CRUDE SHOCK

India's refining boom powered by cheap Russian barrels is faltering under new US sanctions, pushing New Delhi into a costly global oil reset

- By ANILESH S. MAHAJAN

WHEN THE US TREASURY sanctioned Russia's oil giants Rosneft and Lukoil, the shockwaves travelled from Moscow to New Delhi. The move hit at the core of a three-year equation, in place since 2022, that had powered India's refining boom-cheap Russian crude, easy payments and record margins. That comfort is now cracking. So far in 2025, Russian crude has accounted for 35 per cent of India's imports, with Reliance Industries (RIL) alone soaking up nearly half the uptake.

As Washington's expanded sanctions target companies supporting Russia's oil export network and caution global banks and insurers against facilitating such trade, the disruption for India could be seismic. Refiners have been given until November 21 to wind down existing contracts, triggering a scramble for alternatives. However, the price gap between Russian and non-Russian crude ranges from $2 to $12 a barrel. Market estimates suggest that replacing Russian oil with West Asian or Atlantic Basin grades could raise India's landed cost by $2-3 per barrel, adding $6-8 billion (Rs 5.3-7 lakh crore) to the annual import bill. Every additional dollar per barrel raises India's oil import expenditure by roughly Rs 10,000 crore.

Adding to the squeeze, the European Union has announced a ban on Russian liquefied natural gas (LNG) imports from January 2027, further reshaping global energy flows. As European utilities pivot to Qatar, the US and Africa-the very suppliers that India too will rely on-the competition is driving up prices. Analysts estimate India's landed LNG costs could rise $1-2 per MMBtu (metric million British thermal unit), hitting sectors from fertilisers to power.

REFINING STRATEGY