EXPLAINED: India's Russian oil trade and options before it

New Delhi | US President Donald Trump claimed that Prime Minister Narendra Modi has vowed to halt purchases of Russian oil - an issue at the centre of a diplomatic and trade rift between the two countries.

Indian oil companies, which are the world's second-largest buyers of Russian oil, said they await clarification on such purchases from the government.

Russian oil, which now makes up more than a third of all crude oil they process in refineries to produce fuels like petrol and diesel, cannot be halted abruptly, and at best, imports, for now, can be reduced.

Here is an explainer on India's Russian oil trade:

BACKGROUND

India is the world's third-largest oil-importing and consuming country. It imports 87 per cent of its about 5.5 million barrels per day of crude oil consumption.

Russia is one of the world's largest producers and exporters of crude oil.

OIL TRADE

Traditionally, India bought two-thirds of all its crude oil from the Middle East countries, such as Iraq, Saudi Arabia and the UAE.

India turned to purchasing Russian oil sold at a discount after Western countries imposed sanctions on Moscow and shunned its supplies over its invasion of Ukraine in February 2022.

Consequently, from a mere 1.7 per cent share in total oil imports in 2019-20 (FY20), Russia's share increased to 40 per cent in 2023-24, and it is now the biggest oil supplier to India.

In terms of volume, India imported 88 million tonnes from Russia in FY25, out of the total shipment of 245 million tonnes.

The primary reason driving the Russian oil buy was the discounts relative to other internationally traded crude oil. Discounts topped USD 19-20 per barrel in 2023, but have since shrunk to USD 3.5-5 per barrel.

OIL IMPORT NUMBERS

India's crude imports in September were around 4.7 million barrels per day, up 2,20,000 bpd month-on-month and flat year-on-year. Russian crude maintained its position as the largest single supplier, contributing about 1.6 million bpd - a 34 per cent share.

However, this was roughly 1,60,000 bpd below the average Russian volumes imported during the first eight months of 2025, preliminary data by global trade analytics firm Kpler showed.

In the first half of October, Russian oil supplies were at 1.77 million bpd. Iraq was the second biggest crude oil supplier to India at around 1.01 million bpd, followed by Saudi Arabia at 8,30,000 bpd. The US has overtaken the UAE to become India's fourth largest supplier with 647,000 bpd.

UAE supplied 394,000 bpd.

STOPPING RUSSIAN OIL

Cutting off Russian supplies immediately is near impossible. Typically, oil is contracted 4-6 weeks prior to delivery, so the one that is being delivered now is what would have been contracted in early and mid-September.

Deliveries for at least till the end of November have already been contracted. So, the best-case scenario, in case what Trump said is true, would be that Indian refiners will stop contracting and deliveries from Russia will start drying up from the third or fourth week of November.

Going by the contracts entered, the current flows of 1.6-1.8 million bpd of Russian imports look "more realistic" for the coming few weeks, analysts said.

TRUMP STATEMENT

According to Kpler, Trump's suggestion that India will cut Russian oil imports appears to be political posturing, with no official confirmation from New Delhi. Flows from Russia remain robust. "Indian imports of Russian crude are tracking at a strong 1.8 million bpd in October, up approximately 2,50,000 bpd from September."

The dip in imports during July-September was driven less by tariff concerns and more by seasonal factors, particularly increased maintenance activity at PSU refineries. In fact, most contracts for deliveries up to early September were finalised 6-10 weeks in advance, meaning deals were largely locked in before July 31. So, dips in July-September were mostly due to refinery requirements.

ECONOMICS OF RUSSIAN OIL

Russian crude remains structurally vital for India, accounting for roughly 34 per cent of its total imports and offering compelling discounts that are too significant for refiners to ignore.

The rationale for India's continued procurement is clear. Even with narrower discounts than in 2023, Russian barrels remain one of the most economical feedstock options available to Indian refiners due to landed discounts and high GPW (gross product worth) margin outputs from grades, such as Urals.

