Russian Oil: Cutting Oil Imports from Russia Is the Right Thing for India

India’s crude oil strategy has always been a balancing act between price, reliability, and geopolitics. For nearly four years, discounted Russian crude helped Indian refiners manage costs and protect inflation in a high-volatility world. But the context has changed.

Under the evolving India–US trade understanding, India is under pressure to reduce Russian oil purchases, and the economic upside from Russian crude has also narrowed as discounts have shrunk. At this point, reducing dependence on Russia is not just about optics. It is increasingly becoming a practical decision for trade, payments, and long-term positioning.

What matters now is not whether India should cut Russian oil. The real question is how India cuts without creating a cost shock or weakening energy security.

Why Russian Oil Is Hard to Replace Overnight

Despite talk of “zero imports,” India cannot realistically eliminate Russian crude in one clean move.

In recent months, Russia has accounted for roughly 35% to 40% of India’s crude import basket at its peak levels, which is too large to replace instantly without disrupting refinery economics and supply chains.

But the direction is clear. Russia’s share has already started falling and Middle East barrels are rising again.

The bigger constraint is not only volume. It is the operating friction that comes with sanctioned supply chains.

The Real Pain Point: Sanctions, Payments, and Compliance Risk

Buying Russian crude is no longer just a “price decision.” It is a settlement decision.

Even when oil is available, transactions can get complicated because:

• Payments face currency and banking constraints due to sanctions.
• Shipping and insurance chains carry higher compliance checks.
• Counterparties worry about secondary sanctions or future enforcement.

That is why India’s reductions in Russian crude are not only diplomatic signals. They are also risk management decisions for refiners, banks, insurers, and trading partners.

This is also consistent with recent reporting showing reduced Russian purchases and shifting crude sourcing patterns.

What the Indo–US Trade Deal Changes

The practical trigger for faster adjustment is the India–US trade understanding that linked trade outcomes and punitive tariffs to India’s Russian oil purchases.

So the trade-off becomes clearer for India:

• Russia offers lower cost only if discounts are meaningful and settlements are smooth.
• The US offers broader market access and tariff relief that can matter far beyond energy.

If the discount advantage is shrinking, then carrying high compliance and payment risk starts looking less attractive.

Will India Cut Russian Oil Imports to Zero?

The realistic answer is: unlikely, at least in the near term.

The shift is more likely to look like this:

• Reduce Russian crude to a smaller, manageable share.
• Replace the rest through a diversified mix: Middle East, US, and some opportunistic barrels from elsewhere.

This “reduce, not eliminate” approach also preserves an important hedge: Russian barrels can sometimes be less exposed to Middle East supply disruptions, depending on shipping routes and geopolitical conditions.

The Immediate Risk for India: A Cost Spike

Reducing Russian crude can raise India’s average crude import cost for two reasons.

1. Logistics can get more expensive

Sourcing from farther geographies like the US can create:

• Longer shipping routes
• More freight variability
• Higher logistical complexity compared to closer suppliers

India is actively working on lowering shipping dependence through domestic freight and tanker arrangements, which signals that logistics costs are now being treated as a strategic issue.

2. The oil price itself can move up

Brent has been trading around $71 per barrel in late February 2026, with markets pricing supply risks linked to geopolitics.

Even if Russia’s discount shrinks, having a diversified import mix matters most when the benchmark price is rising.

Middle East Risk Still Matters

One reason India valued Russian crude in recent years is that it reduced dependence on a single geopolitical hotspot.

A fresh Middle East risk premium is visible again in oil markets due to US–Iran tensions, which has been noted as a key driver behind price strength.

There is also a broader strategic concern that any escalation in the region can threaten confidence in shipping lanes. Even when physical supply is not disrupted, markets often price fear quickly.

So India must be careful that “cutting Russia” does not unintentionally become “over-concentrating elsewhere.”

Why India Still Has a Strong Economic Case to Reduce Russia

If you step back, the argument is not “Russia bad, US good.” The argument is more practical.

1. The discount advantage has shrunk

If Russian oil is no longer meaningfully cheaper, then the core reason to absorb payment and compliance friction fades.

2. India’s trade interest is stronger with the US

India runs a strong trade relationship with the US, and the US remains a critical market for Indian goods and services. The reported tariff linkage to Russian oil purchases shows that this relationship can directly affect India’s exporters.

So even a partial shift of oil purchases toward the US can be seen as:

• A trade stabiliser
• A negotiation lever
• A way to protect broader economic interests beyond crude

3. Trading with an isolated ecosystem gets harder over time

Even if Russia continues to supply oil, the surrounding ecosystem can remain constrained:

• Settlement channels
• Guarantees and letters of credit
• Insurance and shipping
• Compliance oversight

That friction compounds over time, and it shows up as hidden cost.

The Diplomatic Argument Needs Context Too

A common emotional argument is that India should continue buying Russian oil because Russia supported India historically.

But two points matter here:

• India’s large-scale oil purchases from Russia are relatively recent, they rose sharply after 2022 when discounted crude became available at scale.
• Defence and strategic ties can continue even if the oil mix changes. Trade baskets evolve based on national interest, not sentiment.

Diplomacy runs on alignment, timing, and self-interest. Energy procurement is ultimately a national security decision, not a loyalty certificate.

What This Means Going Forward: The Practical Path

The most realistic path for India looks like “controlled reduction.”

That means:

• Keep Russian crude at a smaller share to avoid sudden refinery disruption.
• Raise Middle East sourcing where economics works and supply is reliable.
• Add selective US barrels where trade logic supports it.
• Keep optionality through diversified contracts and flexible refinery configurations.
• Invest in logistics resilience because freight and shipping dependence is becoming a cost line item that matters.

This approach avoids two extremes:

• Not being over-exposed to Russian settlement risk
• Not being over-exposed to a single region’s geopolitical risk

Key Takeaways

• India is unlikely to cut Russian oil imports to zero quickly because Russia was a large share of India’s import basket at peak levels.
• The economic case for Russian crude weakens as discounts shrink and sanctions-driven friction rises.
• A shift away from Russia can raise India’s average crude cost due to logistics and benchmark price risk.
• Brent’s recent strength reflects geopolitical risk premiums tied to US–Iran tensions.
• The Indo–US trade linkage makes it rational for India to reduce Russian crude exposure to protect broader trade interests.
• The best outcome is controlled diversification, not abrupt elimination.

Disclaimer: This article is for general information and educational purposes only. It does not constitute legal, tax, or investment advice, and should not be treated as a recommendation to take any financial or trading decision.