This report is from this week’s CNBC’s “Inside India” newsletter. Like what you see? You can subscribe here.
The big story
If refineries are the oil industry’s children, India’s got plenty of mouths to feed — and U.S. tariff threats over Russian crude are imperiling a distinctly affordable meal ticket.
This week, U.S. President Donald Trump slapped an additional 25% of levies on New Delhi’s exports to the U.S., bringing total duties to 50%, citing India’s purchases of Russian oil. The White House leader flagged the issue in a CNBC interview on Tuesday: “They’re buying Russian oil, they’re fueling the war machine, and if they’re going to do that, then… then I’m not going to be happy.”
Despite Trump’s tone, “while the U.S. is asking India to put pressure on Russia, it is following a soft approach,” Mukesh Sahdev, chief oil analyst at Rystad Energy, told CNBC by email. “What we’re seeing is that geopolitical pulls are going against oil fundamentals.”
After all, India’s Russian purchases are neither sanctioned, nor new: New Delhi previously enjoyed the White House’s blessing to access Western shipping and insurance tools for crude bought under a price cap that the G7 imposed to simultaneously avoid global supply shocks and dwindle Moscow’s war coffers.
Facing international criticism, Indian officials have repeatedly defended the country’s intake as a matter of national interest.
“We will buy from wherever we can. Our commitment is to the Indian consumer,” Indian Petroleum Minister Hardeep Singh Puri told CNBC’s Dan Murphy in July, noting that back when buying seaborne Russian crude was sanctioned in G7 countries in response to the war in Ukraine, “we were advised, including by our friends in the United States, to please Russian oil, but within the price cap.”
He added: “In effect, by buying from Russia, we will [be] helping the global economy [stabilize] prices, and therefore, we contributed to global stability in oil prices.”
If India were to halt Russian crude purchases today, “global crude prices could jump to over $200 per barrel for all global consumers,” a source within the Indian petroleum sector told CNBC’s Emma Graham.
India, the world’s No. 3 oil importer, boasts a refining capacity of around 5.2 million barrels per day — including 1.24 million barrels per day at just its Jamnagar plant — and the International Energy Agency expects the country to add another 1 million barrels per day of demand over a forecast period to 2030.
Those are some big numbers, so let’s dive into the nitty gritty.
While refineries can switch their slates to maximize output of a particular oil product — think gasoline, diesel, fuel oil — many Indian plants were optimized to process high-sulfur (so-called “sour”) crude, such as the supply from the nearby Persian Gulf… and Russia’s Urals.
But Russia’s sour crude is loaded in far-away ports in the Baltic and Black Seas, making it a less advantageous long-haul arbitrage purchase in the era preceding the war in Ukraine.
India still took the occasional Russian sour cargo — but compare the average 100,000 barrels per day it imported in 2021 to the 1.796 million barrels per day in 2025 to date, according to data and analytics provider Kpler.
The deal discounts offered by Russia, as its traditionally European client base for seaborne crude significantly diminished, made Moscow’s supply virtually irresistible.
In addition, where most Middle Eastern barrels come with year-long commitments, tied to fixed regional monthly sale prices, Russian crude grades have typically been sold on a spot basis — leaving room to haggle on volume, delivery terms and price.
“Operationally, Indian refiners have adapted their systems to accommodate these grades, especially at complex facilities designed to extract high yields from medium-sour crudes,” Sumit Ritolia, lead research analyst for refining & modelling at Kpler, told CNBC in emailed comments.
“Replacing Russian barrels in full is no easy feat — logistically daunting, economically painful, and geopolitically fraught,” he added, noting that substitutes would squeeze refining margins and ultimately sting the bottom line.
That’s bad news in Mumbai, where the Reserve Bank of India has been attempting to stave off inflation without stifling economic growth. A spike in energy costs — the likes of which greatly afflicted European nations shortly after they decoupled from seaborne Russian supplies — could burden that mission.
But the inconvenient isn’t the impossible.
Two oil trading sources, who spoke to CNBC anonymously because of the sensitivity of the matter, said Indian refiners have released a “flurry” of tenders to buy spot crude.
A third trading source said that, when the incentive of Russian price discounts is this attractive, India and China are unlikely to give up the supply – and that, ultimately, Chinese refiners could absorb more of the Russian intake that India no longer consumes, in turn freeing up more West African crude for Indian refinery, redirecting flows.
“It is important to note that crude from the Middle East is typically purchased on term contracts, hence there might not be much flexibility to purchase additional volumes on a prompt basis. As such, India could purchase more crude from West Africa (WAF) and South America,” Ivan Mathews, head of APAC analysis at analytics firm Vortexa, echoed in emailed comments. “Given the escalating tariffs imposed by the U.S. on India, it remains to be seen whether India will import more crude from the U.S. as part of trade negotiations.”
Most U.S. crude, as it happens, is of the low-sulfur (“sweet”) variety. India took about 285,000 barrels per day of U.S. oil over January-July, according to Kpler data.
We’re about to see whether India finds Trump’s bite any more impressive than his bark and halt intake of Moscow’s crude altogether — though an OPEC+ delegate, who spoke anonymously because of the sensitivity of talks, said a subset of eight members that recently decided on a September production hike counted potential Russian supply disruptions among the many lingering uncertainties in the oil market.
“At present, supply-side risks are likely to outweigh demand-side pressures from tariffs. The U.S. appears to be entangling itself with multiple BRICS nations simultaneously — a strategy that may prove counterproductive in delivering the market stability and clarity typically expected from Washington,” Rystad’s Sahdev summed up.