WHAT IS RUSSIAN OIL FLOWS STOP

Russia is a major oil exporter. Its three primary customers are China, India and Turkey. In September, China bought 47 per cent of Russia's crude exports, followed by India (38 per cent), Turkiye (6 per cent) and the EU (6 per cent).

Stopping Russian oil imports would force India to rely on limited alternatives, potentially driving global crude prices up to USD 100 per barrel amid rising demand and tight supply.

Analysts said there is a finite supply of crude oil on the planet. If one major supplier - Russia - is taken out of the equation, importers, likely India, will have to fall back on other suppliers. This increased demand for non-Russian oil will drive up prices, potentially stoking inflation globally.

Russia exports about 4.3-4.8 million bpd (total output of 9.2 million bpd), which is about 5 per cent of the overall crude oil supply.

India has managed to bring down inflation as it kept fuel rates unchanged in the last few years. It created a buffer by buying low-priced Russian and other crude and used it to keep retail pump rates stable when international prices rose, like in 2022.

While the shift to Russia helped India secure affordable energy supplies, the Trump administration criticised the purchases, accusing New Delhi of profiteering by buying discounted Russian oil and exporting refined fuel to regions, including Europe.

India has maintained that its actions do not violate any international laws, as there are no sanctions on purchasing Russian crude. The European Union only recently imposed a ban on importing fuel derived from Russian crude. Additionally, the US has not sanctioned the purchase of Russian crude oil or its refined products.

While many EU countries have banned imports of Russian oil, a price cap was introduced for other countries purchasing Russian crude oil. Indian imports have adhered to this price cap.

OPTIONS BEFORE INDIA

Indian refiners can operate without supplies from Moscow from a technical standpoint, but the shift would involve major economic and strategic trade-offs, analysts said.

Russian crude supports high distillate yields - the share of crude converted into fuels like petrol, diesel, and jet fuel through distillation. Replacing Russian crude, resulting in lower middle distillates (diesel and jet fuel) and higher residue outputs.

Deep discounts and strong compatibility with India's refining systems led to a surge in imports of Russian Ural crude oil.

Russian crude supports high distillate yields (diesel and jet fuel) and is ideally suited to India's advanced refining infrastructure. It has enabled both state-owned and private refiners to operate above nameplate capacity while maintaining strong margins.

Should Russian oil become inaccessible, India could face an additional USD 3-5 billion in annual import costs (based on a USD 5 per barrel premium on 1.6-1.8 million bpd).

If global prices rise further (a scenario in which Russian crude exports are being curtailed, in the absence of sufficient buying interest from India), the financial burden could increase significantly.

Replacing 1.6-1.8 million barrels per day (bpd) of Russian crude would require a multi-regional approach.

The Middle East remains the most viable option operationally, grades such as WTI Midland from the US could contribute 2,00,000-4,00,000 bpd.

These (US crude) are lighter and yield less diesel, a disadvantage for India's distillate-heavy demand. Long-haul freight and cost considerations will also restrict scalability. West Africa and Latin America (LatAm) crudes offer moderate potential.

A balanced replacement strategy may involve 60-70 per cent of substitute volumes from the Middle East, with the US and African/LatAm crudes serving as tactical fillers, analysts said.

US IMPORTS

According to Kpler, India can import more from the US, but the upside is capped at around 4,00,000-5,00,000 bpd. India has limited upside, due to US grades facing both logistical disadvantages, economic and compatibility challenges with Indian refining systems, which makes a material swing toward American crude unlikely.

Though Indian refiners continue to diversify and try to get cargoes that suit the economics, Kpler data shows Indian imports of US crude have averaged 310 kbd so far in 2025, an increase from 199 kbd in 2024, hitting a yearly high of approx 500 kbd (Expected in October).

EXPERT COMMENT

Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings, Icra Ltd, said, "Icra believes domestic refiners will purchase crude from various sources guided by economics and availability".

While the overall volumes of Russian crude remain high, the discounts on Russian crude have been coming down, owing to which the crudes from the Middle East have become attractive because of the geographical proximity of the region to India, he added.