 "India's Russian oil puzzle: Higher cost, drying offers, and tariff pressure")
What was once a transactional energy relationship with Russia has now become the focal point of a growing diplomatic storm. India’s decision to continue purchasing discounted Russian crude, seen by the US as a lifeline to Moscow’s war economy, is now under direct scrutiny from US President Donald Trump. In remarks that have rattled policymakers in Delhi, Trump has imposed a sweeping 25 per cent tariff on Indian goods along with 25 per cent additional penalties for using Russian oil.
Indian refiners, once flush with cheap Russian oil, are now struggling to secure shipments as Western sanctions tighten, shipping insurance becomes harder to access, and intermediaries begin to vanish from the spot market. While India publicly stands its ground, the geopolitical tightrope is growing thinner. Behind the scenes, the country is racing to recalibrate its strategy, one that balances energy security, economic pragmatism, and a fraught global order.
West tightening the noose on Russian oil shipments
India currently relies on Russian crude for approximately 35 to 40 per cent of its oil imports, or roughly 1.9 million barrels per day as of mid-2025. But purchasing Russian oil comes with growing complications. US “secondary” sanctions now target over 180 vessels, Russian exporters like Gazprom Neft, and shadow tanker fleets, reducing sanctioned shipping capacity and dramatically increasing freight costs.
Indian refiners have attempted to build a “sanctions-proof” supply chain using alternate insurers and discreet shipping arrangements. However, many Indian companies remain exposed to US financial norms, and even sanctioned-compliant cargoes can carry operational risks.
Costs rise, discounts shrink, offers disappear
In January this year, freight surcharges made shipping Russian oil to India especially costly: Aframax tanker deliveries surged to $9–10 million per load, compared to $6.5–7.5 million for China-bound deliveries. Discounts on Russian crude have narrowed significantly, weakening the economic rationale.
Major state-owned refiners have paused new Russian spot buys, citing reduced discounts and mounting US pressure. Even discounted Russian crude, once profitable, is now offset by rising insurance and freight costs, eating into refinery margins. Spot-market intermediaries and traders have suspended new offers since March.
Indian refiners like BPCL and IOCL, which typically import 16–17 Russian cargoes monthly, covering roughly 35 per cent of their needs, have reported being unable to secure shipments due to tightened sanctions.
With cargo offers drying up and insurance options constrained, refiners like BPCL are floating tenders for West Asian (e.g. Abu Dhabi’s Murban) and US crude to offset lost Russian volumes. Some are exploring six-month US supply agreements, though at higher landed costs, which significantly reduces margins.
Private players like Reliance and Nayara Energy maintain longer-term Russian contracts but also face EU sanctions. Nayara is now under EU restrictions on export of refined products.
India’s alternatives if Russian crude disappears
Last month, energy minister Hardeep Singh Puri affirmed India’s ability to secure crude from other sources, pointing to diversification from 27 to 40 countries in recent months — including Brazil, Canada, and Guyana — along with higher volumes from OPEC members.
However, analysts caution that replacing 1.8 to 2.0 million barrels per day of Russian oil quickly is difficult. Alternative sources are generally $4–5 per barrel more expensive and may not match the Urals-grade compatibility with Indian refinery output streams. Extended logistics and rigid contracts further complicate a fast switch.
Analysts have warned that exiting Russian crude could inflate India’s oil import bill by $9–11 billion annually, potentially pressuring fuel prices and headline inflation. RBI Governor Sanjay Malhotra, however, expects macroeconomic effects to remain manageable.
If India exits, China becomes Russia’s only major buyer
If India exits the Russian crude market, only China will remain as a primary buyer. India and China together consume around 80 per cent of Russian seaborne exports, with India accounting for roughly 36 to 38 per cent and China about 45 to 47 per cent.
Moscow could respond by shutting the CPC pipeline, potentially cutting global flows by 3 to 3.5 per cent of world supply. OPEC+ has already agreed to raise output by 547,000 barrels per day in September to stabilise markets. Yet, analysts warn that if Russian barrels are removed, global prices could leap to $80–90 per barrel and temporarily spike above $100–200 if disruptions escalate.
Brent crude has already responded to tariff threats, rising to around $68.60 per barrel on August 6.
India’s strategic dilemma grows sharper
India sits at a critical crossroads: surrender to US pressure to cease Russian oil purchases or cling to an import strategy that shields domestic fuel prices but risks escalating trade retaliation.
Although Indian officials claim there has been no instruction to cut imports and emphasise the long-term nature of contracts, the suspension of imports by public-sector refineries signals real operational shifts.