New Delhi: For nearly three years, India capitalised on buying Russian oil at steep discounts after Western sanctions cut Moscow off from many global markets. The move boosted India’s import volumes from Russia and saved billions of dollars in its oil bill. But in FY2025, the numbers suggest the economic advantage is fading.
Russia accounted for about 35 per cent of India’s crude imports in FY2025, up sharply from less than 2 per cent in the five years before the Ukraine war. However, the discount over West Asian crude narrowed to around 7 per cent, reducing annual savings to $3.8 billion, compared with $8.2 billion in FY2024 when the gap stood at 14 per cent. ICRA said that with lower discounts and sanctions from the EU and the US, “it appears increasingly unlikely that such imports from Russia will benefit India materially, going forward.”
From marginal supplier to top source
Between FY2018 and FY2022, Russia’s share in India’s crude basket averaged around 1.5 per cent, with West Asia supplying roughly a third and the US expanding its share to 9 per cent in FY2021 and FY2022. The outbreak of the Ukraine conflict and subsequent sanctions on Russia prompted Indian refiners to increase purchases sharply.
By FY2023, Russia’s share had risen to 19.3 per cent. In FY2024 and FY2025, it stabilised between 33 and 35 per cent. This shift was accompanied by a fall in West Asia’s share to around 28 per cent and a reduction in US supplies to about 5 per cent.
The changing economics of Russian barrels
The attraction of Russian crude was its lower price compared to traditional suppliers. In FY2023, the monthly average imputed price of Russian oil was about 13 per cent lower than West Asian crude, generating savings of $5.1 billion. In FY2024, the discount widened slightly to 14 per cent, pushing savings to $8.2 billion.
That equation shifted in FY2025. The discount halved to around 7 per cent, cutting savings nearly in half. The reduced gap reflects a combination of tighter freight and insurance markets, increased competition for Russian oil among non-Western buyers, and adjustments in Russia’s export pricing to offset revenue losses from Europe.
Petroleum exports and US tariff exemptions
Petroleum products remain a significant component of India’s export basket to the United States, accounting for between 6 and 8 per cent of total petroleum product exports in recent years. Despite heightened trade tensions, the US exempted petroleum products from the 25 per cent reciprocal tariffs announced in April and reaffirmed in July 2025. This move shielded the sector from the direct tariff impact that hit other export categories.However, the reliance on Russian crude has introduced indirect risks. If the US or EU were to impose secondary sanctions or penalty tariffs on refined petroleum products made from Russian oil, Indian refiners could face higher compliance costs, reduced margins, and restricted access to key markets.
Risks for refiners and the economy
The possibility of tighter sanctions coincides with ICRA trimming India’s GDP growth forecast for FY2026 to 6.0 per cent. Any sanctions targeting refined petroleum exports could further weigh on growth. Refiners could attempt to divert exports to alternative markets in Asia, Africa, or Latin America, but these may not match the profitability of US and European destinations.
The narrowing price advantage means the long-term viability of high Russian crude imports will depend on whether the geopolitical costs begin to outweigh the economic gains. For now, the data indicates that India’s oil strategy, while still significant in volume, is delivering lower returns than before.
