Saswata Chaudhury
The U.S. has threatened to impose an unspecified penalty in addition to 25 percent punitive tariffs on India for its imports of Russian oil. To avoid these sanctions without harming India’s economic interests, India has two broad options: restructuring supply chains or diversifying export markets. Using the first option, India can reduce its dependence on Russian oil by reverting to traditional oil-importing routes, such as the Middle East, the U.S., Africa, and Latin America. Or, India can identify alternative markets beyond the European Union (EU), such as the Asia-Pacific and African countries, for exporting refined oil products.
The sanctions by the EU on Russia introduced significant uncertainty and volatility in the global oil market. While European countries have established new supply relationships with Middle Eastern producers, Russian oil flows have shifted predominantly to Asia. The top three destinations for Russian crude oil exports are: India (with a 28 percent share and 1.69 million barrels per day (mbd)), China (with an 18 percent share and 1.09 mbd), and Turkiye (with a 7 percent share and 0.4 mbd).
Countries like India, which have significantly increased their crude oil imports from Russia in recent times and enhanced export of refined petroleum products to Europe, may face challenges due to the sanctions. The EU sanctions have significantly altered Russia’s energy trade dynamics. Prior to the conflict, in 2021, Russia’s exports to Asia and Oceania accounted for 34 percent of its crude oil and 16 percent of its petroleum products. However, by 2024, this region became the primary destination for 63 percent of Russia’s crude oil exports and 36 percent of its petroleum product exports.
To attract buyers, Russia has been offering substantial discounts on its crude oil, pricing it $15-20 below the international benchmark price. As a result, India emerged as Russia’s largest crude oil importer between 2023 and 2024, surpassing China. During this period, India’s share of Russian crude oil imports increased from 30 percent to 34 percent, while China’s share decreased from 32 percent to 26 percent. Indian refiners, including Reliance Industries and Nayara Energy, have leveraged the discounted prices of Russian crude oil to ramp up imports, refining the oil into products like diesel and jet fuel for export to European markets.