Image Source: Deccan Herald
Indian Oil Corporation (IOC), the country’s largest oil refiner, has confirmed that it processed Russian crude oil during the June quarter, despite narrowing discounts that have recently dipped to approximately $1.5 per barrel compared to relevant benchmarks. The announcement comes amid heightened geopolitical tensions and increasing scrutiny from Western powers over India’s continued energy trade with Russia.
Executive Confirmation
Speaking to reporters, IOC executives stated that the company’s crude procurement decisions remain driven by economic considerations. “We continue to buy, purely based on pricing and processing compatibility,” said A.S. Sahney, Chairman of IOC. He emphasized that no directives have been received from the Indian government to either increase or reduce Russian oil imports, and that the company is operating on a “business-as-usual” basis.
This statement aligns with India’s broader stance on energy security: maintaining diversified sources of crude oil based on price competitiveness and refining needs, rather than political pressure.
Discount Dynamics
Russian crude, particularly the Urals blend, has been trading at a discount to Brent since the onset of the Russia-Ukraine conflict in 2022. Initially, these discounts reached as high as $40 per barrel, making Russian oil an attractive option for Indian refiners. However, recent months have seen a sharp contraction in these discounts, falling to just $1.5 per barrel in July2.
This narrowing has led to a temporary slowdown in purchases, with some refiners pausing spot buys. However, as discounts widened again to around $2.70 per barrel in August, interest in Russian oil has resumed, especially among state-run companies like IOC, Bharat Petroleum Corporation Ltd (BPCL), and Hindustan Petroleum Corporation Ltd (HPCL).
Geopolitical Crosswinds
The continued import of Russian oil has drawn criticism from the United States, particularly under President Donald Trump’s administration. In early August, Trump imposed a 25% tariff on Indian goods, citing India’s energy trade with Russia as a contributing factor to Moscow’s war efforts in Ukraine. He has threatened further sanctions if purchases persist.
Despite these pressures, Indian officials have reiterated that energy imports are guided by market dynamics. The Ministry of External Affairs stated that India has not violated any international sanctions, as Russian crude remains unsanctioned under current global frameworks.
June Quarter Processing
IOC’s confirmation of Russian crude processing in the June quarter underscores the strategic importance of these imports. Russian oil accounted for a significant portion of India’s total crude intake during this period, helping stabilize domestic fuel prices amid global volatility.
BPCL’s finance director, Vetsa Ramakrishna Gupta, noted that Russian oil made up 34% of BPCL’s crude intake in Q1 FY26. He added that the company aims to maintain this ratio, provided discounts remain viable and no new sanctions are imposed.
Economic Impact
The narrowing of Russian oil discounts has implications for India’s refining margins. Analysts at JM Financial estimate that a $1–1.5 per barrel reduction in gross refining margins (GRMs) could impact FY26 EBITDA by 8–10% for oil marketing companies (OMCs) and up to 25% for refiners like MRPL and CPCL.
However, the broader impact on India’s economy remains manageable. A Bank of Baroda report estimates that even a full embargo on Russian oil would increase India’s annual import bill by around $5 billion — a figure considered absorbable within the country’s $720 billion import framework.
Strategic Shifts
To hedge against geopolitical risks, Indian refiners have begun exploring alternative sources. Spot purchases from Brazil, West Africa, and the United States have increased, although Russian oil still accounts for over a third of India’s total crude imports.
Private players like Reliance Industries and Nayara Energy, which operate under term contracts, continue to import Russian crude at negotiated rates. However, state refiners remain more sensitive to market fluctuations and political developments.
Sources: MSN, Economic Times, BOE Report on Discount Trends
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