India’s Russian Oil Dilemma: Cheap Crude, Costly Consequences

Russia’s President Vladimir Putin (R) speaks with India’s Prime Minister Narendra Modi (L) during a visit to the shipyard Zvezda, as Rosneft Russian oil giant chief Igor Sechin (C) accompanies them, outside the far-eastern Russian port of Vladivostok on September 4, 2019, ahead of the start of the Eastern Economic Forum hosted by Russia. (Photo by Alexander NEMENOV / POOL / AFP) (Photo credit should read ALEXANDER NEMENOV/AFP via Getty Images)

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India has spent the past two years transforming itself into one of the biggest buyers of Russian oil — a shift that has saved it billions while providing Moscow with a financial lifeline as it wages war in Ukraine. Now, a sharply worded letter from Ukrainian MP Oleksii Goncharenko raises the stakes, arguing that India’s bargain-hunting is prolonging the conflict and calling for Europe to sanction Mukesh Ambani, the billionaire whose refinery empire processes a large share of those Russian flows.

That letter is not likely to alter India’s energy calculus. However, it highlights a deeper geopolitical tension: India is attempting to shield its domestic economy from global shocks while simultaneously increasing its reliance on Russian oil. The more entrenched that relationship becomes, the more challenging it will be for India to manage the diplomatic fallout.

Iuliia Mendel, former press secretary to President Zelensky, told me that Kyiv is growing frustrated that India’s discounted Russian oil purchases extend Russia’s ability to fund its war—a concern Goncharenko made explicit in a letter to Indian officials: “Every discounted barrel India buys is another day Russia can afford to fight.”

For India, the logic is simple. Russia offered steep discounts on its main oil exports—at times as low as $35 a barrel—allowing India to shield consumers from price spikes and keep inflation under control. India now imports roughly one-third of its crude from Russia, up from almost nothing before the invasion.

But energy security comes with geopolitical costs. As Europe has slashed its Russian purchases, India and China now account for more than 90% of Russia’s seaborne oil exports, providing Moscow with a revenue stream that has proven remarkably resilient despite Western sanctions.

Goncharenko’s letter seizes on that reality. It targets Ambani’s Reliance Industries, the giant whose massive refining complex has become a central hub for processing discounted Russian crude and exporting refined fuels — some of which eventually return to Europe. He urges the EU to sanction Ambani and investigate one of its subsidiaries in Estonia, arguing that such steps would “block mechanisms of sanctions evasion” and “strengthen international security.”

Whether Europe would ever go that far is unclear. But the letter puts a human and political face on a question many in the European Union have been privately debating: How long can Western allies tolerate India’s role in financing Russia’s war?

A Hard Reality: India Needs the Oil

India, for its part, has never hidden the transactional nature of its strategy. Before the war, Russian crude was a marginal part of its imports—only a tiny fraction of its total. After the invasion, by contrast, Russia’s share jumped dramatically—to roughly 35–40% of India’s crude imports.

Officials argue that a country of 1.4 billion people cannot afford to let geopolitics override economic stability. As Prime Minister Narendra Modi insists, “India will always act in the best interests of the Indian people.” His foreign minister, S. Jaishankar, has been even blunter: “We are not in the business of fixing global prices. We are in the business of securing our own energy.”

From India’s point of view, discounted Russian oil has been a safety valve—supplementing supply, keeping domestic refiners profitable, and insulating it from the price shocks that have roiled other economies.

The financial upside has been substantial: according to The Indian Express, in fiscal year 2022–23, India saved approximately $4.87 billion because the ultimate price of Russian crude was around $13/barrel cheaper than that of non-Russian oil. And in 2023–24, as volumes rose to 609 million barrels, savings climbed to $5.41 billion, even though the discount narrowed.

Some reports suggest that, after accounting for freight, insurance, and the landed cost of the oil, the net annual gain is closer to $2.5 billion. Analysts argue that, with discounts narrowing, the economic benefit could erode further, especially once market conditions return to normal.

But India’s new oil bargain has undercut Western sanctions. Russia’s budget deficit widened early in the war, only to stabilize as India and China absorbed the crude Europe refused to buy. Even with price caps and shipping crackdowns, Moscow’s oil revenues remain strong enough to fund its military machine.

Interestingly, the U.S. has long viewed India as a strategic partner. Indeed, Donald Trump was once one of New Delhi’s most vocal supporters. But he has recently turned sharply critical, accusing the country of exploiting American trade policy.

Although Trump is broadly sympathetic to Moscow’s position in its war on Ukraine, that hasn’t stopped him from attacking India for buying Russian crude. His criticism has little to do with Ukraine and everything to do with economic nationalism. For years, Trump has argued that India “rips off” the United States on trade, and its reliance on discounted Russian oil simply gives him another hook to press that case. In Trump’s worldview, allies and competitors alike are judged less by geopolitical alignment than by whether they run surpluses at America’s expense.

India Isn’t Acting Alone

India is hardly the only country buying Russian oil. China buys even more. Turkey and the UAE have become major hubs for the re-export of Russian fuel. Meanwhile, the shadow fleet transporting Moscow’s crude — uninsured, aging tankers operating in legal gray zones — continues to expand.

India also maintains that once Russian crude is processed in its refineries, the resulting fuels become Indian products under trade law, no longer considered Russian. The European Union tacitly accepts this distinction, recognizing that many EU economies still rely on these refined fuels.

Energy experts caution that if India were to halt purchases of Russian crude, global fuel prices could surge, hitting consumers from Boston to Berlin. That spike would occur because India’s sudden exit would remove a major source of discounted oil, tightening supply and pushing benchmark prices higher. That potential surge constrains how aggressively Western governments are willing to pressure India.

Even with those caveats, the geopolitical stakes are stark: India’s oil purchases are now vital to Russia’s war machine — and Kyiv’s frustrations are mounting. As Iuliia Mendel, the former Ukrainian presidential press secretary, has warned, the war’s economic toll is severe, and every trade link that sustains Moscow is crucial. Janis Kluge, an economist at the German Institute for International and Security Affairs, told the Washington Post that a significant reduction in Indian or Chinese oil purchases would substantially impact Russia’s budget.

India may not feel it has a moral obligation to recalibrate its energy ties with Moscow. However, as the war drags on and Ukraine takes its case directly to European capitals, India’s strategy is drawing scrutiny it cannot easily dismiss.

The question raised by Ukrainian MP Goncharenko’s letter—perhaps for the first time so explicitly—is whether India’s role as Russia’s indispensable oil customer is becoming incompatible with its aspirations to be a respected global leader in multilateral forums and strategic partnerships worldwide.

For an Indian government that prides itself on independence and sovereignty, ignoring this tension may prove to be the most costly aspect of this geopolitical dynamic.

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