US Sanctions on Russian Oil May Hike India's Import Bill $9-11B

• India’s oil import bill may rise by $9-11B if Russian crude is cut.
• Russian oil forms 35-40% of India’s imports, cutting fuel costs.
• EU sanctions and US tariffs threaten India’s refining margins and exports.

Analysts stated that India's yearly oil import expenses may increase by $9-11 billion if the nation is forced to shift from Russian crude due to US threats of further tariffs or penalties on Indian exports.

India, the globe's third-largest oil consumer and importer, has gained considerable advantages by quickly replacing market-priced oil with cheaper Russian crude after Western sanctions on Moscow due to its invasion of Ukraine in February 2022.

Russian oil, previously making up less than 0.2 percent of India's imports before the war, now constitutes 35-40 percent of the nation's crude oil consumption, aiding in lowering total energy import expenses, stabilizing retail fuel prices, and curbing inflation.

The arrival of cheaper Russian crude allowed India to process the oil and sell petroleum products, even to nations that have enacted bans on direct imports from Russia. The dual approach of Indian oil firms is generating unprecedented profits.

This situation is now at risk following US President Donald Trump's declaration of a 25 percent tariff on Indian products, along with an unspecified penalty for purchasing Russian oil and arms. The 25 percent tariff has been announced, but the penalty has not been defined yet.

Arriving just days before the European Union prohibits imports of refined products made from Russian crude, this poses a significant challenge for Indian refiners.

Sumit Ritolia, Lead Research Analyst (Refining & Modeling) at the global real-time data and analytics firm Kpler, described this as "a squeeze from both sides."

EU sanctions set to take effect in January 2026 could compel Indian refiners to divide their crude oil purchases, while the US tariff warning increases the likelihood of secondary sanctions that would directly impact the shipping, insurance, and financial support crucial to India's trade in Russian oil.

"Together, these measures sharply curtail India's crude procurement flexibility, raise compliance risk, and introduce significant cost uncertainty," he said. 

In the last fiscal year, India invested more than USD 137 billion in crude oil imports, which are processed into fuels such as petrol and diesel.

For refineries such as Reliance Industries Ltd and Nayara Energy - which together represent a significant portion (over 50 percent by 2025) of the 1.7-2.0 million barrels per day (bpd) of Russian crude oil brought into India - the issue is pressing.

Also Read: India's Public Refiners Pause Russian Oil Imports: Sources

"The introduction of strict origin-tracking requirements now compels Reliance to either curtail its intake of Russian feedstock, potentially affecting cost competitiveness, or reroute Russian-linked products to non-EU markets," Ritolia said.

Redirecting diesel exports to Southeast Asia, Africa, or Latin America is operationally possible; however, this change would come with tighter margins, longer travel durations, and greater demand fluctuations, rendering it less commercially viable, he stated

"Financially, the implications are massive. Assuming a USD 5 per barrel discount lost across 1.8 million bpd, India could see its import bill swell by USD 911 billion annually. If global flat prices rise further due to reduced Russian availability, the cost could be higher," it said.

This would heighten financial pressure, especially if the government steps in to stabilize retail fuel costs. The ripple effect on inflation, currency, and monetary policy would be hard to overlook.