From 2% to 40%: How Russian oil became India’s economic lifeline amid curbs

By: Shantanu Bhattacharji

Russia’s share of India’s crude imports may dip to 20-25% by March 2025 from 39% in 2023. Sanctions on tankers and insurance are disrupting payments and logistics, pushing refiners to seek alternative suppliers.

India has become Russia’s second-largest crude buyer since the Ukraine invasion in February 2022, with imports surging from just 2 per cent to nearly 40 per cent of total oil purchases. The sharp increase highlights New Delhi’s strategic shift towards discounted Russian barrels, despite Western sanctions and geopolitical pressure.

More significantly, the surge in Russian crude has helped India cushion the impact of volatile global oil prices, cutting its import costs while strengthening energy ties with Moscow. However, the dependence on Russian supply raises concerns about long-term diversification and potential diplomatic friction with Western allies.

Experts are of the view that with global oil markets in flux and new US and EU sanctions targeting Russia’s energy trade, India’s ability to navigate geopolitical risks while securing stable supplies will be closely watched in the months ahead.

India’s shift to discounted Russian crude has slashed oil import costs by $25 billion in FY 2023-24, with total crude imports falling to $132.4 billion from $157.5 billion a year earlier. This has helped narrow trade deficits and strengthen external balances, providing fiscal relief amid global uncertainty.

Before the Ukraine invasion, Russia played a minor role in India’s oil market—shipments averaged just 100,000 barrels per day (bpd) in 2021, accounting for a mere 2.4 per cent of total crude imports.

That changed dramatically after Western sanctions and price caps made Russian crude cheaper. In 2022, India’s Russian oil imports surged sevenfold to 740,000 bpd, capturing a 16.4 per cent market share, per market intelligence firm Kpler. By 2023, imports more than doubled to 1.8 million bpd, making up 39 per cent of India’s total crude purchases—a trend that continued into 2024.

The surge was fuelled by deep discounts on Russian oil, which averaged $15 per barrel in early 2023—seven times higher than current levels. With Brent crude trading above $80, India capitalised on discounted Russian oil, purchasing $132 billion worth over the past three years, averaging $44 billion annually, based on Customs data. Before the war, Russian crude imports had stood at just $2.5 billion annually.

The latest US curbs imposed by the outgoing Biden administration on January 10, 2025, have significantly disrupted India’s Russian oil imports. The measures targeted 183 tankers, Russia’s state-owned shipping giant Sovcomflot, two major oil producers, two key insurers, and several Dubai-based Russian traders involved in crude shipments to India.

Also, Moscow’s share of New Delhi’s crude imports is projected to drop to 20-25 per cent by March 2025, down from 39 per cent in 2023. The restrictions on tankers and insurance complicate payment mechanisms and supply logistics, forcing Indian refiners to explore alternative sources.

A potential peace in Ukraine could boost Russian oil supply, but a Trump-led crackdown on Iranian exports may counterbalance this.

Brent crude has been volatile in 2025, rising from $76.7 per barrel in early January to $83 after new US sanctions, before retreating to $76.

For India, the average crude basket price in FY25 stands at $79 per barrel—$13 lower than FY23’s war-driven $93.1 average—providing some relief to import costs despite persistent geopolitical uncertainties.