India is gradually diversifying oil imports, balancing Russian crude, costs, and geopolitics while prioritising energy security, refinery economics, and flexibility
India is navigating a calibrated transition in its oil import strategy, one aimed at diversification rather than abrupt disengagement from Russian crude. Analysts have consistently warned that unwinding India’s reliance on discounted Russian barrels too quickly would strain refinery margins, raise the import bill, and complicate inflation management, given refinery configurations optimised for specific crude blends, landed cost sensitivities shaped by freight and insurance premia, and India’s diesel-heavy consumption structure.
Recent political and legal developments in Washington have added a new layer of uncertainty to this debate. While policy signals had linked tariff relief and trade concessions to India’s crude sourcing patterns, the US Supreme Court’s narrowing of executive authority under the International Emergency Economic Powers Act (IEEPA) introduces greater legal uncertainity around the durability of such trade instruments. Instead of ending tariff leverage, the decision is prompting Washington to rely more heavily on existing trade statutes and negotiated arrangements, reinforcing a more legalistic and negotiation-driven approach to managing disputes with major partners, including India.
The interim trade framework has clarified Washington’s expectations on energy while leaving India’s operating logic largely intact. Earlier policy signals had linked tariff relief to a broader effort encouraging India to reduce exposure to Russian crude and expand purchases of US energy. However, the recent judicial scrutiny of executive tariff authorities in the US suggests that any future trade adjustments would likely require firmer statutory grounding, reducing the scope for unilateral conditional leverage. New Delhi, by contrast, has acknowledged the trade reset while reiterating that energy sourcing decisions remain commercially driven and anchored in energy security and national interest.
However, the recent judicial scrutiny of executive tariff authorities in the US suggests that any future trade adjustments would likely require firmer statutory grounding, reducing the scope for unilateral conditional leverage.
The resulting arrangement underscores a move toward conditional and consultative trade engagement, where energy cooperation is increasingly situated within commercial and institutional frameworks, rather than within short-term policy instruments. On the ground, Indian refiners have not been formally directed to halt Russian oil imports. Instead, they have been encouraged to honour existing contracts while exercising caution in entering new ones. Public statements across capitals have reiterated that India’s sourcing choices remain guided by energy security and market fundamentals.
Any serious discussion on replacing Russian crude must begin with refinery configuration and product yields. Over the past two years, discounted Russian grades such as Urals allowed Indian refiners, particularly complex private / National Oil Companies plants, to protect margins and stabilise domestic fuel prices. At their peak, Russian imports exceeded 2 million barrels per day and accounted for close to 40 percent of India’s crude basket. Although this share has eased, Russian barrels continue to play a meaningful role in refinery throughput.
US benchmark grades such as WTI Light are ultra-light and sweet, while Russian Urals is a medium-sour blend better aligned with India’s diesel-heavy demand. A sustained shift toward lighter crudes can misalign refinery output and compress margins unless carefully blended.
Indian refiners have nevertheless built familiarity with US oil. After Iranian supplies declined post-2018, India replaced a large share of those barrels with American crude, with US exports to India peaking at about 420,000 bpd in 2021, making India one of the largest Asian destinations for US oil. Even so, refiners have treated US barrels largely as marginal or balancing grades, rather than core feedstock, precisely because of their impact on product slates. Unless blended with heavier crudes, sustained reliance on light grades can raise surplus gasoline and naphtha volumes, which typically fetch weaker netbacks in Asian markets.
These constraints have pushed Indian refiners toward a split sourcing strategy. Highly complex plants such as Jamnagar and Vadinar are better suited to heavier Venezuelan and Middle Eastern barrels, while lighter US crudes are absorbed by refineries with simpler configurations or export-oriented strategies. This blending approach preserves yield economics while retaining flexibility in a fragmented global crude market.
In this evolving calculus, Middle Eastern producers remain the structural anchor of India’s energy security. Saudi Arabia, Iraq and the United Arab Emirates continue to provide medium-sour grades aligned with Indian refinery configurations, supported by long-term crude supply ties, shorter shipping routes via the Strait of Hormuz and stable diplomatic engagement. Unlike Russian barrels shaped by sanctions risk or Venezuelan supplies tied to waiver politics, Gulf producers operate within comparatively predictable commercial frameworks. Diversification, therefore, is not a shift away from the Middle East, but a recalibration around it.
