Introduction
India’s energy landscape has shifted dramatically over the past few years. As the world’s third largest crude oil importer and consumer, India has been deeply dependent on global oil markets, sourcing a substantial share of its crude from Russia at discounted prices following Western sanctions on Moscow in response to the Ukraine war. But this strategic choice has increasingly put New Delhi in a difficult economic and diplomatic position vis-à-vis Washington. The consequences of continuing to import Russian oil extend far beyond energy security, touching trade relations, costs of imports, inflation, and India’s wider geopolitical calculations.

The Economic Logic Behind India’s Russian Oil Strategy
After the outbreak of hostilities in Ukraine and subsequent sanctions on Russian energy exports by Western countries, Indian refiners began buying Russian crude at significant discounts. Between 2022 and mid-2025, Russia became one of India’s top crude suppliers, with its share in total imports climbing from under 1 per cent in 2020 to between 35–40 per cent by 2025. This shift helped Indian refiners reduce their overall landing cost of crude, keep domestic fuel prices more stable, and export refined fuel products profitably to various markets.

However, these economic gains came with growing diplomatic scrutiny, especially from the United States, which views continued Russian energy purchases as indirectly supporting Moscow’s revenues amid ongoing geopolitical tensions.

Escalating US Trade Tensions and Tariffs
In 2025, the United States signalled its displeasure with India’s continued reliance on Russian oil by imposing additional tariffs on Indian exports. Initially, a 25 per cent tariff was introduced, which was subsequently doubled to 50 per cent, linked directly to New Delhi’s crude oil purchases from Russia. These retaliatory duties apply to a broad range of Indian products exported to the US, from textiles to electronics.

This tariff escalation has strained bilateral trade relations. Indian officials have engaged US legislators, arguing that New Delhi is reducing its Russian crude imports and seeking relief from the elevated duties.

Rising Import Bills and Energy Costs
Should India be compelled to shift away from Russian oil entirely due to US pressure, analyses indicate its annual oil import bill could rise substantially—by roughly $9–11 billion in fiscal year 2026 as the country pivots to more expensive Middle Eastern or American crude grades. These higher costs would not only strain government budgets but could also lead to higher fuel prices domestically, feeding into inflationary pressures across the broader economy. In a context where crude from Russia was priced at notable discounts relative to Brent benchmarks, replacing these volumes will likely shrink refining margins and push up consumer costs.

Impact on India–US Trade Beyond Oil
The tariff dispute is broader than just petroleum. India’s exports to the United States—worth tens of billions of dollars annually—are at risk of becoming less competitive due to the heavy duties tied to the oil issue. For industries that depend heavily on the US market, such as apparel, gems and jewellery, pharmaceuticals, and electronics, punitive tariffs could erode market share and profitability. Even though some petroleum products have been temporarily exempted from tariff retaliation, uncertainty remains about whether continued Russian oil ties could prompt further sanctions or trade penalties down the line.

Geopolitical Ramifications and Strategic Balancing
New Delhi’s Russia oil strategy reflects a complex balancing act between securing affordable energy and maintaining strategic autonomy in foreign policy. India values its longstanding defence and diplomatic ties with Russia and seeks diversified relationships across global powers. However, the US expects allied nations to align more closely with its sanction’s regime against Russia. This tug of war has implications for India’s global positioning. Washington’s pressure is prompting India to diversify its crude oil sources, with rising imports of US crude observed alongside traditional supplies from the Middle East and Africa. From April to November 2025, India’s purchases of US crude surged by over 92 per cent year on year, even as Russia remained a major supplier.

Domestic Economic and Policy Challenges
A higher import bill, tariff burdens, and a need for alternative suppliers all intersect with domestic policy concerns. Inflation could be influenced by higher fuel prices, which in turn may affect interest rate decisions, household incomes, and competitiveness of Indian industries. Moreover, refining capacities may need to be adjusted if cheaper Russian crude becomes unavailable, potentially triggering structural shifts in energy sector investments.

Looking Ahead: Options for India

  • Diplomatic Engagement: India has already sought to negotiate with US lawmakers to seek tariff relief while conveying that it is reducing Russian oil imports. Strategic dialogue aimed at reconciling differences on energy sourcing and trade could help avert further escalation.
  • Supplier Diversification: Expanding crude supply agreements with Gulf states, Africa, and the US can cushion the impact of losing access to discounted Russian oil, albeit at a higher price point.
  • Domestic Energy Transition: Enhancing renewable energy capacity and accelerating investment in alternative fuels—such as green hydrogen—can reduce long term dependency on imported fossil fuels.
  • Trade Negotiations: Broader trade talks with the US, potentially packaged with tariff relief and market access concessions, could reset the bilateral economic relationship.