Sanctions on Russian crude firms set to hit India’s oil import savings

India’s expected shift away from Russian crude oil could deliver a double blow — an erosion of discounts worth billions of dollars annually, coupled with higher crude prices following the US sanctions on Rosneft and Lukoil, two of Moscow’s oil companies.

Since the Russia-Ukraine conflict began in early 2022, India is estimated to have saved several billion dollars on crude oil imports. “Since April 2022, Russian imports have led to potential savings of $16.7 billion (versus non-Russian imports),” Kotak Institutional Equities estimated in its latest report. A news agency cited the report.

Reduced import costs have helped keep India’s overall oil import bill lower than it would have been otherwise, cushioning inflation, stabilising the rupee and boosting foreign exchange reserves, particularly through export of refined Russian crude. Conversely, rising crude oil prices could increase inflation. The Reserve Bank of India noted in its July 2025 bulletin that “a 10 per cent increase in global crude oil prices can lead to a 0.20 per cent rise in India’s headline inflation”.

India’s total crude requirement is about 5.4 million barrels per day, while domestic production — led by ONGC, Oil India, Reliance Industries and Cairn India — meets only 13-14 per cent of demand, leaving roughly 86 per cent to be met through imports, including about 2 million barrels a day from Russia.

Will comply with US sanctions: Reliance

Reliance Industries on Friday said it would comply with the latest US and other Western sanctions relating to Russian oil and would tweak refinery operations to meet them.

Refiners to buy more from West Asia

Indian refiners are likely to ramp up crude oil purchases from West Asia, Latin America and the US to compensate for reduced imports from Russia, sources and analysts said. PTI

If New Delhi reduces reliance on Russian oil, it will need commercial contracts at new crude prices for these 2 million barrels. Reuters reported that Brent futures — a key crude benchmark — rose $3.40, settling at $65.99 a barrel. India had been importing Russian oil at under $60 a barrel, meaning the new rates could increase costs by an average of $7-8 million per day for these 2 million barrels.

Before the sanctions, the gap between Russian and non-Russian crude had narrowed to around $2.5 per barrel. In 2022, India was paying nearly $30 less per barrel for Russian crude compared with the global market.

Oil industry data shows Russia now accounts for 30.01 per cent of India’s crude import bill, followed by the UAE (15.21 per cent), Iraq (13.62 per cent), Saudi Arabia (11.40 per cent) and Qatar (7.12 per cent). The US and other producers in West Asia and Africa make up the remaining 22.63 per cent.

Amid this transition, the government has tasked various ministries with studying the impact of sanctions on India’s crude import bill, including any potential escalation in inflation, according to sources. Indian refiners are expected to ramp up crude purchases from West Asia, Latin America and the US to offset reduced imports from Russia.

However, reducing reliance on Russian oil does not automatically mean the US will lift the 25 per cent punitive tariffs imposed on India for buying Russian crude. The sanctions are set to take effect by November 21. The US, India’s largest export market accounting for roughly a fifth of total merchandise exports, has already affected around 80,000 of India’s 200,000 exporters.

Diplomatically, India has historically resisted unilateral US sanctions. This time, a key challenge lies in how to pay Russian companies for oil, as most banks fear secondary sanctions and are unwilling to facilitate such payments.