India's Evolving Crude Oil Basket: From West Asia to Russia
India's crude oil imports have undergone a significant transformation, shifting from a historical reliance on West Asian nations like Saudi Arabia and Iran to Russia. Driven by geopolitics, sanctions, and economic incentives, sources diversified over the decades, notably expanding to Africa and the Americas. Post-2022, following sanctions on Russia, discounted Russian oil became the largest contributor to India's basket, accounting for over a third of imports by FY2023-24. Experts indicate that this economic shift to Russia is sustainable, and curtailing these cost-effective supplies would be challenging and risky.
India, the world's third-largest oil consumer, has profoundly altered its crude oil import strategy over the years, navigating global geopolitics and economic realities. Historically, before 2005, India depended heavily on West Asia, with Saudi Arabia, Iraq, Iran, Kuwait, and UAE supplying over 70% of its requirements. This dependence gradually broadened between 2005 and 2015 to include African nations like Nigeria and Angola, and Venezuela in South America. However, by 2011-12, West Asian countries still supplied over 60% of India's crude. A major re-evaluation occurred with international sanctions on Iran in the 2010s, prompting India to reduce its Iranian oil purchases significantly. Though imports from Iran briefly rebounded in 2016 after sanctions were lifted, renewed U.S. sanctions in 2017 led to a drastic 91.8% cut by 2019-20, pushing India to diversify further into markets like the UAE and the U.S. The most dramatic shift began in February 2022, following global sanctions on Russia due to its actions in Ukraine. Discounted Russian crude became highly attractive to India. According to DGCIS, Russia's share in India's oil basket surged from less than 2% in 2021-22 to 21.6% in 2022-23, and further to 35.9% in 2023-24, establishing it as the largest supplier. This pivot caused only marginal declines in imports from traditional suppliers like Iraq, Saudi Arabia, and the UAE. Industry observers, like Kpler, note the economic sustainability of these Russian purchases, stating that substituting them would be “difficult, costly and risky,” potentially leading to higher freight costs, weaker discounts, inflation, and reduced refinery profitability.
