Reliance Industries says will comply with US sanctions on Russian oil

Reliance Industries Ltd (RIL) on Friday said it will comply with the latest US and Western sanctions on Russian oil and adjust its refinery operations to remain in full compliance with evolving restrictions.

India’s largest private refiner said it is assessing the implications of sanctions announced by the United States, European Union, and the United Kingdom, which target Russian crude imports and limit the export of refined products to Europe.

“We will comply with the EU’s guidelines on the import of refined products into Europe,” an RIL spokesperson said, adding that the company “remains fully committed to maintaining adherence to applicable sanctions and regulatory frameworks”.

The spokesperson added that Reliance will tweak refinery operations to meet new compliance requirements but did not disclose specific changes.

The latest sanctions, announced by Washington on 22 October, hit Rosneft and Lukoil — Russia’s two largest oil producers — prohibiting US entities from doing business with them and warning non-US companies of possible secondary sanctions.

The US treasury department has directed that all transactions involving Rosneft and Lukoil be wound down by 21 November.

Russia currently supplies roughly one-third of India’s crude imports, averaging about 1.7 million barrels per day (mbd) this year. Of that, approximately 1.2 mbd originates directly from Rosneft and Lukoil, according to trade analytics firm Kpler. Private refiners RIL and Nayara Energy are the main buyers, while state-run firms import smaller quantities.

Analysts say the sanctions could materially disrupt Reliance’s crude sourcing strategy, which has leaned heavily on discounted Russian barrels since mid-2022.

Following the Western embargo after Russia’s invasion of Ukraine, Indian refiners became major buyers of Russian oil, often securing discounts of $8–12 per barrel relative to Brent. Those discounts, said Vivek Dhar, director of energy research at Commonwealth Bank of Australia, “have been the single biggest factor keeping Asian refining margins high over the past two years”.

Losing access to those supplies could narrow Reliance’s gross refining margins (GRMs) by $3–5 per barrel in the near term, according to R. Ramachandran, former director (refineries) at Bharat Petroleum Corporation Ltd (BPCL). “Russian grades gave Reliance flexibility and a huge price cushion. Without them, the feedstock basket becomes more expensive, and that hits export competitiveness directly,” he said.

Reliance operates the Jamnagar refining complex in Gujarat, the world’s largest, with a combined capacity of 1.4 mbd. Its high-complexity configuration allows it to process heavy and sour crudes from multiple sources, a capability that will now be tested.

“RIL can pivot faster than state refiners, but the economics will change,” said Sumit Ritolia, lead analyst for refining and modelling at Kpler. “Replacing Russian barrels with Middle Eastern or Latin American grades will increase crude costs by at least $2–3 per barrel, and some of those grades are logistically tougher to secure.”

He added that Russian crude flows to India would likely remain around 1.6–1.8 mbd until 21 November, but direct volumes from Rosneft and Lukoil could drop sharply thereafter as Indian refiners limit exposure to sanctioned entities.

Because the EU’s sanctions regime also restricts refined products made from Russian crude, Reliance will need to prove the origin of its feedstock for shipments to Europe — one of its key diesel and jet fuel markets.

“Tracking and certifying crude origin adds compliance costs and complicates trade,” said Madan Sabnavis, chief economist at Bank of Baroda. “It doesn’t stop Reliance from exporting, but it reduces agility in switching crude blends and marketing products globally.”

Market watchers expect Reliance to diversify crude sourcing, boosting imports from Saudi Arabia, Iraq, and the UAE, and reviving purchases of US and West African grades. However, these alternatives are costlier and carry longer voyage times, eroding the margins Reliance had enjoyed since 2022.

Refining accounts for roughly 60–65 per cent of Reliance’s consolidated operating profit, with export volumes central to its performance. A reduction in Russian supply could:

• Trim refining margins in the December–March quarters

• Temporarily curb export volumes to Europe

• Increase freight and demurrage costs due to longer shipping distances

• Heighten compliance exposure, as Western regulators intensify scrutiny of crude origin declarations

Still, Reliance’s diversified businesses — spanning telecom (Jio), retail, and renewables — are expected to cushion the financial impact.

“Reliance has the scale and sophistication to adjust sourcing without major supply disruption,” said Amrita Sen, director of research at Energy Aspects, a London-based consultancy. “But it loses the arbitrage advantage that made Jamnagar such a profit engine over the last 18 months.”

For India, the sanctions introduce uncertainty into an energy relationship that had become pivotal. Russian crude — discounted and available amid Western embargoes — has underpinned India’s refining economics for nearly two years.

“Private refiners like Reliance and Nayara have more to lose than state-owned companies,” said Hitesh Jain, lead energy analyst at YES Securities. “They are exposed to Western financing and export markets, so they can’t risk non-compliance. Public-sector refiners, by contrast, can rely on government cover for limited purchases.”

The shift could also narrow India’s refining export margins, particularly for diesel, and push domestic fuel prices marginally higher if costs rise.

Reliance’s public stance remains one of prudence and compliance. Its statement on Friday reiterated the company’s commitment to sanctions adherence and regulatory integrity. Analysts say that approach reflects the company’s need to protect its global trading relationships, including with European clients and US-linked financial institutions.

“The company’s message is clear — it will comply, even if it means sacrificing short-term gains,” said Vivek Dhar of Commonwealth Bank. “For a firm with Reliance’s global exposure, reputational and sanctions risks far outweigh the temporary loss of discounted crude.”

In the months ahead, RIL is expected to rely more on term contracts with Middle Eastern producers while optimising refinery runs to preserve export competitiveness. Though margins may soften, analysts see no major threat to the company’s balance sheet.

“Reliance has weathered far bigger disruptions,” said Amrita Sen. “But this episode underscores a new reality — that geopolitical risk, not market dynamics, will increasingly determine where Indian refiners source their crude.”

With PTI inputs