India is staring at an ‘oil shock’ as U.S. sanctions on Russian crude loom
Russia’s President Vladimir Putin (R) speaks with India’s Prime Minister Narendra Modi (L) during a visit to the shipyard Zvezda, as Rosneft Russian oil giant chief Igor Sechin (C) accompanies them, outside the far-eastern Russian port of Vladivostok on September 4, 2019, ahead of the start of the Eastern Economic Forum hosted by Russia.
Alexander Nemenov | Afp | Getty Images
India’s days of buying cheap Russian oil could be over.
Sweeping sanctions by the U.S. against Russia’s energy companies and operators of vessels that transport oil will complicate Indian efforts to keep importing cheap Russian crude and could push up inflation in Asia’s third-largest economy, analysts said.
The country could be looking at a potential oil shock, said Bob McNally, president of Rapidan Energy Group.
“India will be more affected than China by sanctions, since India imports much greater amount of its oil from Russia than China,” he told CNBC.
Last Friday, the U.S. Treasury announced sanctions on two Russian oil producers, along with 183 vessels which are primarily oil tankers that have been shipping barrels of Russian crude. At present, tankers sanctioned by the U.S. are still permitted to offload crude oil until March 12.
The South Asian nation imported a significant 88% of its oil needs between April and November 2024, little changed from a year earlier, according to government data. Around 40% of those imports came from Russia, data from trade intelligence firm Kpler showed.
Out of the newly sanctioned 183 tankers, 75 of them have transported Russian oil to India in the past, according to data provided by Kpler. Just last year alone, the 183 sanctioned tankers transported around 687 million barrels of crude, of which 30% were shipped to India.
“Most of these barrels went to Indian refiners and, hence, the impact will likely be largest there,” BNP Paribas’ senior commodities strategist Aldo Spanier said in a research note following the sanctions.
The new U.S. sanctions were deeper and broader than foreseen by markets, and the disruptions are expected to amplify, Spanier added.
India’s Ministry of Petroleum and Natural Gas did not respond to a CNBC request for comment.
Oil prices year-on-year
The sanctions are also coming at a time when India is tipped to surpass China as the number one oil consumer in the world in 2025, accounting for 25% of total oil consumption growth globally.
Increasing demand for transportation fuels and home cooking fuels is set to spur this growth of 330,000 barrels per day this year — the most of any country, forecasts by the U.S. Energy Information Administration showed.
India consumed 5.3 million barrels per day in 2023, EIA’s most recent data showed. This consumption is expected to have increased by 220,000 barrels per day last year.
India wasn’t always this dependent on Russian oil.
As recently as 2021, Russian oil accounted for just 12% of India’s oil imports by volume. By 2024, that share had spiked to 37.6%, Muyu Xu, senior oil analyst at Kpler told CNBC.
The catalyst for increased oil imports was the Ukraine war, which prompted some Western countries to impose sanctions against Russia and curtail their purchases of Russian crude. As prices of Russian oil fell, India was able to hoover up supplies cheaply from companies that were not under sanctions.
The discount of Russia’s crude, Urals, to the global benchmark Brent has averaged around $12 per barrel from last August to October, according to S&P Global’s most recently published data last November. In 2024, Russia’s Urals were also cheaper by $4 per barrel compared to oil from Iraq, one of India’s main sources of crude oil imports, data from Kpler showed.
“If India were to fully comply with U.S. sanctions, we could see a sharp decline in Russian crude arrivals in February and potentially March,” Xu added.
Supply disruptions to India could be as high as 500,000 barrels per day, Rystad Energy’s senior analyst Viktor Kurilov shared via email.
No more cheap alternatives?
While the impact may eventually be mitigated as affected importers scramble to source alternative suppliers in the Middle East, some industry watchers say that the relief might still take a few weeks to months to materialize.
Even then, the price of oil from these alternative sources will not be as cheap. The world’s crude benchmark Brent recently advanced to a five-month high to around $80 per barrel following the announcement of the sanctions, after a year of languishing from oversupply and weak demand.
Prices of Middle Eastern crude, which are amongst India’s alternatives, have also surged this week, data provided by Kpler suggested.
“Depending on how quickly Russia resolves its logistical challenges and how cooperative India and China remain with the sanctions, oil prices could spike for a few weeks,” Kpler’s Xu said.
Additionally, as Donald Trump’s inauguration draws closer, the world’s supply of cheap Iranian crude, is also facing the risk of tighter sanctions. Iran made up 4% of the world’s oil production in 2023, according to an EIA report released last year.
