The year 2025 has been an outlier for the Indian oil and gas sector as refiners deftly navigated geopolitical and trade tensions with the US imposing sanctions on two of Russia’s largest oil companies, Rosneft and Lukoil. This turned out to be the first serious attempt that threatened to disrupt energy trade between New Delhi and Moscow.
Despite headwinds like an escalating conflict in West Asia, President Donald Trump’s trade feud, and tightening of EU sanctions amid the Russia-Ukraine war, India skilfully managed these black swan events.
This was achieved by forging stronger trade ties with the UAE, Saudi Arabia and Oman; enhancing energy purchases from the US; bolstering business relations with Brazil and Argentina, and courting African suppliers such as Libya and Gabon.
A top government official said, “2025 has not been easy. Geopolitical tensions, sanctions and trade wars recalibrated energy flows. We are adjusting to this evolving scenario, whether it is reducing crude from Moscow or buying more from Washington. Despite this, refiners ensured availability at the right price. They acted as responsible corporate citizens ensuring that the common man is shielded from high prices of diesel, petrol and LPG.”
The official emphasised that India will keep up the strategy – source the most economical barrels from non-sanctioned sources, while maintaining strategic autonomy and affordability.
Russian roulette
Mohan Ramaswamy, CEO of Rubix Data Sciences, succinctly puts it. He noted that sanctions by the US and the EU are reshaping India’s oil trade, reducing Russian dependence “slightly” and redirecting crude (oil) and fuel (refined petroleum products) flows toward compliant markets. “Sanctions, compliance requirements, and evolving regulatory regimes have also materially altered energy trade flows and export feasibility,” he added.
Manas Majumdar, Partner and Leader, Oil & Gas, Fuels & Resources at PwC India, pointed out that the recent US sanctions and restrictions by the EU made Russian oil cheaper due to rising discounts, which helped Indian refiners import an estimated 1.85 million barrels per day (mb/d) by mid-2025. However, the recent sanctions are expected to reduce imports from Russia to around 500,000 b/d, or roughly 10 per cent of India’s basket.
Supporting the narrative, ICRA’s Senior Vice President & Co-Group Head (Corporate Ratings), Prashant Vasisht, noted that Indian entities have refrained from transacting with sanctioned entities in the past. “Accordingly, crude oil purchases from sanctioned Russian entities is expected to decline and increase from non-sanctioned Russian entities especially considering discounts have increased post sanctions,” he added.
Diversifying sources
Majumdar pointed out that source diversification has happened with addition of recent entrants like Argentina, and the primary reason is energy security and reducing dependence on any single region.
“This broader pool enhances bargaining power, aids access to various crude quality grades, and insulates against sanction-driven disruptions. When Western sanctions constrained Russian supply chains, India pivoted swiftly to alternative suppliers in West Asia , the US, Brazil, and Africa — maintaining energy security and price competitiveness. This flexibility has so far enabled uninterrupted refinery operations and offers resilience against geopolitical volatility,” he added.
Plus, a key aspect is that India’s significant crude volumes will only grow with its refining hub ambitions to be 400 million tonnes per annum (mtpa) capacity. This growing buying power will only increase and hence, the need to look at multiple sources to get most volumes at best deals, he explained.
Vasisht emphasised that India has many sources to purchase crude from, including the geographically close West Asia and regions like Africa, Brazil, US, etc. Diversification has aided in quickly shifting to other suppliers. India is the third-largest crude consumer and Indian entities command the heft and reach to procure a variety of crudes from all over the world.
To compensate for softer near-term Russian arrivals, refiners are expected to increase intake from a broader mix of suppliers — West Asia (Saudi Arabia, Iraq, the UAE and Kuwait), Brazil and broader Latin America (Argentina, Colombia and Guyana), West Africa and North America (the US and Canada), said Sumit Ritolia, Kpler’s Lead Research Analyst for Refining & Modeling recently.