India's oil import bill could surge by USD 9-11 billion annually if forced to abandon discounted Russian crude due to US threats of tariffs and penalties, analysts warn. As the world’s third-largest oil consumer, India has relied heavily on Russian oil, which now constitutes 35-40% of its crude imports, following Western sanctions on Moscow after the 2022 Ukraine invasion.

The shift to Russian crude has lowered energy costs, stabilized fuel prices, and curbed inflation, while enabling refiners like Reliance Industries and Nayara Energy to export petroleum products profitably. However, US President Donald Trump’s recent 25% tariff on Indian goods, coupled with potential penalties for Russian oil purchases, threatens this strategy. The European Union’s January 2026 ban on refined products from Russian crude adds further pressure.

“India faces a squeeze from both ends,” said Sumit Ritolia, Lead Research Analyst at Kpler. The US tariffs and EU sanctions could disrupt shipping, insurance, and financing for India’s Russian oil trade, raising costs and compliance risks. India’s crude oil imports last year cost USD 137 billion, with private refiners like Reliance and Nayara, backed by Russia’s Rosneft, handling over half of the 1.7-2.0 million barrels per day (bpd) of Russian crude.

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Reliance, a major diesel exporter to Europe, may need to redirect Russian-linked products to markets like Southeast Asia or Africa, which offer lower margins and higher logistical challenges. Its dual-refinery setup allows flexibility to process non-Russian crude for exports while using Russian oil domestically, but profitability remains at risk.

Kpler data indicates a July drop in Russian crude imports to 1.8 million bpd from 2.1 million in June, driven by maintenance and geopolitical caution. Replacing Russian oil with Middle Eastern or other sources is challenging due to pricing, quality mismatches, and contractual constraints, potentially squeezing refinery margins.

India’s private refiners are exploring non-Russian crude from West Africa, Latin America, or the US, but a full transition is logistically and economically complex. Losing the USD 5 per barrel discount on Russian oil could inflate India’s import bill significantly, with broader impacts on inflation and fiscal policy.

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