Donald Trump tariffs on India: Can Indian refiners do without Russian oil? ‘Major economic and strategic trade-offs involved…’

Indian refiners have the technical capability to operate without Russian crude, but such a move would come with significant economic and strategic consequences, energy analytics firm Kpler has warned. Russian oil currently makes up nearly 38 per cent of India’s refinery feedstock, prized for its high diesel and jet fuel yields, competitive pricing, and reliable supply. A sudden shift away would squeeze refining margins, alter product output, and raise annual crude import costs by billions of dollars."Indian refiners can operate without Russian crude from a technical standpoint, but the shift would involve major economic and strategic trade-offs," Kpler said in its report ‘US Tariffs on Indian Imports: Implications for Energy Markets & Trade Flows’, cited by PTI.The discussion has gained traction after US President Donald Trump imposed an additional 25 per cent tariff (effective august 27) on Indian imports- taking total duties to 50 per cent- in retaliation for India’s continued purchases of Russian oil. The move could hit around USD 27 billion of non-exempt exports to the US, while also potentially reshaping India’s crude sourcing strategy.Kpler estimates non-Russian crude costs around $5 a barrel more than Russian grades, translating into an additional $3–5 billion annually to replace 1.8 million barrels per day at current prices. In a stressed market scenario, costs could surge to $7–11 billion, especially if substitution relies on premium-priced Gulf and Atlantic Basin supplies.India imported 88 million tonnes of Russian oil in FY25, making Russia its single-largest supplier. July inflows averaged 1.6 million barrels per day — higher than China’s 1 million bpd. Since 2022, discounted Russian Urals have enabled both state-owned and private refiners to run above nameplate capacity while keeping margins strong.Replacing Russian barrels would likely require 60–70 per cent from the Middle East, supplemented by US, West African, and Latin American grades. However, none fully match Russian crude’s combination of cost, quality, and consistency. Lighter alternatives such as US WTI Midland or West African grades yield more gasoline and naphtha but less diesel, hurting both domestic fuel economics and export competitiveness. Middle Eastern grades, though closer in quality, are closely tied to official selling prices, offering little scope for price advantage.Nayara Energy, the Russia-backed Indian refinery, is currently grappling with multiple challenges amid European Union sanctions, according to an ET report. The company is facing disrupted global shipping, domestic regulatory constraints, leadership changes, and concerns regarding digital infrastructure. Responsible for approximately 8% of India's refining capacity and 7% of its retail fuel station network, Nayara Energy operates India's second-largest private refinery, alongside an oil storage terminal, port facilities, infrastructure, and a network exceeding 6,000 petrol stations. These difficulties are testing the company's adaptability and future planning, casting significant uncertainty over its ambitious growth trajectory.Also read: Symbol of India-Russia ties takes a hard hit! How Russia-backed Indian refinery Nayara Energy is navigating a perfect storm - big hurdles challenge growthNobel laureate Abhijit Banerjee advised India to reconsider importing inexpensive Russian oil following the Trump administration's imposition of an additional 25 per cent tariff on Indian goods, raising the total levy to 50 per cent- one of the highest levies by the US on any country. “We need to think hard about whether Russian oil imports are worth it and then go back to the US to say that, you know, will they take it (tariff) off, if we stop importing Russian oil,” Banerjee told PTI on the sidelines of an event organised by BML Munjal University.