India’s state-run oil refiners have begun inquiring about Russian crude purchases again, as widening discounts on Urals oil renew economic interest despite ongoing geopolitical tensions and tariff threats from the United States. The move signals a potential shift in procurement strategy after weeks of hesitation, driven by both commercial incentives and evolving diplomatic calculations.
Here’s a detailed breakdown of the situation and its broader implications.
Recent Pause and Emerging Reconsideration
1. Indian Oil Corporation, Bharat Petroleum Corporation, Hindustan Petroleum Corporation, and Mangalore Refinery Petrochemical Ltd had paused Russian oil purchases in July due to narrowing discounts and mounting US pressure
2. The pause coincided with US President Donald Trump’s announcement of a 25 percent tariff on Indian goods, citing continued energy ties with Moscow
3. Discounts on Russian Urals crude have since widened, prompting state refiners to reassess their stance and explore spot purchases for October-loading cargoes
4. Discussions are underway, but refiners await formal guidance from the Indian government before resuming large-scale imports
The renewed interest reflects the delicate balance between economic pragmatism and geopolitical alignment.
Key Highlights From Industry Sources
- Russian Urals crude is now priced at a deeper discount compared to Middle Eastern grades, improving its attractiveness
- Refiners are evaluating offers from UAE-based traders, with payments likely to be settled in dirhams to bypass dollar-based sanctions risks
- Private refiners such as Reliance Industries and Nayara Energy continue to lift Russian oil under long-term contracts
- The Indian government has not issued any directive to halt Russian imports, maintaining a stance of strategic autonomy
The inquiries suggest that state refiners are preparing contingency plans should the government permit renewed purchases.
Geopolitical Context and Tariff Dynamics
The reconsideration comes amid heightened diplomatic friction:
- The US has threatened secondary sanctions and additional penalties for countries buying Russian oil
- Trump’s executive order allows for tariff modifications if India aligns with US foreign policy objectives
- EU sanctions have lowered the price cap on Russian oil, but Indian refiners continue to source through UAE intermediaries
- India has defended its energy policies as being driven by national interest, not political alignment
These developments underscore the complex interplay between trade, diplomacy, and energy security.
Economic Rationale and Supply Chain Considerations
Russian crude remains economically viable for Indian refiners due to:
- High diesel and jet fuel yields from Urals grade
- Lower per-barrel costs compared to US and Middle Eastern alternatives
- Reliable delivery schedules and flexible payment mechanisms
Replacing Russian barrels entirely would raise India’s annual import costs by an estimated ₹25,000 crore, according to energy analytics firm Kpler. Middle Eastern grades offer quality parity but come with higher official selling prices and limited spot availability.
Operational Adjustments and Strategic Planning
To manage uncertainty, refiners are:
- Increasing spot purchases from Abu Dhabi, West Africa, and the US
- Reworking refinery configurations to accommodate lighter crudes
- Engaging with the oil ministry for clarity on future Russian imports
- Monitoring global freight and insurance trends to assess delivery risks
These steps reflect a cautious but proactive approach to maintaining supply stability.
Conclusion: Indian Refiners Weigh Russian Oil Comeback Amid Shifting Trade Winds
India’s state refiners are cautiously re-engaging with Russian oil suppliers as discounts improve and economic logic reasserts itself. While geopolitical risks remain high, the absence of formal restrictions and the need to optimize refining margins are driving renewed interest. The coming weeks will be critical as refiners await government guidance and assess the evolving tariff landscape. India’s energy strategy continues to walk a tightrope between global diplomacy and domestic demand.
Sources: The Hindu Business Line, Moneycontrol, Economic Times, India Today
