India may lose $11 bn if forced to cut Russian oil amid US sanctions
India may face a $9–11 billion spike in oil import costs if US penalties force it to cut Russian crude. With EU sanctions also tightening, refiners like Reliance and Nayara could lose margins, affecting inflation and fuel pricing.
New Delhi: India’s annual oil import bill could rise by USD 9-11 billion if the country is compelled to move away from Russian crude in response to US threats of additional tariffs or penalties on Indian exports, analysts said.
India, the world’s third-largest oil consumer and importer, has reaped significant benefits by swiftly substituting market-priced oil with discounted Russian crude following Western sanctions on Moscow after its invasion of Ukraine in February 2022.
Russian oil, which accounted for less than 0.2 per cent of India’s imports before the war, now makes up 35-40 per cent of the country’s crude intake, helping reduce overall energy import costs, keep retail fuel prices in check, and contain inflation.
The influx of discounted Russian crude also enabled India to refine the oil and export petroleum products, including to countries that have imposed sanctions on direct imports from Russia. The twin strategy of Indian oil companies is posting record profits.
This is, however, now under threat after US President Donald Trump announced a 25 per cent tariff on Indian goods plus an unspecified penalty for buying Russian oil and weapons. The 25 per cent tariff has since been notified but the penalty is yet to be specified.
Coming within days of the European Union banning imports of refined products derived from Russian-origin crude, this presents a double whammy for Indian refiners.
Sumit Ritolia, Lead Research Analyst (Refining & Modeling) at global real-time data and analytics provider Kpler termed this as “a squeeze from both ends”.
EU sanctions – effective from January 2026 – may force Indian refiners to segment crude intake on one side, and on the other, the US tariff threat raises the possibility of secondary sanctions that would directly hit the shipping, insurance, and financing lifelines underpinning India’s Russian oil trade. “Together, these measures sharply curtail India’s crude procurement flexibility, raise compliance risk, and introduce significant cost uncertainty,” he said.
Last fiscal, India spent over USD 137 billion on import of crude oil, which is refined into fuels like petrol and diesel. For refiners like Reliance Industries Ltd and Nayara Energy – who collectively account for a bulk (more than 50 per cent in 2025) of the 1.7–2.0 million barrels per day (bpd) of Russian crude imports into India – the challenge is acute.
While Nayara is backed by Russian oil giant Rosneft and has been sanctioned by the EU last month, Reliance has been a big fuel exporter to Europe.
As one of the world’s largest diesel exporters – and with total refined product exports to Europe averaging around 200,000 bpd in 2024 and 185,000 bpd so far in 2025 – Reliance has extensively utilised discounted Russian crude to boost refining margins over the past two years, according to Kpler.
“The introduction of strict origin-tracking requirements now compels Reliance to either curtail its intake of Russian feedstock, potentially affecting cost competitiveness, or reroute Russian-linked products to non-EU markets,” Ritolia said.
However, Reliance’s dual-refinery structure – a domestic-focused unit and an export-oriented complex – offers strategic flexibility. It can allocate non-Russian crude to its export-oriented refinery and continue meeting EU compliance standards, while processing Russian barrels at the domestic unit for other markets.
Although redirecting diesel exports to Southeast Asia, Africa, or Latin America is operationally feasible, such a shift would involve narrower margins, longer voyage times, and increased demand variability, making it commercially less optimal, he said.
