Western sanctions are steadily reshaping India’s oil trade, reducing its dependence on discounted Russian crude and redirecting energy flows towards the United States and the United Arab Emirates, according to a report by Rubix Data Sciences.

India’s crude oil imports from Russia declined 17.8% during January-October 2025 compared to the same period last year, as tighter European Union (EU) restrictions and expanded US secondary sanctions increased compliance risks for Indian refiners, the report The Year That Tested Trade: How India Fared in 2025 said.

The shift marks a departure from the post-Ukraine invasion period, when India emerged as one of the largest buyers of Russian oil after Western nations imposed sanctions on Moscow. At the time, steep discounts on Russian crude offered Indian refiners a cost advantage, particularly for export-oriented units. However, that strategy became increasingly difficult to sustain in 2025 as enforcement tightened.

Sanctions squeeze Russian supplies
Rubix noted that pressure intensified in mid-2025 when the EU lowered the price cap on seaborne Russian crude to curb Moscow’s oil revenues. This was followed by broader US secondary sanctions that heightened scrutiny across global energy trade.

In October, the US Treasury Department’s Office of Foreign Assets Control (OFAC) sanctioned Russian oil majors Rosneft and Lukoil, further complicating procurement for Indian importers. Together, the two companies accounted for nearly 60% of Russia’s oil exports to India in FY25, amounting to around 88 million tonnes, the report said.

“These rising compliance risks forced Indian refiners to scale back Russian barrels, especially for export-linked operations,” Rubix said, adding that imports from Russia are expected to decline further from December 2025.

Pivot to ‘clean’ barrels
As reliance on Russian crude eased, India shifted towards what the report described as “clean” barrels, oil supplies that can be refined and exported without violating Western restrictions.

Crude imports from the United States surged 83.3%, while purchases from the UAE increased 8.7% during January-October 2025.

“The pivot highlights how trade considerations, not just price, are now shaping India’s energy sourcing decisions,” the report said.

Exports under pressure
The effects of sanctions have been more visible in exports. Shipments of refined petroleum products to India’s top five destinations, the Netherlands, the UAE, Singapore, the US and Australia, declined sharply during the period.

These markets accounted for 51% of India’s petroleum product exports between January and October 2025. The decline followed EU rules that restricted imports of fuels refined from Russian crude, even when processed in third-party countries such as India.

Western buyers became increasingly cautious about purchasing Indian fuel products that could be traced back to Russian-origin crude amid tighter enforcement, Rubix noted.

Diversifying markets
To offset losses in traditional destinations, Indian exporters have turned to smaller and non-Western markets. China’s share of India’s petroleum exports doubled from 2% to 4%, while Oman’s rose from 2% to 4% and South Korea’s increased from 1% to 2%.

Rubix concluded that while Russian oil remains part of India’s energy mix, its dominance is gradually weakening as sanctions compliance, export access and geopolitical uncertainty reshape trade flows.
Source: Mint