India may face $11bn oil penalty annually

Redirecting diesel exports to Southeast Asia, Africa, or Latin America is operationally feasible, such a shift would involve narrower margins, longer voyage times, and increased demand variability, making it commercially less optimal

- PRESS TRUST OF INDIA

India's annual oil import bill could rise by $9-11 billion if the country is compelled to move away from Russian crude in response to US threats of additional tariffs or penalties on Indian exports, analysts said.

India, the world third-largest oil consumer and importer, has reaped significant benefits by swiftly substituting market-priced oil with discounted Russian crude following Western sanctions on Moscow after its invasion of Ukraine in February 202.

Russian oil, which accounted for less than 0.2 per cent of India's imports before the war, now makes up 35-40 per cent of the country’s crude intake, helping reduce overall energy import costs, keep retail fuel prices in check, and contain inflation.

The influx of discounted Russian crude also enabled India to refine the oil and export petroleum products, including two countries that have imposed sanctions on direct imports from Russia. The twin strategy of Indian oil companies is posting record profits.

This is, however, now under threat after US President Donald Trump announced a 25 per cent tariff on Indian goods plus an unspecified penalty for buying Russian oil and weapons. The 25 per cent tariff has since been notified but the penalty is yet to be specified.

Coming within days of the European Union banning imports of refined products derived from Russian-origin crude, this presents a double whammy for Indian refiners.

Sumit Ritolia, Lead Research Analyst (Refining & Modeling) at global real-time data and analytics provider Kpler termed this as “a squeeze from both ends”.