Russian oil is getting cheaper — India and China are reducing purchases: will the discount help save the Kremlin's budget?
07.11.2025Critical market turbulence: how new US sanctions, falling demand and global changes are driving the price of Urals to a minimum, and what it means for the Russian economy
Oil tankers sail along the Nakhodka Bay near the port city of Nakhodka, Russia, August 12, 2022. REUTERS/Tatyana Mil commercial licensing rights via @reuters.com
In the fall of 2025, the oil market in Asia was reshaped by new active US sanctions and the unexpected reaction of the main buyers of Russian raw materials - India and China. According to Reuters, Global Banking and Finance Review and a number of specialized trading companies, the largest Asian refineries are announcing a pause in new contracts with Rosneft and Lukoil - the multi-billion dollar revenues of the Russian budget and the stability of the industry are at risk1.
US sanctions: the final blow to Russian oil giants
November 21 is the deadline for all Asian counterparties to complete settlements with Rosneft and Lukoil. Under the new sanctions, American banks and companies that cooperate with Russian petrochemicals risk secondary fines and asset freezes.1.
India reacted quickly: Hindustan Petroleum, Bharat Petroleum, Mangalore Refinery, HPCL-Mittal Energy and Reliance Industries have already suspended purchases for December - more than 65% of all Indian imports of Russian oil. Chinese state-owned corporations have also temporarily suspended purchases on the spot market and openly declared to international journalists that deals with "sanctioned" brands are suspended until further clarification.2
More on the details: the Asian market is currently divided - oil from "clean" suppliers is sold at a premium, and cargoes from sanctioned companies are sold at a significant discount2.
Price drop: record discount to Brent
The biggest blow was to Urals: the discount expanded from $2 to $4 per barrel (for December deliveries). This is the largest discount in a year - in 2022, after the first sanctions, the difference was $8 per barrel1Chinese ports accept ESPO oil from eastern Russia at a minimum price, Indian traders switch to "clean" batches, avoiding sanctions risks.3
The withdrawal from Russian oil in December means: Russia leaves dozens of tankers with "unpurchased" oil, the size of barrels in the seas has reached its maximum in six months4.
Trading scenarios and the Asian market
In the face of a sharp drop in demand, Indian and Chinese refineries are renegotiating contracts with Saudi Arabia - prices for petroleum products from Aramco for December have been reduced, which is beneficial for alternative imports.5 Journalists note: key Russian suppliers are looking for workarounds - selling through new trading companies, working with little-known legal entities, and trying to load exports through Turkey, Egypt, and the UAE.
But secondary sanctions block even these chains - banks stop making settlements, and the risk of losing reputation forces traders to switch to spot purchases from trusted sources.
Impact on the Russian budget and energy sector
Urals prices are key to the Russian federal budget's revenues. A drop of $4-8/barrel could reduce treasury revenues by $3-4 billion per month1Bloomberg and BNE Intellinews note: in October, Russian oil and gas revenues fell by 27%, and the number of new contracts for 2026 in Asia decreased by almost a quarter4.
The issue of energy companies' survival is critical: trade shipments remain "hanging," and storing oil in tankers and warehouses costs lost revenue due to lower prices and additional logistics costs. The Kremlin is trying to convince Asian partners of the "stability" of supplies, but banks and insurers are unwilling to take risks under sanctions.
Price dynamics, geopolitical context and further risks
Amid falling Russian sales, Saudi Arabia and the UAE are reducing prices for December contracts — Indian and Chinese companies are grabbing favorable terms.5 Journalists point out that under pressure from Washington, India and China are reducing their purchases to avoid being blacklisted for secondary sanctions. According to the results of November, the decline in demand could be the largest since the beginning of the war.
More and more cargoes of "Russian" oil are being sold through little-known companies under cartel schemes; ship owners are anxiously preparing for the possible seizure of cargoes in European and Asian harbors.
Prospects for Europe and Ukraine: what will change in 2026?
Europe is increasing its purchases of petroleum products from the US, Saudi Arabia, and its own markets — reasons: reliability, transparency, and guarantees of protection from sanctions.5 Ukraine benefits directly — increased competition in the market, lower prices for alternative energy resources, and the acceleration of the “oil sanctions cycle” could reduce the Kremlin’s profits to a historic low.
Conclusions: Will Russian oil become a toxic cargo on the global market?
The current discount on Russian oil is just the beginning of a long trend that could change the global energy map. Changing counterparties, new sanctions, logistics risks, and rising costs are forcing Russia to balance between “empty” tankers and a severe recession for a key industry. When Indian and Chinese refineries refuse Russian oil, it is not only a geopolitical signal, but also a marker of the Kremlin’s financial decline.
Sources
- Reuters: Russian oil discounts widen as Indian and Chinese refiners cut purchases
- Global Banking and Finance Review: Russian oil discounts widen as Indian and Chinese refiners cut purchases
- Economic Times: Russian oil discounts said to widen as Indian and Chinese refiners cut purchases
- Dialog.ua: Russian oil exports have collapsed: China, India and Turkey are turning away...
