Stories
Russian Oil Curbs Threaten India's Energy Costs, Exporters Brace for Tariff Risks
- •India faces potential higher energy costs and export pressure if the US imposes tariffs linked to Russian oil imports, though businesses are better prepared than before.
- •Replacing discounted Russian crude, which constituted 35% of India's imports over 12 months (nearly 50% in July), would be commercially challenging, impacting inflation and the current account.
- •If India and China seek alternative crude, global oil prices could surge, affecting refinery margins and potentially leading the Indian government to prioritize domestic fuel supply over exports.
- •Indian exporters, like Gokaldas Exports, are preparing for tariff disruptions by diversifying markets (Europe, UK, Africa) and reducing dependence on the US.
- •While uncertainty remains, experts believe Indian exporters are significantly better prepared for potential tariff shocks compared to previous episodes due to strategic planning and market diversification.
Key Questions Answered
If the US imposes tariffs linked to Russian oil imports, India could face higher energy costs and significant commercial impacts that raise inflation and pressure its current account balance. Replacing discounted Russian crude, which accounted for about 35% of India's imports over the last 12 months and nearly 50% in July, would be difficult due to supply constraints and global geopolitical conditions.
All Indian refineries are operationally capable of handling non-Russian crude from alternative sources such as West Asia, the US, and other regions. While India has diversified its sourcing options to ensure good energy security, moving away from Russian oil could significantly increase gross refining margin pressure and prompt the government to prioritize domestic fuel supplies over exports if global prices surge.
Indian exporters are in a stronger position due to better planning, strategic long-term preparation, and market diversification away from the US market. Companies like Gokaldas Exports are expanding into Europe, the UK, and Africa through free trade agreements and duty-free access, aiming to reduce revenue dependence on the US market over the next three years.
