India faces $9–11 billion oil bill spike: Pivot from Russian crude after Trump’s ‘penalty’ could hit margins- What analysts say

As US President Donald Trump announced penalties on India in addition to a 25 per cent tariff- citing, in part, India’s trade ties with Russia- analysts warn the moving away could come at a significant cost. According to estimates, India’s import bill could rise by $9–11 billion if it is forced to pivot away from Russian oil.“Financially, the implications are substantial. If a USD 5 per barrel discount is lost across 1.8 million barrels per day, India’s import bill could increase by USD 9–11 billion annually. If global prices rise further due to reduced Russian supply, the cost could be even higher,” as stated in the report by global real-time data and analytics firm Kpler, cited by PTI.

Coming within days of the European Union banning imports of refined products derived from Russian-origin crude, this presents a double blow for Indian refiners.Sumit Ritolia, Lead Research Analyst (Refining & Modelling) at Kpler, termed this as “a squeeze from both ends”. EU sanctions, effective from January 2026, may force Indian refiners to segment crude intake on one side. On the other, the US tariff threat raises the possibility of secondary sanctions that would directly hit the shipping, insurance, and financing lifelines underpinning India’s Russian oil trade.“Together, these measures sharply curtail India’s crude procurement flexibility, raise compliance risk, and introduce significant cost uncertainty,” further said Ritolia, as quoted by PTI.Last fiscal, India spent over Rs 1.14 lakh crore on the import of crude oil, which is refined into fuels like petrol and diesel.India, as the world’s third-largest oil consumer and importer, has significantly benefited from quickly replacing market-priced oil with discounted Russian crude. This shift came after Western sanctions on Moscow following its invasion of Ukraine in February 2022.Before the conflict, Russian oil constituted less than 0.2% of India’s imports. However, it now represents 35-40% of the country’s crude intake. This change has helped India reduce overall energy import costs, stabilize retail fuel prices, and manage inflation.Also read: India’s US crude oil imports surge over 50% in first half of 2025; LNG, LPG trade also expands- ReportThe availability of discounted Russian crude has also allowed India to refine the oil and export petroleum products, even to countries that have imposed sanctions on direct imports from Russia. This dual strategy has led Indian oil companies to achieve record profits.For refiners such as Reliance Industries Ltd and Nayara Energy, which together are responsible for more than 50 per cent of the 1.7–2.0 million barrels per day of Russian crude imports into India by 2025, the situation presents significant challenges. Nayara, supported by the Russian oil giant Rosneft, recently faced sanctions from the EU, while Reliance has been a major exporter of fuel to Europe. As one of the leading diesel exporters globally, Reliance has capitalized on discounted Russian crude to enhance its refining margins over the past two years. In 2024, their total refined product exports to Europe averaged around 200,000 barrels per day, and in 2025, they have averaged 185,000 barrels per day, according to data from Kpler, cited by PTI.Reliance’s dual-refinery setup, consisting of a domestic-focused unit and an export-oriented complex, provides strategic adaptability. This allows the company to direct non-Russian crude to its export-oriented refinery, ensuring compliance with EU standards, while processing Russian oil at the domestic unit for other markets.While it is operationally possible to redirect diesel exports to regions like Southeast Asia, Africa, or Latin America, such a move would result in narrower profit margins, longer shipping times, and increased demand variability, making it less commercially attractive.Private refiners, who process over half of the Russian crude imports, have started to reduce their reliance on Russian oil. This week, they are diversifying their procurement sources due to growing concerns about potential US sanctions.Ritolia noted that replacing Russian crude is not straightforward. The Middle East is a logical alternative, but it presents challenges such as contractual commitments, rigid pricing, and differences in crude quality that can affect product yield and refinery operations. “The risk extends beyond supply to profitability. Refiners will face higher feedstock costs, and for complex units optimized for blends similar to Russian Urals, profit margins could be under pressure,” he explained.Looking ahead, Kpler anticipates that India’s complex private refiners, supported by strong trading capabilities and adaptable configurations, will gradually shift towards non-Russian crude from regions like the Middle East, West Africa, Latin America, or even the US, where it is economically viable.This transition, while operationally possible, will be gradual and strategically aligned with changing regulatory frameworks, contract structures, and margin dynamics.However, completely replacing Russian oil is a significant challenge- logistically complex, economically burdensome, and geopolitically sensitive. While supply substitution may seem feasible on paper, it is fraught with practical difficulties.This would place additional fiscal pressure, especially if the government intervenes to stabilize retail fuel prices. The resulting impact on inflation, currency, and monetary policy would be significant and challenging to overlook.

India continuing to buy oil from Russia: Report

Just days after the tariff announcement, Trump claimed he had “heard” that India was no longer going to buy oil from Russia, calling it “a good step” while speaking to reporters on Friday. However, government sources have reprotedly firmly refuted this, saying Indian oil refiners continue to purchase crude from Russian suppliers. “Indian oil refiners continue to source oil from Russian suppliers. Their supply decisions are guided by price, grade of crude, inventories, logistics, and other economic factors,” sources were quoted as saying by ANI. They also noted that Russia, as the world’s second-largest crude producer and exporter, remains a key player in global energy markets. In this context, India- being the third-largest energy consumer with 85 per cent import dependency- has adjusted its sourcing strategy to ensure affordable and secure energy access while complying with international norms.Read more: India continuing to buy oil from Russia- Report rebuts Donald Trump’s ‘good steps’ claim