be at risk of being sanctioned by OFAC.

Violations of US sanctions may also result in the imposition of civil or criminal penalties, including those for foreign institutions facilitating significant transactions with sanctioned parties.

OFAC holds the power to add as well as remove people or entities from the sanctions list. “The ultimate goal of sanctions is not to punish, but to bring about a positive change in behaviour,” the release noted.