Introduction
In a bold declaration that underscores India’s steadfast approach to energy independence, the Indian Oil Corporation (IOC) has confirmed that it will continue importing Russian crude oil, even amid renewed U.S. restrictions targeting Moscow’s energy exports.
Speaking to reporters this week, senior IOC officials stated that India’s largest state-owned refiner is “absolutely not going to discontinue” sourcing oil from Russia. Instead, the company plans to continue buying via non-sanctioned suppliers — ensuring compliance with international law while safeguarding India’s energy security.
This move, while expected, highlights India’s careful balancing act between maintaining strong diplomatic relations with Western allies and preserving its economic partnership with Russia — one of its top energy suppliers since 2022.
India’s Energy Imperative
India, the world’s third-largest oil consumer, imports nearly 85% of its crude requirements, making affordability and supply stability crucial. With global prices remaining volatile, discounted Russian oil has been a lifeline for Indian refiners struggling with post-pandemic demand recovery and inflationary pressures.
Since early 2022, following the start of the Russia–Ukraine conflict, India has significantly increased its purchases of Russian crude — often securing barrels at $10–15 below Brent benchmark rates. For Indian consumers and industries, this helped contain fuel price inflation and eased the government’s fiscal burden on subsidies.
“Energy security for India is not negotiable,” said R.K. Sharma, a senior petroleum analyst at EnergyVista Research. “The IOC’s decision is not just commercial — it’s strategic. Discounted Russian oil keeps refineries running profitably and domestic prices relatively stable.”
Navigating the Web of Sanctions
The United States and its allies have repeatedly tightened sanctions on Russia’s energy exports, aiming to cut Moscow’s revenue stream that funds its military operations in Ukraine. However, India — like several Asian nations — has not joined the Western sanctions regime, maintaining that its energy policies are guided by national interest rather than external pressure.
Earlier this month, the U.S. Treasury’s Office of Foreign Assets Control (OFAC) expanded sanctions to include shipping companies and intermediaries suspected of helping move Russian crude above the G7 price cap of $60 per barrel.
In response, IOC and other Indian refiners have adjusted procurement strategies, buying oil from traders and suppliers not listed under U.S. sanctions while paying through alternative currency channels, including rupees and dirhams.
“India has been careful to stay within legal boundaries,” explained Sonia Mehta, an expert in international trade compliance. “As long as Indian refiners buy through non-sanctioned entities and at prices that don’t directly violate the G7 cap, they are technically not breaching any rules.”
The ‘Non-Sanctioned Supplier’ Strategy
The IOC’s current plan hinges on purchasing from intermediaries that are not directly targeted by sanctions. These suppliers — often based in the UAE, Singapore, and other neutral trading hubs — act as brokers, sourcing Russian crude and reselling it to Indian refiners under compliant documentation.
Industry sources indicate that these non-sanctioned suppliers typically use a “blended sourcing model”, mixing Russian crude with other grades to obscure its exact origin, ensuring smoother trade flows.
This practice has drawn criticism from some Western policymakers who accuse importers of “circumventing” sanctions, but legal experts maintain that India’s approach remains technically compliant.
“India is walking a fine line, but not crossing it,” said Mehta. “The key point is that IOC and others are avoiding direct transactions with blacklisted companies, while continuing legitimate trade through acceptable channels.”
Impact on India–US Relations
While Washington has expressed its concerns privately, most analysts agree that the U.S. is unlikely to take punitive measures against India over this issue.
“India is too strategically important for the U.S. to confront directly,” says Robert Klein, a senior fellow at the Atlantic Policy Institute. “Washington understands that India’s energy security concerns are legitimate. The focus will likely remain on diplomatic persuasion rather than sanctions threats.”
Indeed, U.S. officials have publicly acknowledged India’s “unique position” as a major developing economy. The U.S. State Department has said it continues to “engage constructively” with Indian partners to encourage diversification of energy sources — a statement seen as tacit recognition of India’s pragmatic stance.
However, the optics remain sensitive. India’s ongoing imports from Russia could complicate efforts to present a unified global front on sanctions enforcement. Yet, for New Delhi, economic stability outweighs diplomatic discomfort.
Russia’s Role in India’s Oil Market
Since 2022, Russia has emerged as India’s largest crude oil supplier, overtaking Iraq and Saudi Arabia. In fiscal year 2024–25, India imported nearly 1.6 million barrels per day (bpd) of Russian crude — accounting for over 40% of total imports.
Indian refiners — including IOC, Bharat Petroleum (BPCL), and Hindustan Petroleum (HPCL) — have adapted their refineries to handle Russia’s Urals blend and newer grades like ESPO and Sokol.
“Russian crude has become integral to India’s refining mix,” noted Anand Deshmukh, Head of Energy Research at Refinitiv India. “Even if the supply chain shifts slightly due to sanctions, the dependence will remain in the medium term.”
Russia, in turn, benefits immensely from India’s continued demand, which provides a stable market as Western buyers retreat.
Global Reactions and Market Outlook
The global oil market has reacted cautiously to India’s reaffirmation of Russian imports. Brent crude prices briefly rose above $82 per barrel following reports of tightening sanctions, but quickly stabilized as traders priced in continued Asian demand.
For Russia, maintaining Indian and Chinese buyers is crucial to offset lost European revenue. Analysts expect Moscow to continue offering deep discounts to retain market share, even as shipping and insurance costs rise under sanctions pressure.
Meanwhile, the International Energy Agency (IEA) projects that India’s oil demand will grow by 3% in 2025, driven by industrial expansion and rising vehicle ownership — further reinforcing the need for steady, affordable crude supplies.
Balancing Diplomacy and Economics
India’s approach to Russian oil reflects a broader philosophy of strategic autonomy — a cornerstone of its foreign policy since independence. The government has repeatedly stated that energy security cannot be politicized, especially when millions of citizens depend on stable fuel prices.
In a statement last month, India’s Ministry of External Affairs reiterated that “all decisions on crude sourcing are guided by national interests and market realities.”
This principle has allowed India to maintain cordial relations with both Washington and Moscow, even amid deepening global divisions.
“New Delhi’s balancing act is a masterclass in diplomacy,” said Klein. “It demonstrates that middle powers can assert independence without alienating major partners.”
Challenges Ahead
While IOC’s stance is firm, several challenges remain:
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Payment Mechanisms:
The ongoing restrictions on Russian banks complicate settlement processes. India has relied on local currency trade, but such systems face logistical and regulatory hurdles. -
Shipping and Insurance:
Sanctions on maritime logistics increase transportation costs and risks. Indian refiners must navigate a shrinking pool of insurers willing to cover Russian shipments. -
Future Sanctions:
If the U.S. or EU expands restrictions to include secondary buyers or intermediaries, India may need to rework its trade channels once again.
Despite these obstacles, IOC and other refiners appear confident in their ability to adapt.
Conclusion
The Indian Oil Corporation’s declaration — that it will “absolutely not discontinue” Russian oil imports — sends a clear signal: India’s energy needs come first.
By sourcing through non-sanctioned suppliers, IOC is preserving both compliance and affordability, ensuring that domestic fuel markets remain stable in a turbulent global environment.
As geopolitical tensions continue to reshape global trade flows, India’s pragmatic energy diplomacy stands out as a model for developing nations navigating great-power rivalries.
In the words of one senior energy official:
“Our job is to keep India’s refineries running — not to take sides. As long as the oil flows and the lights stay on, we are doing what’s best for our people.”
