US President Donald Trump said Prime Minister Narendra Modi on Wednesday assured him that India will end Russian oil purchases, though not immediately — a claim the Ministry of External Affairs (MEA) disputed, saying the two leaders had “no telephonic talks” that day.
“It has been our consistent priority to safeguard the interests of the Indian consumer in a volatile energy scenario. Our import policies are guided entirely by this objective,” the MEA said in its first reaction to Trump’s claims early on Thursday.
“The current (US) administration has shown interest in deepening energy cooperation with India,” it added. By evening, the MEA categorically denied that any Modi-Trump conversation on Russian oil purchases had taken place.
Indian refinery executives told ET they have not received any government directive to halt Russian crude imports. Trump told reporters on Wednesday he received assurances from Modi as part of his administration’s broader push to cut off Moscow’s energy funding. India cannot “immediately” halt oil shipments, “but the process is going to be over with soon,” he said. A phased withdrawal from buying Russian crude over the next 2-3 months is unlikely to roil global oil markets, with prices likely to rise only $2-3 a barrel, refinery executives cited above said.
However, such a move would squeeze domestic refiners as they lose Russian discounts of around $2 a barrel and pay more for replacement supplies, they noted.
Private refiners would be hit harder if they have to switch away from Russian oil. Sanctions-hit Nayara Energy, which is fully dependent on Russian crude, may struggle to maintain operations, while Reliance Industries, which sources about half its crude from Russia, will face higher procurement costs, executives said.
State-run refiners have already slashed the share of Russian crude to about 20 per cent of their intake, diversifying supplies.
Overall, Russian oil accounts for about one-third of India’s crude imports — and India, in turn, takes nearly one-third of Russia’s total crude exports. On Wednesday, Nayara was sanctioned by the UK in an effort to restrict Russian oil trade. “Noted… We do not subscribe to unilateral sanctions. Indian companies source energy supplies from across the world… There should be no double standards,” the MEA said in response to the UK’s sanctions on Nayara.
TAPPING SPOT MARKET
If Indian refiners are forced to replace Russian barrels, they plan to tap the spot market for supplies from the US, UAE and Brazil, where cargoes are available.
Global supply is currently ample, with near-record volumes floating at sea, but not enough to instantly replace India’s 1.5 million barrels per day (mb/d) of Russian imports, a refinery executive said. A phased replacement would be preferable, as a sudden surge in spot demand could drive prices up by $7-8 a barrel, he said.
A key question, executives said, is whether Russia can quickly find new buyers for the volumes vacated by India. “No country, except China, may want to go against the US,” one of them said. China remains the largest buyer of Russian crude, followed by India and Türkiye.
India’s exit would likely deepen discounts on Russian oil, encouraging China to increase purchases, though its ability to absorb all of India’s share is limited by existing long-term contracts in the Middle East, another executive said. Those term contracts typically run on a financial-year basis, making mid-year changes unlikely.
SLOWER DEMAND GROWTH
If Russia fails to find quick buyers for the oil India stops taking, the market could tighten and prices may surge $7-8 a barrel, the executive said. However, such a spike may be shortlived as higher prices would spur increased output from US shale producers, Brazil, and even some OPEC+ members exceeding their quotas.
