India Russia oil trade: India’s benefit from importing discounted Russian oil is far smaller than widely believed, with annual gains estimated at just USD 2.5 billion, compared to earlier claims of USD 10–25 billion, according to a report released by brokerage CLSA on Thursday.
The report warned that halting Russian imports would leave India, the world’s third-largest oil importer, with limited alternatives and could push global crude prices up to USD 100 per barrel at a time of rising demand and tightening supply.
“Benefit Way Less Than Exaggerated Media Numbers”
“Benefit from Russian oil imports is way less than exaggerated media numbers,” CLSA said. While “some media outlets have estimated the benefit in the range of USD 10 billion to USD 25 billion for India from Russian crude imports, we calculate the net annual benefit to India from Russian crude imports to be much smaller at just USD 2.5 billion or a small 0.6 bpc of India’s GDP,” it added.
India’s imports of Russian oil have surged since the Ukraine war, climbing from less than 1 per cent of total crude imports to nearly 40 per cent. This sharp increase came on the back of steep discounts offered by Moscow after Western nations cut purchases in response to the invasion.
Shipping and Insurance Costs Eat Into Discounts
Despite visible headline discounts, the net benefit to Indian refiners remains modest. “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. Therefore, Indian refiners import Russian crude on a cost, insurance and freight (CIF) basis, landed in India. Thus, the landed price of Russian crude is at a far lower discount,” the report explained.
Oil marketing companies noted that the average discount on Russian crude was around USD 8.5 per barrel in FY24 but fell sharply to USD 3–5 in FY25, and now hovers at just USD 1.5. Using an average discount of USD 4 per barrel, CLSA estimated India’s total annual savings at USD 2.5 billion — equal to only 0.6 bps of GDP. “However, current discounts would take down the annualised gains from this import to just USD 1 billion,” it added.
No Clear Gains in Government Import Data
The report also argued that the real savings from Russian oil are difficult to identify. “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. So, any such large gain is not discernible from the Indian oil import data,” it noted.
Still, any abrupt halt could fuel a global price shock. “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 USD 90–100 per barrel and would drive up inflation across the world, in our view,” CLSA said.
Political Dimensions of Oil Trade
India currently imports 36 per cent of its crude oil needs from Russia, compared to 20 per cent from Iraq, 14 per cent from Saudi Arabia, 9 per cent from the UAE, and 4 per cent from the US. Alongside China, it has emerged as one of the top buyers of Russian oil despite Western criticism.
CLSA argued that Indian imports of Russian oil help keep global crude prices in check and reduce inflationary pressures. “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,” it concluded.
