Chennai: US sanctions on Russia’s oil industry and rupee depreciation could see India’s crude oil import bill going up by 8-9 per cent in the coming months.
On January 10, 2025, the US imposed severe sanctions on Russia’s oil industry, particularly on petroleum companies Gazprom Neft and Surgutneftegas, 183 vessels, insurance companies and energy officials. Of these 183 vessels, 30 per cent carry oil to India and in the first 11 months of 2024, 37 per cent of India’s oil import was from Russia.
After January 10, 2025, Indian refiners have stopped doing business with sanctioned entities and tankers and are tying up alternative sources of crude. The sanctions could cause Russian crude supply disruptions of 2.5 million tonnes per month for India.
Crude prices have surged following the sanctions fearing that Russia may not be able to replace the sanctioned vessels. Additionally, tanker rates have surged, leading to an increase in delivered costs of crude. Besides, the Rupee too has witnessed steep depreciation. In the absence of discounted Russian crude, India will have to buy market-priced crude.
This would see India’s crude import bill rise by 8-9 per cent at constant crude prices if availability of discounted crude dries up and is replaced by market priced crude and the depreciation of rupee, finds ICRA.
In FY24, India imported 232.5 million tonnes of crude oil paying $132.4 billion. The country’s gross oil import bill for the first nine months of FY25 was $102.5 billion, an increase of almost 4 per cent year-on-year. The import dependency too rose to 88 per cent.
The twin impact of market priced crude and depreciation of rupee against US dollar would adversely impact the profitability of downstream oil companies.