For the majority of last year, heavily discounted Russian oil constituted the dominant portion of India's crude acquisitions. This arrangement served as a crucial financial lifeline for Moscow while simultaneously saving New Delhi billions on its import expenditures. However, the landscape shifted dramatically with the imposition of US threats, tariffs, and sanctions, leading to months of market disruption and uncertainty.
Resilient Russian Flows Defy Market Expectations
Contrary to widespread market predictions, India's imports of Russian crude have demonstrated remarkable resilience. With discounts on Russian oil widening and a comprehensive US-India trade deal remaining elusive, industry observers suggest this pattern could establish a new normal, with substantial purchases potentially continuing well into 2026.
The global energy environment has grown increasingly complex, Indian Oil Minister Hardeep Puri remarked during a Friday event previewing the country's premier gathering of energy officials in Goa this week. "The world has become more challenging, in spite of the fact there is no shortage of energy globally," Puri stated, emphasizing that market dynamics remain the primary determinant for India's oil procurement strategies.
Strategic Rebalancing Amid Geopolitical Pressure
Washington's sustained pressure has undoubtedly influenced India's energy calculus. Prior to Russia's 2022 invasion of Ukraine, India sourced most of its crude from Middle Eastern suppliers. In response to geopolitical developments, New Delhi has actively sought to rebalance its import portfolio, gradually returning to some traditional suppliers while maintaining Russian connections.
Several Indian refiners have pursued diversified sourcing strategies:
- Bharat Petroleum Corp. has moved to secure long-term Middle East volumes through tenders for Abu Dhabi's Murban, Iraqi Basrah, and Omani crude.
- Indian Oil Corp. has expanded its activities in the spot market to increase flexibility.
- Even Reliance Industries Ltd., known for its conservative approach, has recently placed new orders for non-sanctioned Russian cargoes.
The Irresistible Economics of Discounted Crude
The declining price of benchmark Urals crude for India—a direct consequence of US sanctions on major Russian producers—has made continued purchases economically compelling. Major refiners including IOC, BPCL, and sanctioned refiner Nayara Energy Ltd. continue to procure Russian crude despite geopolitical headwinds.
"We know that oil will always find a way," observed Arne Lohmann Rasmussen, chief analyst at A/S Global Risk Management. "The combination of US sanctions and the EU ban on products derived from Russian crude is taking a toll on imports and is increasing demand for non-sanctioned crude. But I strongly doubt that India will give up importing Russian oil."
Stable Baseline Imports Forecast Through 2026
At their peak, India's Russian oil imports exceeded 2 million barrels per day. This volume declined to approximately 1.3 million barrels daily by December, with analysts anticipating stable levels through January. Contrary to October forecasts predicting near-zero imports following US sanctions against Russian giants Rosneft PJSC and Lukoil PJSC, traders and analysts now believe significant flows will persist.
India is likely to maintain a healthy baseload of Russian crude, explained Naveen Das, senior crude oil analyst at Kpler Ltd., while simultaneously expanding dealings with Middle Eastern suppliers and exploring emerging opportunities like non-sanctioned Venezuelan barrels.
"India will continue to look out for the best prices and best margins for its refiners, strategically changing its buying slate while also dropping Russian imports slightly as it already has done," Das added.
Potential Disruption Factors and Strategic Considerations
Several developments could alter this dynamic beyond ongoing challenges to Russia's export infrastructure, including Ukrainian attacks on energy facilities:
- US-India Trade Agreement: A finalized trade deal between Washington and New Delhi could prompt India to adopt a more conservative stance toward Russian imports. While US President Donald Trump recently suggested at Davos that the two nations would reach a favorable agreement, specific details remain undisclosed.
- Broader Diplomatic Relationships: India must balance its longstanding ties with Russia against other crucial trade and political relationships, particularly as refining capacity continues expanding. Government forecasts project capacity growth to 309.5 million tons annually by 2030 from current levels of 258 million tons.
- Enhanced Supply Optionality: Minister Puri noted that India now accesses 41 crude supply sources, a substantial increase from 27 sources just a few years ago, providing greater flexibility in procurement decisions.
India's Strengthened Position in Global Oil Markets
The global oil market's current oversupply conditions have significantly expanded India's options, even if alternative barrels don't match Russian discount levels.
"What is key to remember is that in a world of oversupplied oil currently," emphasized Kpler's Das, noting that the world's third-largest oil importer possesses "a fair amount of optionality" and wouldn't face market punishment for reducing Russian purchases. "India is still one of the key demand hubs."
This strategic positioning allows India to navigate complex geopolitical waters while securing favorable economic terms, ensuring energy security remains paramount in national policy calculations.
