India's crude lifelines surge as sanctions reshape global oil flows

Recent geopolitical developments have seen record fuel supplies, expanded discounts on oil and robust domestic appetite for fuel

Geopolitics tend to play havoc with India’s oil & gas economy. This time it could be different. 

India’s economy suffered during the 2008 global financial crisis, when crude oil soared to a near $150 per barrel; in March 2022, when European benchmark oil Brent surged to $138 a barrel soon after Russia invaded Ukraine; and again in the same month, when LNG benchmark Japan Korea Marker soared to $85 per million British thermal units. 

With imports accounting for 90 per cent of its crude oil needs, 60 percent of liquid petroleum gas (LPG, or cooking gas) and 50 per cent of liquified natural gas (LNG), India was always one of the first to feel the tremors from geopolitical uncertainties.  But 2025 failed to move the needle on oil and gas prices despite stringent western sanctions, secondary tariffs, the Iran-Israel-US conflict, and sabre rattling over Venezuela before the US bombed the Latin American country this month and removed its president. 

On the contrary—barring any potential fallout from protests in Iran—India is in a sweet spot on supplies and prices, offering comfort to finance minister Nirmala Sitharaman as she draws up Budget 2026. 

European benchmark Brent crude slipped below $60 per barrel after the US assumed control over Venezuelan oil — but prices have since spiked to $65 per barrel after violent protests rocked Iran and US President Donald Trump announced tariffs on nations trading with Iran.  

But the Indian crude oil basket – a blend of medium, sour, lower quality Dubai benchmark and lighter, sweet, better quality Brent — averaged less than $60 per barrel in January, the lowest since $55 per barrel in January 2021 during the pandemic, oil ministry data showed.  

The basket may decline further to less than $50 per barrel by June, according to an SBI Research report. Other foreign brokerages peg oil to fluctuate in the $55-$60 per barrel this year. That compares with a $66 average this fiscal, according to oil ministry data. 

“Oil prices are moderate, so working capital requirements will be lower,” said Prashant Vasisht, senior vice president at ratings agency Icra. “LPG under-recoveries are also expected to remain lower in 2026 owing to decline in crude prices compared to 2025.” 

Ironically, sanctions introduced in October by the Trump administration—crippling exports of oil from Rosneft and Lukoil, Russia’s two biggest producers—have tripled discounts on Russian oil, from $1.50-$2 per barrel in mid-2025, two senior traders from state refiners said.  

Limited impact  

“So far, the impact on Indian refiners is limited,” said Singapore-based Vandana Hari, a leading energy analyst. “If the main purpose of the sanctions was to squeeze Moscow's netbacks (profit per barrel of oil after deducting costs) rather than crimp Russian volumes, that purpose has been at least partially served. Meanwhile, the crude's discounts have widened, so that helps the West's aims too.” 

One reason for expanding discounts is that Russia is finding it harder to find buyers for oil from its sanctioned firms. Non-sanctioned producers like Zarubezhneft and other smaller producers are pooling cargoes and offering them to India via Dubai-based trading entities, traders said. 

Discounts on supplies of Russian oil have expanded by over three-fold to over $7 per barrel, prompting state-run refiner Indian Oil to import 459,000 barrels per day (bpd) in December, the highest since May 2024, data from maritime intelligence agency Kpler shows.  

Competitive pricing continues to entice Indian refiners despite sanctions and a 25 per cent secondary tariff, state-run refining officials said. India imported over 1.2 million bpd in December and is on track for similar volumes this month as on date. While the share of Russian oil has shrunk by around 15 percentage points to 22 per cent in December from November, it is still India’s biggest supplier of oil. 

In 2025, India got away easy. Exports of fuels from India led by Reliance reached an all-time high in 2025 as refiners capitalized on discounted Russian oil and strong export margins, a senior refining official said and ship tracking data showed. Sanctions have made little difference to India’s exports of petroleum products. 

Indian imports of Russian crude oil fell by only 3.5 per cent in 2025 at 1.73 million bpd from 2024, Kpler data showed. But Russia retained top place, with a share nearly twice that of second place Iraq. 

Reliance was the top buyer averaging 590,000 bpd last year on the back of a  500,000 bpd term contract with Rosneft—but October’s sanctions by Washington forced the refiner to cut purchases by around half to 293,000 bpd in December from November while state-run refiner Indian Oil boosted purchases to a 19-month high of 459,000 bpd. Kpler data until today shows Indian Oil’s purchases of Russian oil at a record 577,000 bpd and Reliance at nil. 

Meanwhile Nayara Energy, a Rosneft affiliate, has continued to buy Russian oil from sanctioned Rosneft—it is sourcing its entire requirement for its 400,000 bpd refinery at Vadinar from Russia. Nayara did not comment. 

State-run refiners accounted for around 56 per cent of India’s Russian oil imports until date in January, with Nayara contributing the rest. 

“It should be business as usual since I see no disruption in the crude sourcing channels for India,’’ New Delhi-based Narendra Taneja, a leading energy analyst, said. ''There is plenty of oil available in the world and every oil exporting country seems to be keen to secure maximum share in the Indian crude import basket.” The International Energy Agency expects an oversupply of 3.5 million-4 million bpd this year. 

Venezuela and Iran 

Venezuela offers no immediate gains for India though Reliance has expressed interest in importing their oil. 

From a market perspective, Venezuela’s current production is now too small to have a material impact on global supply, so even further disruptions would likely have only a modest effect on prices in the near term, according to a JP Morgan note.  Based on Vortexa data, recent Venezuelan crude exports averaged 700-750 kbd over 2024-25.  

“We can expect to see crude export momentum pick up from the Atlantic Basin especially from new projects in Guyana, Brazil and Argentina placing an additional 500-550,000 bpd of oil available for export,” said Pamela Munger, head of market analysis EMEA for Vortexa. “And despite significant infrastructure hurdles ahead a wildcard for further exports could be Venezuela.” 

That leaves Iran, a wildcard in 2026. A war in West Asia involving Iran could spell trouble for shipments of oil and gas to India and increase volatility. But given Iran’s meagre contribution to the wider oil market, prices of oil are expected to keep low. What could still upset India’s crude calculations is the growing unrest in Iran and Trump's threat of another 25 per cent tariff for any country doing business with Iran. Iran can also disrupt access to the Straits of Hormuz, a critical but narrow passageway to half of India’s oil imports. 

“The Iran escalation is not looking good (for India),” Hari, founder of energy analysts Vanda Insights, said. 

 

Calm despite storm

• India is highly dependent on crude oil, natural gas and LPG imports, primarily from geopolitically sensitive West Asia and Russia
• But 2025 failed to move the needle on oil & gas prices despite stringent western sanctions and secondary tariffs
• Barring the potential fallout from protests in Iran, India remains in a sweet spot on supplies and prices 
• Exports of fuels from India reached an all-time high in 2025 as refiners capitalised on discounted Russian oil and strong export margins
• State-run refiners accounted for 60% of India’s Russian oil imports