India’s Russian Oil Bet Faces a New Geopolitical Stress Test

Russia's share of India's crude imports has risen from 21.6% in 2022-23 to 36.5% as of May 2026. Four years ago, Russian oil barely featured in India's import basket. Today, more than one in every three barrels processed by Indian refiners originates there.
That shift has delivered obvious benefits. It has also left India more exposed to developments beyond its control.

At the G7 summit in Évian-les-Bains, leaders signalled that the focus is shifting from broad sanctions announcements to the machinery that keeps Russian energy exports moving. The UK imposed sanctions on LNG tankers linked to Russia's Arctic LNG projects, while the UK and Canada targeted 162 vessels, companies and individuals associated with Moscow's shadow fleet.

For countries buying Russian oil, the message is straightforward: pressure is moving closer to the supply chain. These are among the most operationally focused restrictions imposed on Russia's energy shipping infrastructure since the 2022 price cap mechanism.

For India, the implications extend well beyond energy supply.

Concentration Risk 

India's crude imports have become increasingly concentrated. Russia, Iraq, Saudi Arabia, the UAE and the US accounted for just over 75% of imports in 2022-23. By 2024-25, their share had risen to nearly 83%, according to DGCI&S data.

Russia has led that group in every one of those years. A supplier with a negligible share four years ago is now India’s largest single source, and that concentration creates a different risk profile under geopolitical stress.

The latest G7 measures suggest future pressure will focus not only on Russian production but also on the logistics, shipping and financial networks that move Russian crude to international buyers. Restrictions on shadow fleets, shipping intermediaries and financial channels could gradually make Russian oil more expensive and less predictable to access, even if supply remains available.

The attraction of Russian crude remains obvious. As of mid-June 2026, Urals traded at about $64.5 a barrel against $78 for Brent, leaving a discount of roughly $13-14 a barrel. Yet the bargain is not what it was. In the first years after the Ukraine war, discounts often ranged between $25 and $35 a barrel.

The rupee has felt the strain directly. It touched a record low against the dollar in May, foreign exchange reserves came under pressure and oil remains the country's largest import bill. Every additional $10 on the crude price adds roughly $18 billion to annual import costs.

None of this amounts to a crisis. It does, however, show how quickly an energy advantage can become a macroeconomic challenge when prices move the wrong way. There is also an inflationary dimension. Fuel costs ripple through transport, manufacturing and food prices, making inflation management more difficult when oil markets become volatile.

Strategic Choices

One detail in the G7 communiqué deserves attention. Leaders stated that the easing of tensions around the Strait of Hormuz created the right conditions to proceed with additional measures against Russia.

That matters because India's energy vulnerability runs along both axes simultaneously. It depends heavily on imported oil, much of which passes through Hormuz, while an increasing share of that oil originates from Russia.

The financial channel is equally important. India-Russia energy trade increasingly relies on rupee and dirham payment arrangements, along with shipping and insurance networks operating outside traditional Western systems. These mechanisms have worked well, but largely during a period when enforcement against third-country intermediaries remained uncertain.

The sanctions announced at Évian suggest that ambiguity is fading. The Economist Intelligence Unit estimates Indian refiners will purchase around $30 billion of Russian crude in 2026, up from $27 billion in 2025. As volumes increase, so does exposure to tighter restrictions on counterparties and intermediaries.

The immediate risk is not that Russian oil disappears from the market. The bigger risk lies in everything that sits between a Russian oilfield and an Indian refinery. Shipping, insurance, payments and intermediary networks could become costlier and harder to access if sanctions enforcement tightens further.

India has defended its Russian crude purchases on grounds of national interest and energy security, and that position is economically rational. A developing economy with structurally high energy import dependence cannot ignore a sustained cost differential in a critical input market.

What has changed is the surrounding environment. The flexibility that allowed India to expand Russian imports rapidly after 2022 is narrowing as G7 countries move towards more coordinated enforcement. The question is no longer whether buying Russian oil is economically rational. It is whether dependence on a single sanctions-exposed supplier has created new vulnerabilities.

A complete reversal would be neither practical nor desirable. Replacing more than a third of India's crude imports would be costly and strategically unnecessary. A more sensible response lies in diversification and resilience.

Accelerating the expansion of strategic petroleum reserves is one obvious step. Existing reserves cover around 9.5 days of net oil imports, while approved Phase 2 projects at Chandikhol and Padur remain under development. Every additional day of storage buys policymakers more time when markets become volatile.

A second priority is supplier diversification. Russia's share rose from under 1% to nearly 36% without any formal framework governing concentration risk. Establishing internal thresholds for supplier exposure would reduce vulnerability while preserving flexibility.

Finally, India should stress-test the payment, insurance and logistics systems supporting Russian crude imports against scenarios involving tighter shadow fleet enforcement. The sensible time to test the system is before it comes under pressure.

Nothing announced at Évian will stop Russian crude from reaching Indian ports tomorrow. Its significance lies elsewhere. The conditions that enabled India's rapid shift towards Russian oil, incomplete sanctions coordination and limited enforcement pressure, are changing. As they do, India's energy strategy will need to evolve from exploiting discounts to managing concentration risk.