Venezuelan crude is often cited as a closer technical substitute for Russian barrels, particularly the Merey stream, having around 15–16° API, 2.5–3 percent sulphur, which fits the heavy, sour configuration of India’s most complex coastal refineries. These high-conversion plants, with Nelson complexity indices above 10 and deep coking/desulphurisation capacity, can broadly replicate Urals-like yields when running Merey-type grades.
The economics are tougher to make work. Even under the new US-managed waiver regime, years of under-investment still cap how much Venezuelan oil can reliably flow, and Indian refiners remain exposed to licensing and regulatory uncertainties, rather than to pure market risk.
The deep discounts on Russian oil seen in 2022–23, often in the US$ 20–30 per barrel range, have narrowed sharply as lower international crude oil prices from above US$ 100 per barrel to the US$ 60-75 range, sanctions enforcement tightened, freight and insurance costs rose, and Russia secured alternative buyers.
Although technically compatible, Venezuelan supplies face longer shipping distances, higher freight and insurance costs, and waiver-related uncertainty. Sustained deep discounts would be required to replicate Russian economics, an outcome that remains structurally uncertain.
The commercial calculus has also shifted for Russia itself. The deep discounts on Russian oil seen in 2022–23, often in the US$ 20–30 per barrel range, have narrowed sharply as lower international crude oil prices from above US$ 100 per barrel to the US$ 60-75 range, sanctions enforcement tightened, freight and insurance costs rose, and Russia secured alternative buyers.
Several Indian refiners have already pared back spot purchases as landed discounts narrowed sharply. Analysts suggest that replacing the remaining Russian volumes with market-priced alternatives would raise India’s oil import, adding US$ 4 billion bill by a modest margin, an increase that remains manageable when weighed against lower exposure to sanctions and trade-related uncertainty. In practice, refiners continue to prioritise sourcing flexibility, aligning crude choices with refinery configuration, product demand, and margin optimisation rather than with political signalling.
Recent US judicial developments have clarified the limits of executive trade authority. As energy diversification remains part of bilateral discussions, future trade measures are likely to operate within clearer statutory frameworks. This reinforces India’s longstanding position that crude sourcing decisions are guided primarily by commercial logic and energy security considerations.
For New Delhi, the challenge is no longer whether to diversify its crude basket, but how to manage that transition without disrupting refinery economics, domestic fuel prices, or diplomatic flexibility. As India-US trade talks evolve within clearer institutional frameworks, cooperation in LNG and clean energy is likely to progress through negotiated commercial pathways rather than rushed policy measures.
The most credible path forward lies in incremental recalibration rather than abrupt substitution. Russian crude is likely to continue declining as a share of India’s basket, but through market-driven mechanisms, narrowing discounts, contract rollovers, and refiners' blending strategies, rather than through formal mandates or compressed political timelines. Such an approach allows diversification to proceed in alignment with commercial arithmetic, even as broader strategic partnerships adapt to shifting geopolitical and legal contexts.
Middle Eastern suppliers, however, will remain the backbone of India’s oil security, providing scale, proximity and diplomatic stability that alternative corridors cannot easily replicate.
US crude may increase modestly as a diversification and balancing instrument, enhancing negotiating flexibility. Middle Eastern suppliers, however, will remain the backbone of India’s oil security, providing scale, proximity and diplomatic stability that alternative corridors cannot easily replicate. In a fragmented energy order, Gulf partnerships offer continuity even as India adjusts its exposure to discounted Russian barrels.
Venezuelan crude, despite its technical compatibility with India’s most complex refineries, is best treated as a conditional supplement rather than a structural replacement. Its viability hinges on sustained discounts, logistical costs, and the durability of sanctions waivers, factors that lie largely beyond India’s control. Positioning Venezuelan barrels as opportunistic additions, rather than as a diversification anchor, limits exposure to external policy risk.
At the policy level, preserving optionality is paramount. This requires maintaining a diversified supplier base, investing in refinery flexibility and storage, and strengthening logistical resilience to absorb future shocks. Ultimately, India’s oil strategy will be guided less by headline trade deals than by the enduring logic of refinery configuration, landed costs, and demand patterns. The durability of India-US energy ties will depend on long-term market alignment and institutional cooperation, rather than short-term policy leverage.
Manish Vaid is a Junior Fellow at the Observer Research Foundation
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Manish Vaid is a Junior Fellow at ORF. His research focuses on energy issues, geopolitics, crossborder energy and regional trade (including FTAs), climate change, migration, ...
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