Benefit from Russian oil imports exaggerated
New Delhi: India’s financial benefit from discounted Russian crude oil imports stands at just about $2.5 billion annually, far below earlier projections of $10–25 billion, according to a research note by brokerage CLSA released on Thursday.
“Benefit from Russian oil imports is way less than exaggerated media numbers,” CLSA said. “We calculate the net annual benefit to India from Russian crude imports to be much smaller at just $2.5 billion or a small 0.6 bps of India’s GDP.”
India, the world’s third-largest oil consumer, has sharply increased its intake of Russian crude since the Ukraine conflict began. Purchases from Moscow climbed from less than 1 per cent of India’s total crude basket before 2022 to around 40 per cent in 2024–25. Currently, Russia accounts for 36 per cent of India’s imports, or 1.8 million barrels per day (mbpd) of the 5.4 mbpd total. Other key suppliers include Iraq (20 per cent), Saudi Arabia (14 per cent), the UAE (9 per cent), and the United States (4 per cent).
Russia, which produces about 9.2 mbpd, exports nearly 4.3–4.8 mbpd, with India and China being the largest buyers. China alone is estimated to import 2 mbpd from Russia.
According to Indian oil marketing companies, the discount on Russian crude was around $8.5 per barrel in FY24. This narrowed to $3–5 in FY25 and has fallen further to nearly $1.5 per barrel in recent months.
“Using an average discount of $4 per barrel would imply a total annual advantage of just $2.5 billion captured by Indian importers in FY25,” CLSA stated. “However, current discounts would take down the annualised gains from this import to just $1 billion.”
The brokerage added that the apparent headline discounts are often misleading, since Indian refiners typically import on a cost, insurance, and freight (CIF) basis. “The net gain to Indian importers is far smaller than this visible discount, as there are several shipping, insurance and reinsurance-related restrictions for Russian crude. Thus, the landed price of Russian crude is at a far lower discount,” it said.
The report noted that the expected savings are not evident in government trade data. “To our surprise, the import data of the government reveals no clear gains from Russian oil imports, as the unit price of Indian crude oil imports has moved from a discount versus Dubai pre-FY22 to a premium over the past couple of years,” CLSA observed.
Refining economics also play a role. Since Russian crude is of lower quality, Indian refiners must mix it with costlier grades to maintain fuel standards, further reducing the effective benefit.
The report cautioned that halting Russian imports could destabilise the market. “With only a few buyers purchasing Russian crude, any stoppage from India may make it difficult for Russia to find buyers for possibly 1 million bpd or 1 per cent of global supply in the near term. Although India should be able to easily secure supply from other sellers, such a supply disruption could drive a spike in crude oil price to $90–100 per barrel,” it said.
Such an increase, it warned, could trigger inflation globally. “Indian imports of Russian oil provide a much-needed check on crude oil prices, as well as curbing the risk of global inflation,” CLSA said.
The report also underlined that the issue has gone beyond economics. India has consistently defended its purchases, arguing that there are no international sanctions prohibiting crude imports from Russia. The European Union’s restrictions apply only to refined products, while the United States has not sanctioned Russian crude itself.
“Economics aside, we believe the issue of Russian crude oil imports has now become a political one with India reiterating its freedom to choose its trade partners within the purview of global trade rules,” CLSA concluded.
