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India could face an additional $1.8-3.7 billion annual oil bill if it replaces just 1 million barrels per day (bpd) of Russian crude with supplies costing $5-10 a barrel more, highlighting the potential cost of any sharp shift in sourcing under US tariff pressure.
Replacing around 2 million bpd could roughly double that impact, though the estimate is only a sensitivity calculation and not a forecast of the current price differential, said Natalia Katona, a UAE-based freelance commodity analyst.
The bigger constraint, however, may be availability rather than price.
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Russia supplied India around 1.9 million bpd in August, or about 42% of its crude imports. “Indian authorities have made clear that energy security and national interests come first, so I would expect diversification, if any, rather than a retreat from Russian oil,” Katona said.
India is also entering its peak fuel-demand season, which runs from October through March-April. Crude requirements are expected to rise during this period, with refinery runs moving towards maximum levels, leaving little room to reduce overall imports.
Russian barrels are no longer cheap in absolute terms either. Urals is trading at an $8-a-barrel premium to ICE Brent, Katona said, but remains cheaper than competing grades. Russian suppliers also adjust their offers against rival barrels to keep sales commercially attractive.
Prashant Vasisht, senior vice-president and co-group head, corporate sector ratings, Icra, said Russia accounted for around 52% of India’s crude imports in July, after shares of about 48-49% in earlier months.
“Replacing such large volumes would be extremely difficult,” Vasisht said. “India is unlikely to risk fuel shortages for its population merely because of a tariff threat.”
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While India can turn to Guyana, Nigeria, the US and Brazil, the scale required makes an effective replacement difficult, he said, adding that negotiations would likely play a key role.
Buying from farther markets also carries a steep freight cost. A VLCC voyage from Brazil to India currently costs $50-51 million, excluding the crude itself, Katona said. Brazil and Guyana can contribute supplies and avoid conflict-linked chokepoints, but India would compete with other Asian buyers, including Japan and South Korea.
The natural fallback would eventually be West Asia.
“Once the market stabilises, the natural alternative would be West Asian crude, given its proximity to India, lower freight costs and shorter transit times, along with the suitability of these grades for Indian refineries,” said Nikhil Dubey, lead analyst for refining at Kpler.
For now, however, Gulf supplies remain constrained. The East-West pipeline has reportedly resumed operations, but loadings at Yanbu are yet to restart, keeping physical availability tight.
“If India were to replace a substantial portion of Russian supply, it would have to compete for the limited barrels available elsewhere, which in itself could put upward pressure on global crude prices,” Dubey said.
The situation is also far more difficult than India’s earlier exit from Iranian oil. India was buying around 313,000 bpd from Iran in early 2019, roughly 6% of total imports, compared with 1.9 million bpd from Russia this August.
“I do not see the Iranian and Russian cases as directly comparable. Replacing Russia would be a much bigger undertaking,” Katona said.
China’s rising crude intake and refinery runs over the past two months are adding to competition for available cargoes. For India, the tariff threat therefore poses a two-fold challenge: whether alternative barrels are available in sufficient quantities, and how much more they will cost once freight and delivery are included.
TOPICSTrump TariffThis article was first uploaded on September twenty-five, twenty twenty-six, at forty-three minutes past seven in the evening. © The Indian Express (P) Ltd