Indian Banks Block Russian Oil Payments After New U.S. Sanctions

Indian banks have begun blocking payments for Russian oil imports following the latest round of U.S. sanctions targeting Russia's oil industry, according to a report from Energy Intelligence. The sanctions, announced on January 10, target major Russian oil companies and nearly 200 vessels in Moscow's "shadow fleet," disrupting global energy trade.

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Impact on Indian Banks

State-owned banks, including the State Bank of India and Punjab National Bank, have taken a cautious approach to avoid violating U.S. sanctions. Private banks, however, have been less rigid in their response, according to the report.

India, the world's leading importer of Russian oil since the 2022 invasion of Ukraine, accounted for nearly half of all Russian seaborne crude exports in 2024. Approximately 20% of these exports originated from sanctioned companies like Surgutneftegas and Gazprom Neft, according to S&P Global.

Grace Period for Sanctioned Tankers

An official told Bloomberg that sanctioned Russian tankers booked before January 10 will be allowed to unload at Indian ports until March 12, the end of a U.S. grace period. After this date, India will no longer accept shipments from blacklisted vessels.

In the meantime, Indian refineries have reportedly entered agreements to purchase crude from alternative sources, such as Oman and the United Arab Emirates, according to Reuters.

Global Impact of Sanctions

The new sanctions have caused a sharp decline in Russian seaborne crude exports, with dozens of tankers worldwide suspending operations. According to S&P Global Commodity Insights, sanctioned tankers transported approximately 450,000 barrels of crude to India daily, accounting for a quarter of all deliveries.

The U.S. Treasury Department's sanctions have also targeted Russia's shadow fleet, which has been used to circumvent Western restrictions. This has further complicated global energy trade, particularly for countries like India that rely heavily on Russian oil.

India’s Strategic Shift

India's decision to block payments and seek alternative oil sources reflects its efforts to balance economic interests with compliance to international sanctions. The country has become a key player in global energy markets, leveraging discounted Russian crude to meet its growing energy demands.

However, the tightening sanctions have forced India to reassess its energy strategy. "The Indian authorities have decided that sanctioned tankers will not be able to enter the country's ports after March 12," a high-ranking official in New Delhi told Bloomberg.

Looking Ahead

As the March 12 deadline approaches, the global energy market remains in flux. The U.S. sanctions have not only disrupted Russian oil exports but also reshaped trade dynamics, prompting countries like India to diversify their energy sources.

The situation underscores the growing influence of geopolitical tensions on global energy markets, with far-reaching implications for producers, consumers, and financial institutions worldwide.