“It is [also] a bit of a double whammy for the key importer [India] as Iran will likely face new sanctions pressure with the incoming Trump administration,” Helima Croft, global head of commodity strategy at RBC Capital Markets, told CNBC.
If the new sanctions are coupled with a potential curb on Iranian crude, Brent prices could rise even higher to $90 per barrel, Goldman Sachs wrote in a note published after the announcement of the sanctions.
An Indian economy pain point
The Indian economy is “significantly vulnerable” to fluctuations in oil prices, a research paper published in 2023 established. Domestic retail prices of gasoline and diesel surge “like rockets” in response to rising crude oil prices, Abdhut Deheri, assistant economics professor at the Vellore Institute of Technology and M. Ramachandran from Pondicherry University’s department of economics said in the research paper.
Analysis from the Reserve Bank of India in 2019 found that every $10 per barrel rise in oil prices could lead to a 0.4% increase in headline inflation.
“High oil prices, if passed to consumers, could further hurt their purchasing power at a time when income and GDP growth have slowed,” Dhiraj Nim, an economist at ANZ.
However, weak consumer demand could deter producers from passing on the cost burden to consumers, which means it could dent companies’ profits instead, Nim added. Although if the government chooses to shoulder the additional costs, it would strain its finances.
Not only will China and India have to pay more for the oil they consume, they will need to pay more to have it delivered to their shores because oil tanker rates have also risen, said Andy Lipow, president of energy consultancy Lipow Oil Associates.
Combined with a stronger U.S. dollar and weaker rupee, the impact on the India economy will be magnified, said Lipow.
India’s rupee recently plunged to a record low as a result of pressure from a strong greenback and selling by foreign portfolio investors.
The country is no stranger to protests over high fuel prices. In 2018, widespread protests across the country against record-high petrol and diesel prices led to the closure of businesses and schools in several regions.
The BYD Shenzen, its new ro-ro ship that can carry 9,200 vehicles, has officially undocked. BYD’s new car carrier is the world’s largest as the EV giant aggressively expands overseas. After sales surged last year, the Chinese EV leader looks for even more global market share in 2025.
BYD Shenzen undocks as the world’s largest car carrier
BYD sold a record 4.25 million new energy vehicles (NEVs) last year, over 40% more than it did in 2023. That includes electric vehicles (EVs) and plug-in hybrids (PHEVs).
Although several automakers have yet to release full-year sales results, BYD is expected to outsell several global auto leaders, such as Ford, Honda, and Nissan. Meanwhile, this year could be even bigger for China’s largest automaker.
According to a new report from China News Service (via IT Home), the BYD Shenzen, the company’s fourth ro-ro (roll-on/Roll-off) ship, finished undocking and is ready to set sail.
BYD’s new car carrier is the world’s largest, capable of transporting up to 9,200 vehicles. Since 2024, BYD has launched four ro-ro ships as it expands into new overseas markets.
The first, the BYD Explorer No 1, was launched in January 2024. It has already completed several trips to Europe, including Spain and Germany, and also docked in Brazil.
BYD’s second (BYD Changzhou) was put into operation in early December 2024, followed by the BYD Hefei, which set sail last week. All three can carry up to 7,000 vehicles.
The Hefei hit the seas last week, carrying 5,000 NEVs. BYD said the vessel will “accelerate the internationalization process of China’s new energy vehicles.”
The BYD Shenzen, named after its hometown, is not only the world’s largest but also the most environmentally friendly. According to the report, the new ship includes BYD box-type battery packs and shaft-belt generators for the first time.
Electrek’s Take
BYD has already entered 100 countries and regions globally, but it’s poised for even more growth in 2025. After producing over 1.77 million vehicles last year, BYD topped Tesla by about 4,500 units to become the world’s largest EV maker.
Meanwhile, Tesla delivered slightly more fully electric vehicles, with 1.78 million in 2024, compared to BYD’s 1.76 million.
With an influx of new rivals in China, BYD is aggressively expanding into new overseas. After entering Japan in 2023, a market dominated by domestic automakers, BYD sold more EVs than Toyota in 2024.
After launching its first EV in South Korea this week, starting at just over $20,000, BYD will now challenge Hyundai and Korea on their home turf.
BYD’s growing presence is forcing legacy automakers to take drastic actions to keep up. After falling behind, Japan’s Nissan and Honda are now teaming up on EVs to fend off BYD’s surge.
