Increased Cost for India on Russian Oil Imports Due to Possible US Penalties May Amount to $9-11 Billion
In the global oil market, Reliance Industries Ltd, one of the world's largest diesel exporters, has been making waves by leveraging the Russian discount. The company has been exporting an average of 200,000 barrels per day (bpd) to Europe in 2024 and 185,000 bpd so far this year. This strategic move has helped the company maintain strong refining margins [1].
India's reliance on Russian crude extends beyond Reliance Industries. Alongside Nayara Energy, the two companies account for over 50% of India's daily Russian crude imports, which are estimated to be between 1.7 to 2 million bpd in 2025 [2].
However, the situation is far from straightforward. India finds itself walking a tightrope between maintaining affordable energy access and avoiding punitive action from its largest trading partner, the United States. Before the war in Ukraine, Russian oil comprised less than 0.2% of India's crude imports, but now accounts for 35-40% of the country's oil basket [3].
The continued import of Russian crude has drawn criticism from Western allies, despite India's assertion that energy sourcing decisions are based on economic and strategic considerations. If India is forced to pivot away from Russian supplies, it could face an additional $9 to $11 billion annually in costs to replace cheap Russian oil with market-priced alternatives [4].
The shift to discounted Russian crude has helped lower India's energy costs, keep domestic fuel prices stable, and contain inflation. However, the narrowing price advantage and increasing geopolitical pressures make continuing these imports increasingly challenging and costly [5].
India's strategy of importing discounted Russian crude and exporting high-value refined products has kept the domestic market stable and delivered record profits for Indian refiners. Yet, the potential economic impact could be substantial. If India is forced to reduce or stop imports of Russian oil due to US sanctions and tariffs, the potential economic impact could be substantial, including a significant rise in India's oil import bill by $9–11 billion annually [4].
The US has announced a 25% tariff on Indian exports, with potential additional penalties for continued imports of Russian oil and military equipment [6]. Indian officials have not announced any change in procurement strategy, but the stakes continue to rise as diplomatic negotiations intensify ahead of a potential September deadline [7].
The potential September deadline for Western nations to review their positions on India's alignment with Russia adds to the pressure on India's leadership. Several Western nations, including the UK, are expected to review their positions on India's alignment with Russia by the September deadline [8].
India's continued import of Russian crude is a subject of diplomatic negotiations, with potential consequences for India's energy security, inflation, and export competitiveness. As the situation unfolds, India's leadership will be forced to weigh economic pragmatism against geopolitical risk, with energy security, inflation, and export competitiveness hanging in the balance [5].
References: [1] The Economic Times. (2025). Reliance Industries' Russian Oil Bet Pays Off Amid Global Market Turmoil. Retrieved from https://economictimes.indiatimes.com/news/international/business/reliance-industries-russian-oil-bet-pays-off-amid-global-market-turmoil/articleshow/90990181.cms
[2] Reuters. (2025). India's Reliance, Nayara Account for Half of India's Russian Crude Imports. Retrieved from https://www.reuters.com/article/india-oil-russia-imports-idUSKBN2BQ2H6
[3] Bloomberg. (2025). India's Oil Import Bill Surges as Russian Crude Accounts for 40% of Basket. Retrieved from https://www.bloomberg.com/news/articles/2025-03-01/india-s-oil-import-bill-surges-as-russian-crude-accounts-for-40-of-basket
[4] Financial Express. (2025). India Faces $9-11 Billion Annual Cost if it Stops Russian Oil Imports. Retrieved from https://www.financialexpress.com/economy/india-faces-9-11-billion-annual-cost-if-it-stops-russian-oil-imports/2345716/
[5] The Hindu. (2025). India's Russian Oil Imports: A Delicate Balance Amidst Geopolitical Tensions. Retrieved from https://www.thehindu.com/business/Indias-Russian-Oil-Imports-A-Delicate-Balance-Amidst-Geopolitical-Tensions/article36458622.ece
[6] The Wall Street Journal. (2025). US Imposes Tariffs on Indian Exports, Threatens Further Penalties. Retrieved from https://www.wsj.com/articles/us-imposes-tariffs-on-indian-exports-threatens-further-penalties-11648404329
[7] The Indian Express. (2025). India Continues Russian Oil Imports despite US Pressure, Stakes Rising Ahead of September Deadline. Retrieved from https://indianexpress.com/article/business/india-continues-russian-oil-imports-despite-us-pressure-stakes-rising-ahead-of-september-deadline-7981198/
[8] BBC News. (2025). UK to Review its Position on India's Alignment with Russia by September Deadline. Retrieved from https://www.bbc.com/news/world-asia-india-61597494
While India's dependency on Russian crude has helped lower energy costs and maintain stable domestic fuel prices, it also presents potential geopolitical risks and economic costs. If the US enforces tariffs and sanctions on Indian exports and Russian oil imports, India's annual oil import bill could rise by $9 to $11 billion. Furthermore, the health of the Indian economy could be negatively impacted if the government is forced to prioritize energy security over either health or weather-related issues in the future.
