Loss of discounted Russian crude could add $4 billion to India’s oil import bill

Replacing Russian crude could lift India’s import bill by $3-4 billion

• India likely to halt Russian oil imports, switch to US, Middle East, Venezuela suppliers
• Replacing Russian crude may raise India's import bill by $3–4 billion annually
• US and India have agreed to a trade deal whereby the US will charge a reduced reciprocal tariff of 18%

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Replacing Russian crude with market-priced oil could see India’s import bill rise by as much as $4 billion, analysts have said after US President Donald Trump on February 2 claimed that New Delhi agreed to stop buying oil from Russia as part of a trade deal between the two countries.

If Trump’s claim is true — the government is yet to clarify on Russian oil — India’s crude import strategy is expected to be pragmatic and highly diversified in the absence of Russian barrels. It will likely include a ramp-up in the intake of American crude and potentially re-engaging with Venezuela.

In his Truth Social post that announced the deal on February 2 night, Trump said he would remove the 25 percent penal tariff slapped on India for buying Russian oil. Tariff on Indian goods will be lowered from 50 percent, one of the highest in world, to 18 percent.

India’s crude basket

For the Indian refining sector, there are ample avenues, including the US, to source oil. Russian crude accounted for less than 2 percent of India’s fuel import before FY23, Icra said.

In the absence of Russian oil, Middle Eastern suppliers including Saudi Arabia, Iraq, the UAE, and Kuwait will continue to anchor India’s crude slate, while incremental volumes from the US and select Atlantic Basin producers will provide India flexibility, global real-time data and analytics provider Kpler had said.

It expects Russian volumes to soften further toward the sub-1 million barrel a day range, though a complete halt looks unlikely at the moment.

"Even if PSU refiners scale back, Nayara is expected to continue lifting Russian barrels, given its ownership structure and current circumstances," said Nikhil Dubey, Senior Research Analyst, refining and modeling, Kpler.

What does the deal mean for India’s oil import bill?

According to S&P Global Energy, replacing discounted Urals with Middle East barrels raises feedstock costs, compressing Indian margins, risking lower runs and exports.

“A gradual phase-out of Russian crude would shift India toward the Middle East and some US barrels, firming Dubai structure and narrowing the Brent–Dubai EFS (Exchange of Futures for Swaps) while pressuring Urals differentials as displaced Russian barrels clear into China,” said Zhuwei Wang, director of research & analysis, S&P Global Energy.

According to Kpler, India’s annual crude import bill could rise by $3–4 billion, assuming a conservative $5 per barrel differential on 1.8 million barrels per day (bpd) of displaced volumes if Russian crude becomes inaccessible.

Losing this pricing cushion would not only inflate input costs but also strain fiscal balances if the government intervenes to prevent retail fuel inflation.

“The discounts on Russian crude oil were marginal prior to the US announcing sanctions on some Russian crude suppliers in October 2025, and Icra estimates that replacement of Russian crude with market-priced crude would lead to an increase in the import bill of the country by less than 2 percent,” said Prashant Vasisht, senior vice president and co-group head, Icra.

The Venezuelan crude is heavy and sour and therefore cheaper and would be of interest to Indian refiners, many of whom can process these types of crudes.

The country’s oil import bill stood at $90.7 billion during April-December of FY26 compared to $102.5 billion in the year-ago period. In FY25, the import bill stood at $137.2 billion.

WTI-linked grades (US crude oil benchmark) are too light to fully substitute Urals, and Venezuela upside looks limited near term.

"So India likely must secure more Middle East barrels. European spring maintenance, plus incremental Middle East pull, should cap Brent strength and narrow the Brent-Dubai EFS," Wang said.

Russian imports unlikely to fall to zero

Russia emerged as the top supplier of crude after its invasion of Ukraine on the back of the heavy discounts it offered on its Urals.

Its share in the Indian crude basket increased to 35 percent-40 percent in recent years from just 0.2 percent before the Russia-Ukraine war.

In January 2026, India’s Russian crude imports eased to around 1.1 mbpd, the lowest level since November 2022, Kpler data shows.

State-run Indian Oil imported 468,000 bpd of Russian oil as of January 23, while Bharat Petroleum imported 164,000 bpd.

Privately-owned Nayara Energies imported 469,000 bpd. No other refineries imported Russian crude during the month, Kpler said.

Reliance Industries in November 2025 said it had halted the import of Russian oil for its export-oriented Special Economic Zone unit at Jamnagar.

IOCL earlier told Moneycontrol that it will continue to purchase crude based on what makes commercial sense rather than discounts or geopolitical considerations and continue to expand its crude basket.

Hindustan Petroleum Corporation said the re-emergence of Venezuelan crude to the market is creating evaluation opportunities, noting that while the heavy grade is challenging to process, the company has assets that provide flexibility to assess such barrels.

The US in late August imposed 25 percent additional tariffs on India for buying Russian oil, taking the total levy on Indian goods to 50 percent.

Many Indian refineries have already reduced their purchases of Russian oil following US sanctions on major Russian oil producers Rosneft and Lukoil.

According to S&P, the country’s February Russian inflows are unlikely to fall to zero because some cargoes are already scheduled.

Trump said that India has committed to “BUY AMERICAN,” at a much higher level, in addition to over $500 billion of US energy, technology, agricultural, coal, and many other products.

Though the country has ample choices, analysts note that the real cost would be losing discounted crude, resulting in higher average prices and a stronger focus on term contracts, diversification, and refinery optimisation.

Disclosure: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.