New Delhi, August 5, 2025 – In a strategic move that has reshaped its energy landscape, India has saved an estimated ₹2.21 lakh crore (approximately $26.3 billion) over the past three years by opting for discounted Russian crude oil over more expensive Saudi Arabian oil. This shift, driven by geopolitical realignments following Russia’s invasion of Ukraine in February 2022, has not only reduced India’s energy import bill but also played a pivotal role in keeping domestic inflation in check, providing significant relief to the economy and consumers alike.
The Shift to Russian Oil
India, the world’s third-largest oil consumer and importer, relies on imports for over 85% of its crude oil needs. Traditionally, the country sourced the majority of its oil from Middle Eastern nations, particularly Iraq and Saudi Arabia. However, Western sanctions on Russia following the Ukraine conflict created an opportunity for India to capitalize on heavily discounted Russian crude. Before the war, Russian oil accounted for less than 0.2% of India’s crude imports. By mid-2025, this share had surged to 35-40%, making Russia India’s top oil supplier, surpassing both Iraq and Saudi Arabia.
According to data from the Centre for Research on Energy and Clean Air (CREA), India spent €112.5 billion (approximately ₹1.5 lakh crore or $121.59 billion) on Russian crude oil between February 2022 and March 2025. In contrast, the Indian Express’s analysis of official trade data estimates that Indian refiners saved at least $10.5 billion (₹88,200 crore) between April 2022 and May 2024 by purchasing discounted Russian oil. For the fiscal year 2023-24 alone, ICRA Research reported savings of $7.9 billion (₹66,360 crore), with additional savings in subsequent periods contributing to the cumulative total of ₹2.21 lakh crore over three years.
The discounts on Russian oil, often priced $5-16 per barrel lower than Middle Eastern crude, have been a game-changer. For instance, in FY24, the average cost of the Indian crude oil basket was $82.58 per barrel, compared to $93.15 the previous year, largely due to the lower cost of Russian imports. This cost advantage allowed India to reduce its oil import bill from $162.21 billion in FY23 to $139.86 billion in FY24, despite importing similar or higher volumes.
Economic and Inflationary Benefits
The savings from Russian oil imports have had a profound impact on India’s economy. By lowering the cost of crude oil, which constitutes a significant portion of India’s import expenditure, the government has been able to stabilize retail fuel prices for petrol, diesel, and other petroleum products. This has been critical in containing inflation, which could have otherwise spiked due to global oil price volatility. The Reserve Bank of India (RBI) projects Consumer Price Index (CPI) inflation to average around 3.7% for FY 2025-26, a relatively stable figure partly attributed to these energy cost savings.
Ajay Srivastava, a former trade official, noted, “Discounted Russian oil has helped India manage inflation during global volatility.” The lower import costs have also compressed India’s current account deficit-to-GDP ratio by 15-22 basis points in FY24, strengthening the country’s fiscal position. Additionally, the influx of cheaper Russian crude has enabled Indian refiners, such as Reliance Industries and state-owned companies like Indian Oil Corporation, to post record profits by refining and exporting petroleum products, including to markets that restrict direct Russian oil imports.
Geopolitical and Economic Challenges
While the shift to Russian oil has been economically advantageous, it has not been without challenges. The United States, under President Donald Trump, has recently imposed a 25% tariff on Indian exports and threatened additional penalties for India’s continued trade with Russia, citing both oil and defense equipment purchases. Analysts estimate that pivoting away from Russian oil could increase India’s annual import bill by $9-11 billion, potentially disrupting retail fuel price stability and fueling inflation.
Furthermore, an impending EU ban on refined products originating from Russian crude, set to take effect in January 2026, poses a threat to India’s lucrative re-export market. Indian refiners, particularly complex private units like Reliance’s Jamnagar refinery, have benefited from processing Russian crude into diesel and jet fuel for export to Europe and other regions. The EU’s sanctions could curtail this trade, squeezing refiner margins and increasing compliance risks.
Despite these pressures, Indian officials have emphasized that the country’s oil procurement decisions are guided by national interest and economic pragmatism. Ministry of External Affairs spokesperson Randhir Jaiswal stated, “India will take all necessary measures to safeguard its national interests and economic security.” Oil Minister Hardeep Singh Puri has also affirmed that India will continue to buy affordable oil, regardless of the source, to meet its energy needs.
Strategic and Structural Factors
India’s reliance on Russian oil is driven by several strategic factors. First, the re-export of refined products has generated substantial revenue, with companies like Reliance benefiting significantly. Second, instability in the Middle East, particularly around the Strait of Hormuz, has underscored the need to diversify energy supply lines. Third, production cuts by OPEC+ members, including Saudi Arabia, have made Russian oil an economically attractive alternative.
However, the rupee-rouble payment mechanism, introduced in 2022 to bypass dollar-based transactions, has faced hurdles. Indian refiners have largely settled payments in UAE dirhams through West Asia-based traders, as Russia prefers hard currencies over rupees due to trade imbalances. This has added complexity and costs to transactions, with conversions costing 2-3% more than direct settlements.
Looking Ahead
India’s oil import strategy remains at a crossroads. While discounted Russian crude has delivered significant savings—₹2.21 lakh crore over three years—and helped control inflation, the looming threat of U.S. tariffs and EU sanctions could disrupt this model. Indian refiners are exploring alternatives, such as sourcing crude from the Middle East, West Africa, Latin America, or even the U.S., but these options are logistically complex and economically burdensome.
The government continues to frame its approach as a balance of energy pragmatism and strategic autonomy. With oil import dependency projected to remain high (87.7% in FY25), and global oil prices expected to hover around $85 per barrel, India’s ability to navigate geopolitical pressures while maintaining economic stability will be critical.
As the world watches, India’s oil gamble underscores the delicate interplay between economics, geopolitics, and energy security. The savings from Russian oil have been a boon, but the path forward demands careful calibration to sustain these gains without compromising global relations or domestic economic stability.
