In the wake of tightening US, UK, and EU sanctions, India – once the largest importers of Russian oil – faces growing geopolitical and financial pressure to curtail transactions with Moscow. The latest restrictions targeting Russian energy firms and maritime fleets have created a complex web of legal and logistical challenges for Indian refineries and businesses. As the sanctions landscape evolves, companies must reassess their strategies to ensure better compliance and mitigate risks.
Indian businesses dealing in Russian oil now face increasing legal and financial exposure. With heightened scrutiny on shipping and payment mechanisms, the risk of non-compliance – and its consequences – has never been greater.
How Sanctions Are Increasing Risks for Indian Businesses
India’s dependence on Russian oil – accounting for roughly 35% of its crude imports in 2024 – puts its refiners in a precarious position. Regulatory pressure has intensified, particularly concerning compliance with the G7 oil price cap. Previously, Indian companies relied on indirect payment mechanisms, but with increasing scrutiny of financial institutions handling Russian transactions, compliance risks are now significantly higher.
In January 2025, the US Treasury Department blocked over 180 entities, including shipping companies and oil traders, aiming to disrupt Moscow’s revenue streams. A key focus of these measures is the so-called “shadow fleet” – a network of tankers circumventing restrictions to transport Russian crude.
Unlike primary sanctions, which impose restrictions on US persons and entities within the US, secondary sanctions target non-US businesses that engage with sanctioned persons or in sanctioned activities. While these entities may not be subject to US jurisdiction, they risk severe consequences, such as losing access to the US financial system, being restricted from dollar transactions or facing operational disruptions.
For Indian businesses, the ripple effects of sanctions breaches extend beyond oil. Financial institutions, logistics providers, and insurers are reassessing their exposure to Russian trade. In October 2024, the US Department of the Treasury’s Office of Foreign Assets Control (OFAC) sanctioned 19 Indian private sector entities and two individuals for facilitating transactions that bypassed US restrictions on Russia, by supplying technology and dual-use equipment for military use. Among them, Bengaluru-based Emsystech faced asset freezes and was banned from US-linked transactions for exporting electronic components to Russian entities. These measures resulted in banking restrictions and loss of access to US dollar transactions, severely disrupting its global operations.
Given the extraterritorial reach of these measures, companies must implement real-time sanctions screening and legal oversight to mitigate exposure. Compliance is no longer optional – it is essential.
Risks for Indian Companies
Indian companies face two major risks amid evolving sanctions: supply chain disruptions and compliance challenges in international payment systems and dollar transactions.
1. Supply Chain Disruptions
Sanctions on logistics networks and shipping firms are affecting industries beyond energy, including manufacturing and pharmaceuticals. Restrictions on Russian oil shipments have forced major Indian refiners to scramble for alternative suppliers, increasing costs and uncertainty. In January 2025, Bharat Petroleum Corporation Ltd (BPCL) reported a shortage of Russian oil cargoes for March deliveries due to new US sanctions that blocked Russian oil producers and vessels, forcing BPCL to source oil from the Middle East at higher costs.
Beyond oil, businesses reliant on Russian raw materials and industrial components face similar disruptions. Shipment delays, payment processing hurdles, and sudden supplier blacklisting can cause production slowdowns.
To mitigate supply Chain Risks, companies must implement due diligence mechanisms to screen suppliers, partners and financial institutions. At its most basic level, this involves screening against global sanctions lists including OFAC’s Specially Designated Nationals (SDN) List, the EU’s Consolidated Sanctions List, and the UK’s Office of Financial Sanctions Implementation (OFSI) List.
2. International Payment Systems and Dollar Transactions
With Western authorities increasing oversight, Indian banks and financial institutions processing payments for Russian oil face heightened risks. Any dollar-based payment involving a sanctioned entity falls under US jurisdiction, potentially leading to financial penalties or restrictions.
In response, Indian refiners are exploring alternative payment methods. Some refiners have started settling Russian oil imports in Chinese renminbi, reducing reliance on the US dollar. Additionally, Russia has proposed a BRICS cross-border payment system to facilitate transactions in local currencies and strengthen economic ties within the BRICS bloc.
However, these alternatives come with their own set of legal and regulatory challenges. Even non-dollar transactions may violate sanctions depending on the jurisdictions, transactions and entities involved.
The Cost of Non-Compliance for Indian Businesses
Without a robust sanctions compliance policy, Indian businesses face serious legal, financial, operational, and reputational risks. Violations of sanctions laws can result in significant penalties, including fines and, imprisonment.
An added complexity is that evolving sanctions regimes can lead to commercial disputes. In May 2023, India’s GAIL took Gazprom to the LCIA after supply disruptions linked to sanctions on a German Gazprom subsidiary. These types of disputes can cause major financial losses.
With sanctions evolving rapidly, Indian businesses must act now to protect their global operations. Strengthening compliance programs, reassessing procurement strategies, and seeking expert legal advice can prevent financial penalties and disruptions.
At Eldwick Law, we offer tailored solutions to help businesses navigate the complex sanctions landscape. Contact us today to safeguard your business and ensure full compliance with international regulations.
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