India's Russian Oil Imports: A Strategic Autonomy Worth Trillions

Strategic Insights -

India's imports of Russian oil have been a contentious issue in the country's relationship with the US. According to an analysis of India's official trade data, these imports have saved Indian refiners at least $12.6 billion in the past three years. However, the effective discounts on Russian crude narrowed considerably over time, falling to their lowest in the 2024-25 fiscal. But beyond the apparent savings, the implications of India's Russian oil imports are much broader and have significant economic and strategic implications.

Key Takeaways:

  • Indian refiners have saved at least $12.6 billion in the past three years due to imports of Russian oil, which have been discounted by an average of 10.4 percent to 13.6 percent compared to oil from other suppliers.
  • The effective discount on Russian oil narrowed significantly over time, falling to 2.8 percent in the 2024-25 fiscal, leading to savings of just $1.45 billion.
  • The presumptive savings from India's Russian oil imports may be much higher, given that India's rapidly expanded appetite for Russian crude contributed in keeping global oil prices in check, and had the average landed price of oil imported into India been higher by $10 per barrel, the country's oil import bill would have been higher by nearly $58 billion.
  • Industry experts and analysts believe that global oil prices would jump if India stops buying Russian crude, with CLSA estimating that oil prices could jump from $65 per barrel to $90-$100 if India stops importing Russian oil.
  • Nomura economists estimate that given India imported around 1.8 billion barrels of oil in 2024-25, India's annual import bill could rise by around $1.8 billion for every $1 increase in global crude prices.
  • The combined effect of loss of discounted barrels and the potential increase in international oil prices due to a chunk of Russian supply going off the market could push up India's annual oil import bill by up to $11 billion.

Statistics:

  • India's total oil import bill for the 2022-23 fiscal was $162.21 billion, and had Indian refiners paid for Russian oil the average price they paid for crude from all other suppliers put together, the oil import bill would have been $167.08 billion, or $4.87 billion higher.
  • The savings accrued by Indian refiners due to Russian oil imports in 2022-23 was around $31 billion, with the average landed price of Russian crude being $83.24 per barrel, about $13 lower than the average landed price of non-Russian barrels.
  • The savings in 2023-24 was higher at $5.41 billion, with the average landed price of Russian crude being $76.39 per barrel, $8.89 lower than the average landed price of non-Russian oil.
  • The presumptive savings from India's Russian oil imports may be much higher, with a recent report by CLSA estimating that oil prices could jump from $65 per barrel to $90-$100 if India stops importing Russian oil.

Sources:

  • The Indian Express, "Russian oil math: discounts and savings" (no date provided)
  • CLSA, "India's oil import bill may rise if it stops buying Russian crude" (no date provided)
  • Nomura, "Impact of India's oil import bill on the country's economy" (no date provided)
  • Kpler, "Combined effect of loss of discounted barrels and increase in international oil prices" (no date provided)