India’s Russian Oil Imports Slide as Refiners Hunt for Alternatives

India's imports of Russian crude oil fell 16.5% in August and are projected to decrease further in September, as new U.S. sanctions legislation grants Washington the power to impose tariffs of up to 100% on major Russian oil buyers. Russian shipments to India dropped to approximately 2.1 million barrels per day in August from a record-high level in July.

Preliminary data from Kpler anticipates September imports at 1.9 million bpd. Russia continues to be India's primary crude supplier. The August decline occurred before the implementation of the new U.S. law, so attributing it to sanctions avoidance would be inaccurate. Indian refiners had already begun reallocating barrels due to improved Middle Eastern supply routes.

Purchases of Iraqi crude surged by roughly 25% to 171,000 bpd in August, while Saudi imports increased by 1.5% to 328,000 bpd. UAE shipments decreased by 5.4% to 620,000 bpd, although ADNOC has expanded its capacity to move crude from Hormuz to export points outside the strait. Overall, India's crude imports fell by 8.8% in August to 4.44 million bpd.

Upcoming purchases in October and November might present a different scenario. Indian refiners are turning to spot markets to secure replacement barrels as they evaluate the risks associated with future Russian purchases. President Donald Trump signed the Lindsey O. Graham Sanctioning Russia and Iran Act on Friday, empowering authorities to levy tariffs of up to 100% on goods from designated major buyers of Russian energy.

The law does not automatically enforce those tariffs. Additionally, India faces a significant challenge due to the high cost of its crude import bill, which surged by 48.4% year-over-year to $74.8 billion between April and August, even though import volumes declined by 0.4%. The rise in crude prices and freight costs has eroded the savings India gained from discounted Russian barrels over the years.

While Russian crude remains economically viable for Indian refiners, the decision becomes increasingly complicated if the discounted oil price is accompanied by a potential tariff on all of India's exports to the United States.