India could face a significantly higher oil import bill if it cuts back on Russian crude and replaces it with supplies from more expensive markets. Estimates suggest the additional cost could exceed ₹35,000 crore a year, highlighting the difficult balance India faces between energy security, global trade pressures and fuel costs.

Replacing Russian oil could add billions to India's bill

Russia has become one of India's biggest sources of crude oil. If India were to replace around 1 million barrels per day of Russian crude with oil costing $5–10 more per barrel, the additional annual cost could reach approximately $1.8–3.7 billion, or more than ₹35,000 crore at current exchange rates.

If around 2 million barrels per day had to be replaced, the financial impact could potentially be almost twice as large.

However, analysts point out that this is a sensitivity calculation rather than a prediction of future oil prices. The bigger challenge could be securing enough alternative crude rather than simply paying a higher price.

Russia remains a major source of India's crude

India imported around 1.9 million barrels of Russian crude per day in August, accounting for roughly 42% of its total crude imports.

Analysts believe completely replacing such a large volume would be extremely difficult. India could potentially increase purchases from countries such as the US, Brazil, Guyana and Nigeria, but finding enough crude at competitive prices could prove challenging.

For India, maintaining a reliable supply of crude is particularly important as domestic fuel demand typically increases during the October-to-March/April period.

Russian crude is still relatively attractive

Russian oil is no longer as heavily discounted as it once was. According to the estimates cited, some Russian crude was trading at around an $8-per-barrel premium to ICE Brent.

Even so, it can remain more attractive to Indian refiners than alternative supplies once factors such as crude quality, transportation and other costs are considered.

Russian suppliers also have an incentive to adjust their pricing to remain competitive in the global market.

Shipping could make alternative oil even more expensive

Price isn't the only issue India would have to consider.

Buying crude from countries farther away can significantly increase transportation costs. For example, a very large crude carrier travelling from Brazil to India can involve tens of millions of dollars in shipping costs, even before the price of the oil itself is considered.

India would also have to compete with other major Asian buyers, including Japan and South Korea, for available cargoes.

Why Gulf countries could become important

West Asian suppliers could offer India a more practical alternative because of their geographical proximity.

Crude from Gulf producers generally involves shorter shipping distances and is compatible with many Indian refineries. However, supplies aren't unlimited.

If India suddenly tried to replace a large portion of Russian crude with Gulf oil, it could end up competing with other buyers for limited supplies. That increased competition could push international crude prices higher.

Replacing Russian oil is very different from replacing Iranian oil

India has previously faced a situation where it had to reduce its dependence on Iranian crude, but analysts say the two situations cannot easily be compared.

At the beginning of 2019, India was importing roughly 313,000 barrels of oil per day from Iran, around 6% of its total imports. In contrast, Russian supplies have reached nearly 1.9 million barrels per day.

That makes replacing Russian crude a much larger challenge.

India's biggest priority: energy security

The issue ultimately goes beyond the price of a barrel of crude. India must balance geopolitical pressure with the need to ensure adequate fuel supplies for its economy and consumers.

Completely abandoning Russian oil could increase procurement and transportation costs, while continuing to depend heavily on one source carries its own risks.

As a result, diversifying suppliers rather than abruptly replacing Russian crude could be the more practical approach. India may increasingly look toward the Gulf, the US, Brazil, Guyana and other producers while trying to keep its overall oil import costs under control.