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U.S. penalty risk on Russian oil may add $9-11 billion to India’s import bill, analyst say
India’s annual oil import bill could rise by $9-11 billion if the country is compelled to move away from Russian crude in response to U.S. threats of additional tariffs or penalties on Indian exports, analysts said.
India, the world’s third-largest oil consumer and importer, has reaped significant benefits by swiftly substituting market-priced oil with discounted Russian crude following Western sanctions on Moscow after its invasion of Ukraine in February 2022.
Russian oil, which accounted for less than 0.2% of India’s imports before the war, now makes up 35-40% of the country’s crude intake, helping reduce overall energy import costs, keep retail fuel prices in check, and contain inflation.
The influx of discounted Russian crude also enabled India to refine the oil and export petroleum products, including to countries that have imposed sanctions on direct imports from Russia. The twin strategy of Indian oil companies is posting record profits.
This is, however, now under threat after U.S. President Donald Trump announced a 25% tariff on Indian goods plus an unspecified penalty for buying Russian oil and weapons. The 25% tariff has since been notified, but the penalty is yet to be specified.
Coming within days of the European Union banning imports of refined products derived from Russian-origin crude, this presents a double whammy for Indian refiners.
Sumit Ritolia, Lead Research Analyst (Refining & Modelling) at global real-time data and analytics provider Kpler, termed this as “a squeeze from both ends”.
EU sanctions — effective from January 2026 — may force Indian refiners to segment crude intake on one side, and on the other, the U.S. tariff threat raises the possibility of secondary sanctions that would directly hit the shipping, insurance, and financing lifelines underpinning India’s Russian oil trade.
“Together, these measures sharply curtail India’s crude procurement flexibility, raise compliance risk, and introduce significant cost uncertainty,” he said.
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