Amid rising strain on India from the US and different Western powers over the previous couple of months, Indian refiners — led by public sector gamers — started slicing down on Russian oil imports, a lot earlier than US President Donald Trump’s announcement earlier this week of an unspecified tariff “penalty” on New Delhi for its defence and vitality imports from Moscow. Newest vessel monitoring information reveals that July deliveries of Russian crude — which might have been contracted Might or early June — to Indian refiners fell considerably. Trade and commerce sources additionally indicated that Indian public sector refiners have, in the intervening time, halted future contracting of Russian oil, the mainstay of India’s oil imports for the higher a part of the previous three years.
Trump has now stated that he “heard” that India will not be shopping for oil from Russia, calling it a “good step”, but additionally added that he’s unsure if the data is “proper or not”. “Properly, I perceive India not goes to be shopping for oil from Russia. That’s what I heard. I don’t know if that’s proper or not, however that’s a great step. We’ll see what occurs,” Trump instructed reporters within the US on Friday.
In the meantime, India — the world’s third-largest client of crude oil with an import dependency stage of over 85 per cent — continues to take care of that its oil purchases are industrial selections. “We take selections based mostly on the worth at which oil is out there within the worldwide market and relying on the worldwide state of affairs at the moment,” Ministry of Exterior Affairs Spokesperson Randhir Jaiswal stated Friday in response to a query on whether or not Indian refiners have stopped shopping for Russian oil over the previous few days.
Trade insiders, consultants, and commerce sources point out that renewed strain and threats from the US and Europe over the previous few weeks have solid a shadow on India’s Russian oil imports, and will mark the start of Indian refiners pivoting away from Moscow’s oil. To this point, India had efficiently managed to stroll “the advantageous line between vitality safety and geopolitical strain”, however its choices now appeared restricted, one skilled stated, including that Indian refiners “should now plan not only for industrial shifts, however for systemic geopolitical realignment”.
Deliberations are on between the federal government and different stakeholders — primarily refiners — on managing the state of affairs and assessing the alternatives on the desk for India, sources stated. With a pre-emptive discount in Russian oil imports, some little bit of signaling has already taken place. The subsequent steps would almost definitely be selected how the India-US dynamic evolves, and extra importantly, whether or not or not Trump decides to additional harden the American stance and rhetoric in opposition to Russia. Any breakthrough between the White Home and Kremlin over the Russia-Ukraine struggle would almost definitely ease the strain on patrons of Russian crude.
This renewed strain from the West — forcing Russia’s prime commerce companions to chop down on imports from the nation — are geared toward forcing the Kremlin’s hand into ending the struggle in Ukraine. For Trump, who needs the three-year-old Russia-Ukraine struggle to finish inside days, that is an opportune time to pressurise international locations like India and China over their Russian imports, given the delicate commerce negotiations that these international locations are holding with the US.
Stress up, volumes down
India’s Russian oil imports in July had been at 1.6 million barrels per day (bpd), down 24 per cent from June ranges, and 23.5 per cent from volumes delivered in July of final yr, in accordance with newest tanker information from world real-time information and analytics supplier Kpler. The share of Russian crude in India’s oil import basket in July contracted notably to round 33.8 per cent from July’s 44.5 per cent. Whereas the drop in oil imports from Russia is evidently extra pronounced amongst Indian state-owned refiners, seemingly reflecting heightened compliance sensitivity amid mounting dangers, personal sector refiners—who account for over half of Russian crude imports, have additionally lowered publicity to Moscow’s oil.
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The discount in import volumes from Russia in July was offset by larger crude deliveries from different suppliers — primarily Iraq, Saudi Arabia, the United Arab Emirates, the US, Nigeria, and Kuwait — all of which expanded their share in India’s oil imports vis-à-vis June ranges.
With a lot of the West shunning Russian crude following the nation’s February 2022 invasion of Ukraine, Russia started providing reductions on its oil to prepared patrons. Indian refiners had been fast to avail the chance, resulting in Russia — earlier a peripheral provider of oil to India — rising as India’s greatest supply of crude, displacing the normal West Asian suppliers. Whereas the reductions have different over time, Russian oil flows to India largely remained sturdy regardless of Western strain and restricted sanctions on Russia’s oil buying and selling ecosystem. However the seems to be altering now, and quick.
