India’s evolving energy landscape has once again come into global focus as recent trade data reveals that the country’s declining dependence on Russian crude began well before the United States imposed a 25% additional tariff on Russian oil imports. The tariff, which came into effect on August 27, 2025, was widely expected to trigger significant adjustments in global oil flows. However, India’s import pattern indicates that New Delhi had already recalibrated its sourcing strategy for nearly a year prior to the tariff announcement.

This trend underscores a broader, more deliberate form of economic positioning that predates recent U.S. policy changes. Far from reacting impulsively to international developments, India appears to have been quietly restructuring its oil supply mix, responding to shifting price dynamics, currency constraints, supply chain disruptions, and evolving geopolitical pressures.

A Clear Trend Before Tariffs: India's Russian Oil Decline

Data from the Ministry of Commerce shows that India cut the value of Russian oil imports in eight out of the previous ten months leading up to September 2025 when compared to the same months in 2024. This sustained decline highlights a pattern that cannot be attributed solely to U.S. tariff policy.

Indian refiners, some of the largest buyers of discounted Russian crude since early 2022, began moderating their volumes gradually as the global pricing advantage of Russian barrels narrowed. The marginal benefit of buying Russian oil weakened as freight costs increased, payment channels tightened, and Middle Eastern producers began offering more competitive terms.

The fact that the downturn in imports spans nearly a year suggests that India had carefully assessed long-term risks associated with overexposure to one geopolitical supplier. Analysts note that tariffs imposed by the United States may have acted as an accelerator of an already-existing trend, rather than the primary trigger.

Why India Started Diversifying Early: Multiple Structural Drivers

India’s shift away from Russian crude was driven by several interconnected factors, each contributing to a gradual but deliberate reduction.

1. Narrowing Price Discounts

When sanctions against Russia were first implemented in 2022, Indian refiners enjoyed unprecedented discounts on Urals crude. But by late 2023 and early 2024, these discounts began tightening significantly. With supply chains adapting and Russia finding alternative markets, the price gap between Russian grades and Middle Eastern benchmarks shrank considerably.

By the end of 2024, many refiners found that the effective landed cost—after factoring in freight, insurance, and transaction complexities—was no longer substantially cheaper than other sources.

2. Payment and Sanction-Compliance Challenges

India had to navigate increasingly complex payment mechanisms due to tightening U.S. and EU financial restrictions on Russian entities. Transactions in yuan, dirham, or rupees faced frequent delays, expanding administrative overhead and heightening compliance risk.

Banks became more cautious about clearing Russia-linked payments, forcing refiners to seek safer and more predictable channels.

3. Higher Shipping and Insurance Premiums

The shadow fleet that had emerged to transport Russian crude carried inherent risks. Insurance premiums rose, ship availability tightened, and compliance scrutiny increased. Refiners found themselves allocating more resources to logistics, reducing the attractiveness of Russian barrels.

4. Middle Eastern Suppliers Regained Competitive Advantage

Saudi Arabia, Iraq, and the UAE began offering more favourable long-term contracts, stable delivery schedules, and reliable credit arrangements. For refiners needing predictable supply at scale, these producers became difficult to overlook.

5. Strategic Energy Security Considerations

India’s government has repeatedly emphasised diversification as a core element of national energy security. Relying heavily on a single supplier—particularly one under broad sanctions—poses long-term risks. A gradual recalibration helped spread geopolitical exposure more evenly.

6. Domestic Refinery Adjustments

Some refiners rebalanced their crude slates due to maintenance cycles, product mix optimisation, and regional demand shifts. Not all Indian refineries are optimised for heavy Russian grades; diversifying feedstock improves operational flexibility.

The Role of the U.S. Tariff: An Accelerator, Not the Driver

While the 25% additional U.S. tariff caused a global reshuffle in Russian oil flows—redirecting more barrels toward Asia—the evidence shows that India’s downtrend began long before. This suggests the tariff was a reinforcing factor, helping speed up a decline whose foundation had already been built.

Some analysts believe that the tariff also signalled a likely continuation of more assertive U.S. policies against Russia, prompting Indian refiners to adopt a conservative approach. Indian companies, which depend on access to U.S. technology, financing, and markets, often proactively mitigate exposure to potential secondary risks.

But crucially, the tariff did not trigger the initial drop.

How India Managed Its Supply Mix During the Transition

India’s overall crude import volumes remained stable throughout this transition, indicating that refiners were not cutting consumption but simply rebalancing their portfolios.

Middle East Takes the Lead Again

Saudi Arabia and Iraq reclaimed a larger share of India's crude basket as Russian volumes tapered. Long-term supply contracts offered consistent pricing formulas tied to established benchmarks, ensuring predictability.

Africa Emerged as a Supplementary Source

Countries like Nigeria and Angola increased deliveries as refiners sought to diversify into lighter grades suitable for gasoline-centric production.

North American and Latin American Cargoes Reappeared

Occasional shipments from the U.S., Guyana, and Brazil added more flexibility, demonstrating that India was broadening its horizons beyond traditional geographies.

Impact on India’s Refinery Economics

Russian oil had allowed Indian refiners to enjoy elevated margins due to cost savings on feedstock. As discounts shrank and logistical complexities rose, margins naturally adjusted.

However, refiners adapted by:

• optimising product slates

• using higher-value export opportunities

• securing better term deals with Middle Eastern producers

• improving refining efficiency

Experts say that while margins moderated, they remain healthy, and refiners are now operating under more balanced, less volatile conditions.

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