India’s energy landscape has undergone a radical transformation in recent years, especially when it comes to its dependence on Russian oil. The country’s purchases of Russian crude surged from just 4 million tonnes in fiscal year 2021-22. They are projected to reach an astonishing 87 million tonnes by 2024-25. So India’s strategic maneuvering in the emerging global energy market should be no surprise. In so doing, it artfully walks the line of the dual pressure emerging from Moscow and Washington.
The financial ramifications of this dependence are significant. In 2023, India’s imports of Russian oil amount to an estimated $52.7 billion, making up 37% of India’s total oil spending. The discounted prices of Russian crude have been a major piece of this equation. This has led to Russian oil averaging a discount of -14.1% in 2022-23, which fell modestly to -10.4% in 2023-24. These discounts saved India about $5 billion per year, enabling it to insulate its economy from the impacts of extreme energy volatility.
That’s because most Indian refineries are configured for heavier crude grades, especially the Urals blend from Russia. This medium to heavy crude oil fits perfectly to the currently operated crude oil processing configuration of Indian refineries, securing maximum run length and profitability. Experts warn that switching to lighter alternatives, such as US shale oil, would necessitate costly reconfigurations of these facilities. These increased requirements would hurt the yields of important products such as diesel and jet fuel. This will further complicate India’s burgeoning energy strategy.
Meanwhile, India has more than doubled its imports from Russia. Yet, it continues to suffer from an enormous petroleum trade deficit with the United States. So far in 2024, India has imported $7.7 billion in American petroleum products, of which $4.8 billion has been crude oil. Even with these enormous imports, India still recorded a $3.2 billion trade surplus with the US. India’s challenges are immense as it seeks to diversify its energy mix. All the while, it attempts to position itself to keep a good line with Russia.
India’s energy policy is an ongoing tightrope walk between its long-standing relationship and contracts with Moscow and the increasing push from Washington. An official spokesperson for the Indian government remarked that their import policy is “guided by the interests of the Indian consumer in a volatile energy scenario.” This declarative clause highlights the government’s priorities in achieving affordable energy for its citizens, all while addressing rising geopolitical tensions.
The consequences of stopping Russian oil imports could be catastrophic. Experts caution that India’s import ban will be a surprise that sends global oil prices soaring. This massive increase would undermine any fiscal savings India has experienced and translate into higher import costs. The amounts saved through discounted Russian oil may be small for now—less than 1 percent of India’s $900 billion goods and services import bill. That’s still gargantuan savings of $9 billion.
Denis Alipov, Russia’s envoy in New Delhi, has commented on the positive impact of Russian oil on India’s economy. He stated that Russian oil is “very beneficial for the Indian economy and for the welfare of Indian people,” reinforcing the narrative that these imports play a crucial role in supporting India’s economic stability.
Global oil demand isn’t strong at the moment. That fatal flaw would open the door for other countries to more quickly compensate for the 4-5% of global production that India sources from Russia. We’ve given India the room to pursue its inward-facing agenda without upping the ante on global markets too much. Authorities such as Partha Mukhopadhyay warn that the increase in Russian imports is dangerous. This increase has led to a significant decline of imports from various countries, some seeing extreme reductions of their exports to India.