“On one facet, the EU’s (European Union’s) sanctions — efficient from January 2026 — ban imports of refined merchandise derived from Russian-origin crude, forcing Indian refiners to phase crude consumption and product flows. However, the US tariff menace raises the opportunity of secondary sanctions that may immediately hit the delivery, insurance coverage, and financing lifelines underpinning India’s Russian oil commerce. Collectively, these measures sharply curtail India’s crude procurement flexibility, increase compliance danger, and introduce important value uncertainty…(it) represents a double whammy for Indian refiners,” stated Sumit Ritloia, Lead Analysis Analyst, Refining & Modeling at Kpler.
Earlier than this week’s tariff announcement by Trump mentioning a “penalty” on India, India’s important Russian oil imports had been being subjected to a extra aggressive stance by Western powers for just a few weeks. Trump himself had had threatened “biting” secondary tariffs of 100 per cent on patrons of Russian exports, and the European Union final month introduced a sanctions bundle, broadly seen as essentially the most complete effort but by the EU to limit Russia’s income stream, inserting a ban on import of fuels into Europe if constructed from Russian oil in third international locations like India, and likewise sanctioning Indian refiner Nayara Vitality, wherein Russian oil big Rosneft holds 49.13 per cent stake.
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Suspending Russian oil imports: it’s not that easy, or simple
Based on Petroleum Minister Hardeep Singh Puri, the huge market share of Russian crude in India’s oil imports doesn’t imply that India relies on Russia for oil, and different suppliers can shortly are available to exchange Russian volumes if there’s any main disruption. “I don’t really feel any strain in my thoughts. India has diversified the sources of provide… I’m not anxious in any respect. If one thing occurs, we’ll cope with it…there’s adequate provide obtainable,” Puri had stated at an occasion earlier in July. He added that India in recent times has expanded its crude sourcing slate from 27 international locations to round 40 international locations, and sufficient oil was obtainable globally for India to purchase and guarantee vitality safety.
If India certainly decides to shift away from Russian crude, business insiders and consultants count on New Delhi to barter a possible wind-down interval for decreasing provides, as changing the huge volumes of Russian oil provide in a single day is inconceivable, in accordance with business insiders. It could take a minimum of three-four months to considerably lower down on imports and shift to different suppliers — primarily in West Asia, but additionally in Africa, and even the US and Latin America.
Lack of discounted Russian barrels will surely push up the relative value of imports by just a few {dollars} a barrel, which in flip would inflate India’s oil import invoice by billions of {dollars} on an annualised foundation. Moreover, if world oil costs rise within the eventuality of most of Russian oil going off the market, the hit for India can be amplified additional.
“Changing Russian crude isn’t plug-and-play…it’s no simple feat—logistically daunting, economically painful, and geopolitically fraught. Provide substitution could also be possible on paper, but it surely stays fraught in observe. Gulf barrels include pricing rigidity, African grades add freight volatility, and Latin American flows face availability constraints,” stated Ritolia.
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India’s conventional crude suppliers in West Asia — mainly Iraq, Saudi Arabia, and the UAE — can be the logical fall-back, however Indian refiners must grapple with important constraints as they cut back Russian oil imports. Numerous the crude from West Asia comes by time period contracts, in contrast to spot purchases of Russian crude, which can drive Indian refiners to decide to larger annual offtake of West Asian oil, which is extra rigidly priced in comparison with discounted Russian crude. Additionally, various Indian refineries that had gotten attuned to processing Russian crude in massive volumes might even see an influence on their product yield and refinery configurations as a result of crude high quality mismatch.
India can be anticipated to maintain its ongoing efforts to diversify its sources of crude oil. Geopolitical shifts, freight economics, and refinery economics are anticipated to proceed shaping India’s crude sourcing selections and diversification technique.