Limited discounts on Russian oil for Indian refiners


Indian refiners are receiving lower discounts on Russian oil compared to European counterparts following the EU directive in March that bars European traders from supplying to non-European customers.

Since the outbreak of the Ukraine war, Indian state-run and private refiners have significantly raised their intake of Russian oil that’s been selling at a deep discount to the global benchmarks. But average discounts availed by Indian refiners on a delivered basis have been in the range of $10 per barrel, much lower than what is believed to be availed by refiners in Europe, said oil industry executives.

Proximity to Russia has always meant lower delivered costs for Europe but a reconfiguration of suppliers due to sanctions has increased the advantage the customers on the continent have over Indian refiners. While price assessment agencies have reported a discount of $35 per barrel to Brent, the global benchmark, on a free on board (FOB) basis, a combination of shipping and insurance costs, which have sharply risen due to war, and increased traders’ margins have resulted in an effective concession of $10 a barrel to Indian buyers, the executives said, adding that fewer traders mean lower bargaining power for the oil customers.

Since the middle of March, European traders — the big boys of global oil trading — have been barred from signing new supply contracts with non-EU customers.


“This has resulted in fewer suppliers of Russian oil to Indian or other non-European buyers and this weighs on discounts available to buyers,” said a person familiar with the matter said. “At the same time, the big European traders must sell Russian crude only to customers in the continent, resulting in bigger discounts for those customers.”

Russian-origin crudes made up 5% of India’s total oil imports in April for the first time, rising from under 1% in the full year 2021, as refiners chased cheaper oil amid expanding demand and spiralling prices, according to S&P Global Market Intelligence. Before the Ukraine war, Indian refiners used very little Russian oil due to higher freight.

The European Union has imposed several rounds of sanctions on Russia since the outbreak of war and has pledged to ban two-thirds of Russian oil imports by the end of the year.

Its sanctions package released on March 15 prohibits engagement in any transaction with Russian oil and gas producers such as Rosneft, Transneft and Gazprom Neft. The prohibition, however, does not apply to “transactions which are strictly necessary for the purchase, import or transport of fossil fuels, in particular coal, oil and natural gas,… from or through Russia into the Union.”

This exemption has meant that independent European traders like Glencore, Gunvor, Vitol and the trading units of European oil majors can only supply Russian oil to the buyers in the continent, and not to the ones outside, such as Indian refiners, said people familiar with the matter.

Many big traders are either based in European Union member countries or Switzerland, which is not an EU member but has been adopting EU sanctions against Russia.

EU sources 27% of its imported oil from Russia and remains its biggest customer despite the war and sanctions. The UK gets 8% of its oil needs from Russia.


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