In Thailand, or the “Detroit of Asia,” as it’s called, Japanese automakers have watched their market share fall from 90% to just 76% over the past two years amid BYD’s growing presence.
With new vehicles launching in Mexico, Brazil, Europe, Singapore, Thailand, and many more regions this year, BYD is poised for more growth in 2025.
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Rivian’s (RIVN) stock is trending on Friday after Volkswagen CEO Oliver Blume hinted at expanding upon their new EV partnership. Volkswagen’s boss said the company could offer “great opportunities” for Rivian. Here’s what the new plans could include.
Rivian stock climbs on Volkswagen EV partnership plans
After launching their new joint venture in November, “Rivian and VW Group Technology, LLC,” Volkswagen is already looking to expand its partnership with the EV startup.
Blume told German news outlet Spiegel that “The Volkswagen Group offers great opportunities for a small brand like Rivian” on Friday. For example, Volkswagen’s head honcho said, “We are thinking about sharing modules and bundling purchasing volumes.”
Volkswagen already plans to invest up to $5.8 billion in the collaboration, which, according to Rivian CEO RJ Scaringe, is a “meaningful financial opportunity.”
So far, the partnership is mainly software support. Rivian is using its software expertise to develop a new EV architecture to power up new SDV (software-defined) electric vehicles.
Rivian already uses the platform and software stack, which consists of seven control units. Volkswagen models typically have over 100 of these units. The next steps could involve a joint purchase, deepening the VW/ Rivian EV alliance.
The architecture is designed to cut costs and speed up output. According to the report, a new ultra-luxury three-row Porsche electric SUV, codenamed “K1” internally, and the electric Golf successor will be among the first EVs to feature the new architecture.
Audi, Porsche, and the upcoming Scout brand for the US will use the new tech. Scout will launch an off-road electric SUV and pickup built at Volkswagen’s new plant in South Carolina from 2027.
The news comes after Rivian closed a loan agreement with the US Department of Energy (DOE) on Thursday for up to $6.6 billion in funding for its new EV plant in Georgia.
Rivian’s second manufacturing plant will house its midsize R2 and R3 electric models. The smaller, more affordable electric SUV and crossover will also benefit from the Volkswagen alliance.
On Friday, Rivian stock trended up over 5% after Volkswagen’s Blume hinted at expanding the new EV partnership. Since reporting third-quarter earnings in November, RIVN shares are up over 57%. However, they are still down nearly 10% over the past 12 months.
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Police have seized an imported Tesla Cybertruck in the UK as it is not road-legal in the country and deemed dangerous for pedestrians.
Tesla has always known that its Cybertruck design would be complicated to get homologated in other markets than North America, where the rules are similar between the US, Canada, and Mexico. The company admitted that it might limit the markets where Cybertruck would be sold, which is why Tesla doesn’t plan to expand beyond current markets.
However, it hasn’t stopped people from privately importing Cybertrucks to their home markets.
We have seen two Cybertrucks traveling through Europe, and they were stopped at Lithuanian customs due to suspicions that they were going to Russia.
Sure enough, Russian warlord and Chechen ruler Ramzan Kadyrov took delivery of Cybertrucks and outfitted them with machine guns a few months later and then claimed that they joined the war effort in Ukraine.
Other Cybertrucks made their way to other markets like China.
Now, we learn that one has made it to the UK, but it didn’t last long.
The Greater Manchester Police (GMP) announced that the seized the Cybertruck pictured above that was roaming the streets in the UK illegally. They wrote on social media:
Whilst this may seem trivial to some, legitimate concerns exist around the safety of other road users or pedestrians if they were involved in a collision with the Cybertruck.
Tesla had brought the vehicle in the UK, but only for demonstration. It never tried to make it legal in the country.
The police added:
The Tesla Cybertruck is not road-legal in the UK and does not hold a certificate of conformity.
The authorities said that the Cybertruck was registered and insured abroad, but the driver was a UK resident. They will have to show prove of ownership and insurance to release the vehicle.
Electrek’s Take
The authorities are clearly right here since the vehicle is not road-legal currently, but could it be road-legal? It’s hard to say.
The police here repeat claims that the Cybertruck might be dangerous for pedestrians in crashes. That has been a concern that has often been raised since the truck launched in 2023.
It looks obvious based on the design of the Cybertruck. However, we haven’t seen third-party crash testing of the Cybertruck yet, and it might take a while before we do.
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