Trump’s Tariff Move: What a Russian Oil Cut-Off Could Cost Indian Refiners

When the fuel that powers your economy starts burning diplomatic bridges, it’s time to rethink the route.

That’s the dilemma Indian oil refiners face today.
The jackpot of cheap Russian crude, which started flowing after the Ukraine war, is now under threat. What was once a boon for margins has become a flashpoint in trade relations — with the US turning up the heat through fresh tariffs and warning India over its energy ties with Moscow.

From Windfall to Warning
For more than two years, Indian refiners pocketed billions in savings by buying discounted Russian oil. But US President Donald Trump’s latest move — an additional 25% tariff on Indian exports, pushing the total levy to 50% — signals that Washington’s patience is running thin.

The message is clear: step away from Russian barrels or risk damaging trade ties with your biggest export market. India exported goods worth $87 billion to the US last year, compared to an estimated $3.8 billion saved through discounted Russian oil.

“Are you going to risk $87 billion in exports to save a few billion on oil?” asked Warren Patterson, head of commodities strategy at ING Singapore.

The Price of Walking Away
Shifting away from Russian crude won’t be painless.

• Higher Costs: PTI estimates India’s annual oil bill could rise by as much as $11 billion.
• Lower Margins: Middle Eastern crude costs more, eating into gross refining margins — a key profitability metric.
• Global Ripple Effect: Russia still supplies about 10% of the world’s oil, so any change in buying patterns could push prices up.

How India’s Oil Mix Changed
Before the Ukraine war, the Middle East dominated India’s oil supply. In 2021, imports came mainly from Iraq (24%), Saudi Arabia (16%), the US (10%), and just 2% from Russia.

Post-war sanctions drove Russian oil into India’s arms, with Moscow offering steep discounts on its Urals crude. By mid-2024, Russia supplied 41% of India’s oil imports, and July 2024 saw record purchases of over 2 million barrels a day.

Cheaper input costs allowed refiners to boost fuel exports — even to Europe and the US — though weaker international prices meant export earnings fell nearly 7% in FY25.

If the Door to Russia Closes
India still has options — though none as cheap as Russia.

Middle East: Iraq, Saudi Arabia, and the UAE can quickly ramp up supply. Iraq alone sent 49.9 million tonnes to India in FY24.

United States: Lighter, sweeter American crude is well-suited for Indian refineries. Imports from the US jumped over 50% in early 2025.

Americas: Brazil, Guyana, and Canada are emerging suppliers, diversifying the basket.

West Africa: Nigeria and Angola remain reliable partners; in FY22, crude from Nigeria alone accounted for $10 billion in imports.

IOC has already begun pivoting, booking 7 million barrels for September from West Asia, Brazil, Guyana, the US, and Canada.

The Bottom Line
Russian crude gave India a rare opportunity to cut costs and boost refining margins. Losing it would hurt, but it wouldn’t leave the country stranded. Existing infrastructure, long-standing supplier relationships, and diversified sourcing mean India can adapt — at a price.

Going back to old partners like Iraq, Saudi Arabia, and the US might feel like turning back the clock. It won’t be as profitable as Russian barrels, but it offers stability in an increasingly volatile energy market.