As West Asian conflicts reshape trade flows, India grapples with narrowing discounts on Russian oil and rising import costs, prompting diversification and strategic recalibrations.
India’s hunt for replacement crude is getting costlier as the West Asia conflict redraws trade routes and narrows the gap between discounted and benchmark-priced oil. For Indian refiners, the problem is no longer simply where to buy crude, but how to secure the right grade at a price that still leaves room for profit once freight, insurance and processing costs are added.
Russia remains central to that calculation. Reuters reported that Russian oil accounted for a record 50.83% of India’s crude imports in July, equal to about 2.47 million barrels a day, underscoring how deeply Indian refiners have leaned on Moscow since Western buyers stepped back from Russian supply. The Council on Foreign Relations has said that alternative shipping, insurance and payment arrangements helped sustain those flows, while Russia’s share of India’s crude purchases rose sharply in recent years. The U.S. Energy Information Administration has also noted that India imported 4.5 million barrels a day of crude and condensate in 2023, making it the world’s second-largest net importer.
Yet the economics are shifting. The discounts that once made Russian barrels stand out have narrowed, leaving Indian buyers with less room to manoeuvre as they try to diversify away from concentrated supply lines. Between April and July, Latin American crude gained ground in India’s import mix, while Russia’s share remained dominant, suggesting refiners are broadening their sourcing but not escaping price pressure.
Venezuelan crude has emerged as one of the alternatives, particularly as Indian firms look beyond the Gulf. But the oil is typically heavier and often needs more specialised refinery configurations, which can erase much of the benefit of a lower headline price. S&P Global has reported that Indian refiners have resumed buying Venezuelan cargoes after sanctions relief opened the market further, but it also warned that some of those volumes are now competing with Chinese demand, which could limit how cheap the barrels stay.
The wider geopolitical backdrop matters just as much as the posted price. With uncertainty around the Strait of Hormuz, Asian refiners have increasingly treated route security as part of the buying decision. Reuters has reported that refiners in South Korea, Japan and Taiwan have turned to US crude as an alternative, and that US exports to Asia hit a record 2.35 million barrels a day in July. Indian buyers are making a similar judgment, spreading purchases across Russia, the United Arab Emirates, Latin America and other suppliers to reduce exposure to any single disruption.
That diversification, however, is not free. India is still heavily dependent on imported crude, so higher global prices quickly feed through to the national import bill. Government data cited in the source material show that in the first quarter of FY27, India’s crude import bill rose 26% from a year earlier to $49 billion even though import volumes fell 18%, a sign of how quickly price inflation can overwhelm lower physical purchases.
The result is a more complicated market than the one Indian refiners faced when Russian barrels were deeply discounted and readily available. Venezuelan oil offers another outlet, but not necessarily a cheaper one once the full supply chain is counted. As Business Standard has reported, India’s reduced reliance on West Asian crude has also shifted the balance of its import basket away from OPEC suppliers, but the latest phase of the market suggests that resilience now comes at a higher cost.
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