India’s annual oil import invoice may rise by $11th of September billion if the nation is compelled to transfer away from Russian crude in response to U.S. threats of extra tariffs or penalties on Indian exports, analysts stated.
India, the world’s third-largest oil shopper and importer, has reaped vital advantages by swiftly substituting market-priced oil with discounted Russian crude following Western sanctions on Moscow after its invasion of Ukraine in February 2022.
Russian oil, which accounted for lower than 0.2% of India’s imports earlier than the warfare, now makes up 35-40% of the nation’s crude consumption, serving to cut back general vitality import prices, preserve retail gas costs in verify, and comprise inflation.
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The inflow of discounted Russian crude additionally enabled India to refine the oil and export petroleum merchandise, together with to international locations which have imposed sanctions on direct imports from Russia. The twin technique of Indian oil firms is posting report earnings.
This is, nevertheless, now beneath risk after U.S. President Donald Trump introduced a 25% tariff on Indian items plus an unspecified penalty for getting Russian oil and weapons. The 25% tariff has since been notified, however the penalty is but to be specified.
Coming inside days of the European Union banning imports of refined merchandise derived from Russian-origin crude, this presents a double whammy for Indian refiners.
Sumit Ritolia, Lead Research Analyst (Refining & Modelling) at world real-time information and analytics supplier Kpler, termed this as “a squeeze from both ends”.
EU sanctions — efficient from January 2026 — may drive Indian refiners to phase crude consumption on one facet, and on the opposite, the U.S. tariff risk raises the potential for secondary sanctions that will straight hit the transport, insurance coverage, and financing lifelines underpinning India’s Russian oil commerce.
“Together, these measures sharply curtail India’s crude procurement flexibility, raise compliance risk, and introduce significant cost uncertainty,” he stated.
Last fiscal, India spent over $137 billion on import of crude oil, which is refined into fuels like petrol and diesel.
For refiners like Reliance Industries Ltd and Nayara Energy — who collectively account for a bulk (greater than 50% in 2025) of the 1.7–2.0 million barrels per day (bpd) of Russian crude imports into India – the problem is acute.
While Nayara is backed by Russian oil large Rosneft and was sanctioned by the EU final month, Reliance has been a giant gas exporter to Europe.
As one of many world’s largest diesel exporters — and with whole refined product exports to Europe averaging round 200,000 bpd in 2024 and 185,000 bpd up to now in 2025 — Reliance has extensively utilised discounted Russian crude to enhance refining margins over the previous two years, in accordance to Kpler.
“The introduction of strict origin-tracking requirements now compels Reliance to either curtail its intake of Russian feedstock, potentially affecting cost competitiveness, or reroute Russian-linked products to non-EU markets,” Mr. Ritolia stated.
However, Reliance’s dual-refinery construction — a domestic-focused unit and an export-oriented complicated — presents strategic flexibility. It can allocate non-Russian crude to its export-oriented refinery and proceed assembly EU compliance requirements, whereas processing Russian barrels on the home unit for different markets.
Although redirecting diesel exports to Southeast Asia, Africa, or Latin America is operationally possible, such a shift would contain narrower margins, longer voyage instances, and elevated demand variability, making it commercially much less optimum, he stated.
Kpler information reveals a notable decline in India’s Russian crude imports in July (1.8 million bpd versus 2.1 million bpd in June), aligning with seasonal refinery upkeep and weaker monsoon-driven demand. However, the drop is extra pronounced amongst state-run refiners, possible reflecting heightened compliance sensitivity amid mounting geopolitical risk.
Private refiners, who account for over 50 per cent of Russian crude consumption, have additionally begun decreasing publicity, with contemporary procurement diversification underway this week as considerations over US sanctions intensify.
Mr. Ritolia stated changing Russian crude is not plug-and-play. The Middle East is the logical fallback, however has constraints – contractual lock-in, pricing rigidity, and a mismatch in crude high quality that impacts product yield and refinery configuration.
“The risk here is not just supply but profitability. Refiners will face higher feedstock costs, and in the case of complex units optimized for (Russian) Urals-like blends, even margins will be under pressure,” he stated.
In the long run course, Kpler believes India’s complicated non-public refiners — backed by strong buying and selling arms and versatile configurations — are anticipated to pivot towards non-Russian barrels from the Middle East, West Africa, Latin America, and even the U.S., the place economics permits.
This shift, whereas operationally possible, will probably be gradual and strategically aligned with evolving regulatory frameworks, contract constructions, and margin dynamics.
However, changing Russian barrels in full isn’t any straightforward feat — logistically daunting, economically painful, and geopolitically fraught. Supply substitution may be possible on paper, however stays fraught in apply.
“Financially, the implications are massive. Assuming a $5 per barrel discount lost across 1.8 million bpd, India could see its import bill swell by $9–11 billion annually. If global flat prices rise further due to reduced Russian availability, the cost could be higher,” it stated.
This would improve fiscal pressure, significantly if the federal government steps in to stabilize retail gas costs. The cascading impression on inflation, foreign money, and financial coverage can be tough to ignore.
