US pressure on Russian crude trade could inflate India’s oil imports by $11 billion

US pressure on Russian crude trade could inflate India’s oil imports by $11 billion

India’s reliance on discounted Russian crude may soon come at a steep cost. According to analysts quoted by the Press Trust of India (PTI), India could see its annual oil import bill surge by $9–11 billion (₹75,000–91,000 crore) if compelled to scale back or halt Russian crude purchases amid growing US pressure. The warning follows US President Donald Trump’s recent announcement of a 25 per cent tariff on Indian goods and threats of additional penalties for importing Russian oil and defence equipment. The tariff is now in force, while the nature of the penalty remains unspecified. However, the chilling effect is already visible in Indian refineries and global trade circles.

Russian crude, once a bargain, now a geopolitical liability

India, the world’s third-largest oil importer, had swiftly ramped up Russian oil purchases after Western sanctions isolated Moscow post its 2022 invasion of Ukraine. From under 0.2 per cent before the war, Russian crude now makes up 35–40 per cent of India’s total imports. The shift delivered massive cost savings, tamed domestic fuel prices, and helped private refiners like Reliance Industries and Nayara Energy clock record profits by refining cheap crude into diesel and exporting it, even to Europe.

But with the European Union banning imports of fuels derived from Russian-origin crude starting January 2026, and Washington threatening penalties, Indian refiners now face what Kpler analyst Sumit Ritolia calls “a squeeze from both ends.” According to Kpler, EU rules will force Indian refiners to segregate their crude intake, while the US may introduce secondary sanctions that complicate shipping, insurance, and dollar-based financing, the backbone of India’s Russian oil trade.

Refiners export and margin hit

India’s total oil import bill stood at over $137 billion (₹11.4 lakh crore) last fiscals. Any disruption in Russian flows or loss of the $5-per-barrel discount could push costs sharply higher, as per PTI. The impact would be most acute for private refiners. Reliance, which sends over 185,000 barrels per day of refined fuels to Europe in 2025, risks losing market access if it fails to comply with origin-tracking mandates.

While Reliance may reroute these products to Asia, Africa, or Latin America, analysts warn this would involve longer voyages, narrower margins, and higher risk. Nayara Energy, majority-owned by Russia’s Rosneft, faces EU sanctions already and is even more exposed.

July imports drop as refiners reassess risk

India’s Russian crude imports fell to 1.8 million barrels per day in July, down from 2.1 million bpd in June, as per Kpler data. While part of the decline was due to seasonal refinery maintenance, analysts noted that state-run refiners are particularly cautious, anticipating compliance challenges and regulatory uncertainty.

Private refiners, who account for over 50 per cent of Russian crude intake, have also begun diversifying their procurement, with a fresh focus on non-Russian barrels from the Middle East, West Africa, Latin America, or even the United States, wherever commercially viable.

But experts caution that this is far from a plug-and-play switch.

Consumers may feel the heat

Ritolia noted that replacing Russian crude fully is logistically complex, costly, and technically challenging, especially for complex Indian refineries calibrated to handle Urals-grade blends. Switching feedstock could reduce yields and profitability, ultimately affecting margins. Should Russia be forced out of India’s oil mix, the country’s energy security, fiscal balance, and inflation management would come under stress. If the government opts to absorb the price shock to protect consumers, the resulting fiscal burden could widen.

Kpler estimates that India could face an additional $9–11 billion (₹75,000–91,000 crore) in annual import costs just from losing the Russian discount. And if global oil prices rise further due to supply rebalancing, the impact could be even worse. In that case, Indian consumers could face rising petrol and diesel prices, while the rupee may weaken and monetary policy could become harder to manage. As PTI reports, India’s bet on Russian crude helped stabilise its energy economy for two years. But with US and EU pressure mounting, that bargain may soon turn into a very expensive risk.

(With inputs from the agencies)