Sanctions A Blow To Russian Exports; Oil More So

India and Russia have been maintaining strategic relations till date. But US sanctions on Russian oil exports to India could disrupt those ties. This development comes as India and Russia are working to strengthen their economic ties, with the goal of increasing bilateral trade to $100 billion by 2030. The combined crude exports from Russia to India and China have decreased since January 10. Exports from West Africa and the Middle East have increased, while other Atlantic basin producers have not shown any indication of increasing exports to India or China at this point in time. Russian-origin crude exports have fallen by approximately 4.5 lakh barrels per day since sanctions were imposed on January 10, compared to the average export volumes throughout 2024, Vortexa data showed. Meanwhile, exports from the Middle East (excluding Iran) have increased by two lakh barrels per day. However, the most significant increase in exports has come from West Africa, which has risen sharply in recent weeks by about twice the amount as Middle Eastern flows. “The strong uptick in West Africa exports is motivated by wide Brent-Dubai spreads, which make West African crudes (priced against Brent) relatively cheap in comparison to Middle East grades,” said the report.

Recent data indicates that India’s imports of Angolan crude oil increased on a month-over-month basis in February. This increase was accompanied by a similar rise in exports from Congo and Cameroon, suggesting a broader trend of increased Indian interest in crude oil from Central and West African sources. Additionally, the Middle East is the only region outside of West Africa that has shown an increase in exports to China and India. Looking at the changes in exports after the January sanctions, China’s historically larger Middle East suppliers (Saudi Arabia and Iraq) have increased exports, at the expense of other producers. India has opted to gradually increase imports from smaller suppliers like the UAE, Kuwait, Oman and Qatar. Meanwhile, imports from Saudi Arabia and Iraq have remained steady. Initial analysis suggests that OFAC sanctions in January have prompted India to diversify its crude oil suppliers, while China has consolidated its reliance on its historically large suppliers. This observation is further supported by the trends seen with West Africa exports.

The delayed return of barrels into the market by OPEC and allies from April will be compounded by the potential divergence in crude procurement by India and China. With Saudi Arabia and the UAE likely to be the biggest contributors to this, we could see another pivot, particularly in India’s case, towards the largest producers again. However, oil production worldwide was still 1.9 million barrels per day higher in January compared with the corresponding period a year ago. Global oil supply is expected to increase by 1.6 million barrels per day in 2025 to 104.5 million barrels. The long-term impacts of escalating sanctions on Iran and Russia, as well as the effects of new US tariffs and their anticipation on trade flows, remain uncertain, according to IEA. OPEC added: But time and again, oil markets have shown remarkable resilience and adaptability in the face of major challenges – and this time is unlikely to be different.