US Secondary Sanctions: Why Indian Refiners May Cut Russian Oil Imports

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• India has consistently opposed unilateral economic sanctions, but has often complied with US-imposed restrictions to avoid fallout.
• In the past, Indian refiners stopped importing oil from Iran and Venezuela after the US sanctioned those countries. Now, with new US sanctions on Russian oil giants Rosneft and Lukoil, a similar situation looms.
• India avoids dealing with sanctioned entities mainly due to the risk of US secondary sanctions, which could penalize third-party countries or companies doing business with the targeted nations. 

Understanding Secondary Sanctions

• Secondary sanctions extend beyond the direct targets of US restrictions.
• Primary sanctions stop American citizens and companies from dealing with blacklisted entities (like Rosneft and Lukoil).
• On the other hand, secondary sanctions aim to discourage foreign countries and companies — over whom the US has no legal authority — from engaging with them.
• These measures act as “anti-circumvention tools”, forcing other nations to comply indirectly by threatening penalties.
• Because they apply outside US borders, secondary sanctions are often seen as extraterritorial and questionable under international law.

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Why Countries Fear US Secondary Sanctions

• The US dollar’s dominance in global trade and the central role of the American financial system make US sanctions highly influential worldwide.
• Any company or country engaged in international trade needs access to US markets and banks — losing that access can cripple business.
• Secondary sanctions don’t always impose fines; instead, they block foreign entities from the US financial system if they act against Washington’s foreign policy interests.
• Because of this, India’s refiners and banks are expected to cut back on Russian oil imports, fearing penalties.
• The US Treasury’s warning that secondary sanctions could hit buyers of Russian crude has already had an impact — experts predict an immediate drop in India’s Russian oil imports, which currently account for over 35% of total imports.

Why US Sanctions Matter for India

• US sanctions carry real weight because they make banks, insurers, and investors cautious, cutting off access to funding and financial systems.
• Most Indian refiners — including Reliance Industries (RIL) and public sector companies — rely heavily on the US market, banking network, and technology partners. Losing that access would seriously impact their global operations.

India’s Heavy Exposure to the US

• RIL, which buys nearly half of India’s Russian oil, has subsidiaries, partnerships, and investments in the US with firms like Google, Meta, and Intel.
• Public sector refiners also depend on dollar-based payments and the American banking system to buy crude oil, pay shippers, and insurers.
• Any disruption in US dollar transactions could severely hurt India’s refining sector.

Impact on Russian Oil Imports

• To avoid secondary sanctions, Indian refiners and banks are expected to act with extreme caution, likely leading to a sharp drop in Russian oil imports.
• Government-owned refiners are already reviewing compliance risks, and RIL has said it will fully follow government guidance.
• Some refiners may try to buy Russian oil through third-party traders not directly targeted by sanctions.
• However, experts warn this loophole may not last, as the US could extend sanctions to these intermediaries if it wants to curb Russian oil flows more effectively.

India’s Official Stand

• The Indian government has reiterated that it will buy oil from wherever it gets the best price, as long as the oil itself is not under sanctions.
• However, the new US restrictions on Rosneft and Lukoil — which supply over two-thirds of India’s Russian oil — could seriously limit India’s access to cheap Russian crude in the near term.

Source: IE | IE | NYT