Shashwat Kumar
India is a net importer of crude oil, importing 88 percent of its requirement in FY 2025. For a high import-dependent and price-sensitive market like India, where demand is increasing every year, economics dictate import strategy, which is why the share of cheaply available Russian oil went from just 2 percent to more than 30 percent in a short span. However, India’s oil import basket is likely to undergo a drastic change as India may find it increasingly difficult to ignore geopolitical compulsions. The latest sanctions by the United States, along with decisions by the United Kingdom and the European Union, on Rosneft and Lukoil, Russia’s two largest oil companies, coupled with earlier sanctions on Gazprom Neft and Surgutneftgas, will require India to recalibrate its crude oil import strategy based on the steepening tradeoffs between cheap oil and geoeconomic ties with Washington and other members of the sanctioning coalition.
The lack of clarity from the United States on sanction enforcement provides India with maneuverability in planning a diversification strategy. Russian oil is not providing the high returns that it did in the early years of the war in Ukraine. A 50 percent tariff imposed on Indian goods by the United States is hurting India’s micro-, small-, and medium-sized enterprises (MSMEs). Therefore, it is in India’s own interest to diversify its oil imports and use them as a bargaining tool in the bilateral trade negotiation with the United States. India’s strong macroeconomic indicators (e.g., low inflation and low current account deficit) and 2026 global oil outlook do favor a transition back to prewar diversified import levels.
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