IOC's Risky Play: Can It Dodge US Sanctions On Oil?

The energy security endeavours in India are now at the centre of a high-stakes geo-political chess match. There were fresh US sanctions last week on Rosneft and Lukoil, which are Russian energy giants. With this, a wave of caution seems to have swept through the Indian refining sector. Major refiners such as Bharat Petroleum Corp Ltd. (BPCL) and Mangalore Refinery and Petrochemicals Ltd (MRPL) have paused new orders as they await clarity. HPCL-Mittal Energy (HMEL), a major refiner has become the first to officially suspend further purchases of Moscow’s oil.

The IOC (Indian Oil Corporation) is India’s largest refiner and has drawn a clear line in the sand on the back of this widespread retreat. The state-run giant had clearly declared, in a post-earnings call, that it will "absolutely not" halt its imports of Russian crude. So, with other refiners backing away, why is IOC holding firm, and can it navigate this complex geopolitical minefield?

What Is IOC’s "Comply But Continue" Strategy?

IOC has avoided an “open defiance" and has adopted a calculated compliance stance. Thus, IOC is threading a very fine needle with the problem, a loophole, markets and a shield.

• The Problem - The newly sanctioned entities, Rosneft and Lukoil account for as large as 55% of the total Russian oil supplied to India. Thus, these are not minor players, but primary suppliers and a supply-chain hurdle can represent a massive, sudden and high-risk operational void.

• The Loophole - IOC has a plan to simply bypass these sanctioned entities.

• The "Shadow" Market - This has opened the door for sourcing crude from non-sanctioned intermediaries. Many of these intermediaries are operating from hubs like Dubai or Singapore, or from Russia's other producers who are not yet on the blacklist.

• The "Delivered-at-Port" Shield - Indian refiners have been buying Russian oil on a "delivered-at-port" basis. Meaning, it is the supplier’s and not the refiner’s responsibility to arrange shipping. This setup might shield the buyer from any potential sanctions violations on the transportation vessels.

This strategy can be a clear assertion of India's sovereign economic interests. But is the economic benefit still large enough to justify this high-wire act?

Is The Russian Discount Still Worth The Trouble?

If we look at the economic story of India's Russian oil imports, we will find two distinct chapters.

1. The beginning of 2022: India became the top buyer of seaborne Russian crude. It snapped up oil at massive discounts of up to $40 per barrel. This saved the Indian economy roughly $5bn/year.

2. July to August 2025: Those discounts had evaporated to as low as $1.5-$2.70 per barrel, respectively. With such a state of affairs, some had started to question if the risk was still worth the reward.

Despite this, industry officials have now stated that the discount has stabilised in the $3.5 to $5 per barrel range. While a shadow of its former self, this discount is still highly attractive. Furthermore, refiners like BPCL are now forced to look for alternatives. They seem to be keenly eyeing spot cargoes of Iraqi or US WTI crude, which they note is $3 to $3.50 per barrel more expensive than rival grades.

IOC processed 22-23% of its crude from Russia in Q1. For them, such a discount on every barrel is a massive commercial incentive. A considerable discount is one thing, but is it worth provoking the US, which has already begun to retaliate?

The Geopolitical Endgame For India

Now, this is where the short-term economic story collides with the long-term geopolitical one. The Trump administration has moved from quiet irritation to open retaliation.

But India is not facing such pressure for the first time. Washington has successfully forced India to halt all oil imports from Iran and Venezuela, despite a pricing benefit. Geostrategist Brahma Chellaney noted that this move ultimately hurt India and benefited China, which became the exclusive buyer of discounted Iranian crude. According to Chellaney, "Unlike Iranian and Venezuelan oil, the Russian crude is not subject to direct U.S. sanctions". This is the very legal and diplomatic distinction that the IOC is now banking on.

IOC's decision, therefore, is a carefully worded assertion of India's strategic autonomy. The company is betting that its "comply but continue" strategy is legally sound enough to withstand the US pressure. The question now is whether Washington will accept this nuanced compliance or view it as a defiance that warrants escalating the trade war.

Source

Livemint, Livemint 1
Business Today, Business Today 1, Business Today 2
Reuters
CNBC TV 18
Indian Express
BBC News
The Economic Times