By Sourav Mitra and Praveen RaiIndia’s search for the optimal crude import mix is a constant balancing act. As the world’s third-largest crude oil importer, and with around 88% of its crude needs met from abroad, India feels the impact of every price swing – from the pressure it puts on the forex bill to its effects on businesses and consumers. The key task therefore is to find crude oil that is affordable, reliable, and suited to domestic refining capacity. That imperative explains both India’s embrace of Russian oil after 2022 and why its economics must now be reassessed.India has an important advantage in this search. Several of its sophisticated refineries can process a wide range of crude grades, including heavier, sulphur-rich varieties that require more intensive treatment. Capabilities differ across refineries, but this flexibility allows Indian refiners to switch suppliers and blends as relative prices change.Also Read | Trade irony amid Trump threat: Why Russia is buying its own oil as fuel from India
Crude selection more than just about discounts
Selecting crude, however, involves more than just comparing headline discounts. Refiners evaluate the time taken for the voyage, the delivered price after freight and insurance, value added products such as petrol, diesel, and jet fuel each barrel can yield, and the energy and hydrogen needed to process it.Payment terms, voyage duration, working capital, supply reliability, and access to markets for the finished products also matter. The economically preferred barrel is the one offering the strongest margin while accounting for these costs and risks.For example, crude from Venezuela may be cheaper than Russian crude, however, the higher delivery time along with fluctuating freight costs, which are subject to geopolitics and sanction, will play a critical role in the final decision.Additionally, crude quality is also a major parameter, assuming that a refinery is sophisticated enough to handle multiple fuel grades, Russian Urals is still easier to process than Venezuela’s Merey 16 which has larger portion of heavy molecules and residual material along with high sulfur content which increases refining costs and impacts margins. The decision to select the source of crude oil is hence a complex interplay of all such factors and not just about initial discount on the crude oil.
India’s savings due to Russian crude
Russia became an unusually attractive supplier when Western buyers retreated after the war with Ukraine. Its share of Indian crude imports, below 2% before the war, expanded rapidly as discounts compensated refiners for longer supply chains.The relationship remains substantial, it has been reported by various outlets that Russian crude of about 2.1 million barrels per day in August 2026 were delivered, which forms close to 45% of India’s total import mix, down from over 50% in the previous month.Now the question is how much India has saved by doing this. Industry estimates put savings at around $12 billion between April 2022 and June 2025.The estimates compare the average landed cost of Russian crude with imports from other suppliers. Estimated savings were around $4.9 billion in fiscal 2023, $5.4 billion in fiscal 2024, $1.5 billion in fiscal 2025, and $840 million between April-June 2025.These estimates try to provide the best possible picture given limitations on different crude grades and other underlying assumptions.Nevertheless, the evidence supports a substantial multibillion-dollar benefit for the Indian economy. Those gains lowered acquisition costs; however, their distribution among refinery margins, consumers, and government revenues depended on pricing and taxation.The profits have also fluctuated sharply. Industry estimates and analyses found the Russian landed-price advantage declining from around $13 per barrel in fiscal 2023 to $2.30 per barrel in fiscal 2025.More recently, it was observed that delivered Urals discounts to Brent have narrowed to $1-2 a barrel in late July 2026, from above $10 earlier that month. It reinforces the point that yesterday’s discount cannot justify tomorrow’s purchase.
Prospect of US tariffs
In the present day, the situation has become more complex, the new US law potentially changes the economics of India’s Russian oil purchases. Signed into law on September 18 as the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026, it provides for tariffs of up to 100% on goods from the five largest buyers of Russian oil and natural gas.The relevant exposure is therefore potential damage to Indian exports entering the United States, rather than a 100% surcharge on crude arriving in India. India must therefore weigh its oil savings against potential losses for exporters.Actual costs will depend on implementation, product coverage, tariff rates and waivers. The law also puts additional pressure on shipping and financial networks supporting Russian trade.
What Russia Sanctions Act Could Mean For India
These channels can raise transaction costs or interrupt supply even before any export-market loss is counted. The commercial test must consequently include both the refinery’s additional costs and the wider economy’s exposure.Consider an illustrative calculation, at purchases of one million barrels a day, every $1 per barrel of net advantage is worth approximately $365 million annually.A $2 advantage produces $730 million while a $5 advantage produces $1.83 billion.However, under an illustrative scenario, if additional costs associated with Russia-related trade amount to say $5 billion annually, a crude oil discount of approximately $13.70 per barrel would be required by India to offset those costs at imports of 1 million bpd.Another important facet of this conversation is the scale of export exposure. India sold$86.5 billion of goods to the US in fiscal 2026. Even a hypothetical 10% decline would mean around $8.7 billion in lost export sales, assuming all other factors remain constant.It is worth noting here that a tariff is not paid mechanically by India; US importers pay it, with the burden transmitted through prices, margins and demand. So, the central argument here is that relatively modest trade disruptions can outweigh narrow oil discounts.
The balancing act
However, one must remember that an abrupt exit from Russian oil could also be expensive. Replacement cargoes may carry higher delivered costs, while refinery scheduling and inventories need adjustment.If displaced Russian barrels fail to find other buyers, reduced global supply could raise benchmark prices across India’s entire import basket. Conversely, if those barrels are simply redirected, the global price effect would be smaller. Supply availability matters especially amid the current disruption to Middle Eastern energy trade.India’s sensible response is therefore a flexible procurement portfolio. Refiners can consider retaining Russian purchases where transactions remain economically feasible and the delivered economic advantage is sufficiently robust, while building alternatives across the Middle East, the Americas, and Africa.Contracts should provide room to adjust volumes, and sourcing decisions should be tested against narrower discounts, higher freight costs, and interruptions to payments or deliveries.Balancing commercial relationships with Washington and Moscow requires a negotiated economic proposition. India can seek US waivers or calibrated treatment alongside measurable diversification, while expanding purchases of American energy where price, quality, and logistics justify them.Russia, meanwhile, would need to offer terms that compensate for the additional risks its supply now carries. Replacing discounted oil with unnecessarily expensive imports would weaken the economic rationale for diversification.Russian crude has delivered meaningful savings, but those historical gains have already been realised. The forward-looking question is whether the next barrel improves India’s overall economic position or not. Where discounts remain material and wider trade costs can be contained, continued procurement makes sense.Where thin margins on crude expose a much larger export economy to sustained losses, reducing dependence becomes the stronger commercial choice.(Sourav Mitra is Partner – Oil & Gas, Grant Thornton Bharat and Praveen Rai is Director, Grant Thornton Bharat.)
