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India has relied heavily on discounted Russian oil since 2022 to keep domestic fuel prices in check. Russian crude imports now account for nearly 30 percent of India’s total oil imports, a sharp rise from just 1 percent before the Ukraine war. This supply of cheaper oil allowed India to cushion the impact of global price surges on its economy and consumers. However, the latest US sanctions on Russia’s two largest oil companies, Rosneft and Lukoil, threaten this flow of cheap crude, raising concerns about higher fuel costs and the need for India to adjust its energy strategy.

US sanctions and India’s oil supply

The Donald Trump administration imposed sanctions on Rosneft and Lukoil, accusing Moscow of continuing the war in Ukraine. These sanctions are expected to sharply reduce the flow of Russian crude to India. According to refinery officials, orders for November are already being diverted to alternative suppliers, as few Urals cargoes are available for spot deals since mid-October.

Before these sanctions, India had benefited from a $60 per barrel Western price cap, making Russian crude significantly cheaper than Middle Eastern or African alternatives. Now, without this discounted oil, Indian refiners may have to source more expensive barrels from other regions. This shift would increase India’s import bill and likely push up domestic fuel prices.

The situation comes after the US also imposed 50 percent tariffs on Indian goods in August, citing Delhi’s continued purchases of Russian oil as a breach of “global responsibility.” These new sanctions complicate India’s geopolitical balancing act, as it must maintain ties with both Washington, DC, and Moscow while securing affordable energy.

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Impact on fuel prices and energy diplomacy

India’s dependence on Russian oil was a strategic move shaped by Western sanctions against Russia, which priced its oil below market rates. With these sanctions tightening, India faces the risk of a higher fuel import bill and rising domestic fuel prices, affecting consumers and industries alike.

If Russian supplies dwindle, Indian refiners will rely more on Middle Eastern and African crude, where prices are tied to the costlier Brent benchmarks, and freight costs are higher. This would remove the price advantage India enjoyed over the past few years and could lead to inflationary pressure on transportation and goods.

The US sanctions also put pressure on India’s energy diplomacy. India has to navigate carefully between Moscow and Washington, securing energy at reasonable prices without jeopardizing international relations. Analysts say this could lead to renewed focus on alternative energy partnerships and possibly faster adoption of renewable sources to reduce reliance on imports.

The big picture shows how a geopolitical move, such as sanctions, can have direct economic consequences. India’s access to discounted Russian oil has been central to its energy security strategy since the Ukraine war, but with the tap potentially turning off, the government and refiners must act quickly to mitigate impacts on fuel prices, trade, and diplomatic relations.

In conclusion, US sanctions on Rosneft and Lukoil pose a major challenge to India’s energy strategy. The country may face higher costs at the pump, a need to diversify oil sources, and greater pressure to balance international relations. How India adapts in the coming months will determine both its energy security and economic stability.