How Economic Efficiency Drives India’s Commitment to Russian Crude Amidst Global Pressure
Explore India's unwavering commitment to oil imports from Russia despite US tariff warnings. Understand the economic rationale behind this strategic sourcing and its implications for India's energy sector.
India's decision to maintain its oil purchases from Russia, despite the US President's tariff warning, is a clear demonstration of its commitment to economic efficiency. AS Sahney, Chairman of Indian Oil Corporation (IOC), the largest oil company in the country, has underscored this strategic approach.
The volume of purchases may vary each month depending on the discounts applied to Russian crude grades such as Urals. While discounts had previously soared to $40 per barrel, they dropped to $1.5 late last month, leading to a decrease in offtake. Recently, discounts have widened to approximately $2.70.
On August 6, US President Donald Trump enacted a 25 per cent tariff on goods imported from India due to its purchase of Russian oil, effectively raising the total duty to 50 per cent, citing the nation's ongoing imports of Russian oil as the reason.
India, in response to the imposed penalty, has reaffirmed its commitment to its national interests and economic security, demonstrating its unwavering strategic autonomy in oil procurement.
Given that the significant tariffs could impact the $40 billion in non-exempt exports India sends to the US, discussions have emerged about halting or reducing oil imports from Russia.
India's steadfast commitment to its oil procurement from Russia, despite the fluctuating discounts and the threat of US tariffs, is a testament to its resilience in the face of economic challenges. This stability in strategy is a key factor in India's financial resilience.
Sahney stated that refiners like IOC source crude oil from Russia solely based on economic factors and have not received directives to modify their purchase levels in reaction to US tariffs. "There is no pause," he remarked, noting that Russian oil has consistently flowed to Indian refiners in both July and this month.
India's oil purchases are strictly guided by economic factors, as explained by Sahney. The decision to acquire crude oil is made when the pricing and characteristics align with the processing needs of Indian refiners, a strategy that ensures economic efficiency.
"We're not making any special efforts to alter import volumes. Economic factors purely drive our buying decisions," he added.
During the April-June timeframe, imports from Russia constituted approximately 22-23 per cent of all crude oil processed by IOC refineries.
Sahney confirmed that at no point was Russian crude oil importation sanctioned, allowing India to continue purchasing based on economic factors. "These purchases will persist unless sanctions are implemented," he asserted. "We haven't received any instructions (from the government) to increase or decrease purchases. We're conducting business as usual."
Regarding speculations of refiners being urged to enhance purchases from the US to appease Trump, the IOC Chairman stated, "We are neither directed to buy more nor less from the US or any alternative source. Economic considerations guide our actions."
In a separate statement, Bharat Petroleum Corporation Ltd (BPCL) Director (Finance) Vetsa Ramakrishna Gupta mentioned during an investor call that discounts have decreased to $1.5 per barrel, resulting in diminished imports last month.
In the first quarter, Russian oil accounted for 34 per cent of BPCL's crude intake, and the company aims to maintain a 30-35 per cent ratio as long as sanctions remain absent.
"There are no sanctions on Russian crude," he emphasised. "India hasn't taken any actions that breach any sanctions."
India's oil imports from Russia have stayed robust in August, indicating that refiners continue to favour Russian crude, even with a significant drop in discounts from the nation. In 2025, India's import of Russian oil has risen to 1.8 million barrels daily, with Urals crude—Russia's primary export—making up 70% of its maritime shipments, surpassing the total June imports, according to data from Kpler, a provider of global real-time data and analytics. June saw imports from Russia at 1.6 million barrels per day.
However, the August import data may not accurately represent the current purchasing strategy of Indian refiners, especially in light of the US government's decision to impose penalties on New Delhi for its acquisition of Russian oil, as the cargoes arriving in India this month were likely booked in June or earlier before any recent market or policy changes. Hence, short-term data reflects earlier purchasing choices rather than immediate reactions.
Any repercussions from new restrictions or alterations in trading conditions are expected to emerge in the arrival figures from late September to October.
"India's strategic sourcing has enabled Indian refiners to obtain feedstock at a 30% cost advantage compared to their Middle Eastern competitors. For example, Reliance Industries has secured a 10-year agreement to import 500,000 barrels per day of Urals crude, which is projected to yield an additional $6 billion in profits by 2025.
Similarly, Nayara Energy, a partnership with Rosneft, has also gained from this, with Urals crude accounting for 72% of its imports. These refiners have utilised their ability to diversify feedstock to enhance profit margins, blending cheaper Russian crude with lighter grades for exports.
The US has imposed a 25% tariff on goods from India, bringing the total tariff to 50% and affecting $27 billion in exports. This action, along with EU sanctions that prohibit refined products sourced from Russian crude, did little to deter Indian refiners. For instance, Nayara Energy, though it experienced a drop in exports to the EU, transported diesel to China and Southeast Asia.
Indian refiners have shown impressive resilience in their financial standings. Reliance's annual report emphasises its ability to utilise multiple feedstocks, allowing it to assign non-Russian crude to its export-focused facilities while continuing to serve India's substantial demand for distillates through domestic refining. On the other hand, Nayara has shifted its focus to domestic sales via its 6,600 retail locations, reducing risks associated with exports.
The Urals-Brent differential is an important metric. Should the discount decrease even more—to $2 per barrel—Indian refiners might forfeit their cost benefit, leading them to turn to Middle Eastern crude. This is, however, based on the assumption that India would agree to the US’s policies on tariffs. On the other hand, if the discount increases, it could boost their profit margins, since India has managed to keep geopolitical conflicts under control. It has not yet reacted, nor given any statement, like Brazil, in response to the US’s 25 or 50 per cent tariff policies.
India has teamed up with BRICS nations and has worked out a way out and sourced alternate markets. The exports to the US from India that are affected by tariffs are textiles; pharma is still untouched, and the US is well aware of the significance of India's generic drugs. The F-35 sale has already been shelved, India has demonstrated to the world the F-35's vulnerability and is working on a much better and cheaper stealth variant.
Besides, shipping companies and insurers see a dramatic dip in their business when India does not export petroleum products to the EU. The EU had mentioned their ban on Nayara would apply from January 2026. Still, Nayara affected it forthwith and exported diesel to China soon after, implying neither the EU nor the US has any control to dictate terms.
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India's oil imports from Russia
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