Russian oil: It isn’t so much about money but stakes are much higher

US President Donald Trump’s 50 per cent tariff and threats of secondary sanctions for trade ties with Russia because the latter is at war with Ukraine are a stretch for many reasons. At the heart of it is India’s import of Russian weapons and oil.

Also read: 'India must be firm; its Russian oil deal is longstanding and sovereign'

India’s defence ties with Russia are historic, but its oil import is a recent development. It became a major importer only after the Russia-Ukraine war broke out in February 2022 and the West’s sanctions led to Russia offering its crude at substantially discounted price. India lapped it up, its import of Russian crude jumping from 0.2 per cent of the total crude import before the war to 45 per cent in June 2025 and then fell to 33 per cent in July 2025, according to Kpler, a global real-time data and analytics provider.

The Kpler’s data show, India imported 1.8 million barrels a day in 2024 from Russia. As per its lead research analyst (refining and modelling) Sumi Ritolia, the landing cost of Russian crude is cheaper by $5-6 per barrel than non-Russian crude.

Over the years, India’s savings in crude bill have fallen as the price differential between the Russian and non-Russian crude narrowed. Shunning Russian crude altogether may not cost, India can well afford it. But much is at stake here: India’s sovereign rights to trade with whichever country it wishes and national pride. Besides, Trump is being hypocritical because his own country trades with Russia too (more of it later).

What would it cost to shun Russian oil?

A back-of-the-envelope calculation would show, it would cost India as little as $3-4 billion a year.

The Kpler’s data show, India imported 1.8 million barrels a day in 2024 from Russia. As per its lead research analyst (refining and modelling), Sumi Ritolia, the landing cost of Russian crude is cheaper by $5-6 per barrel than non-Russian crude.

Also read: ‘Modi’s friend’ Trump’s 50 pc tariff blows hole in India’s foreign policy

Assuming India buys 1.8 million barrels a day and the price difference remains at $5-6 per barrel, the total additional burden would be $3.3-3.9 billion a year.

This is one part of the cost.

The other could be a sudden spike in the non-Russian crude price as India raises its demand. India is the third-largest crude importer, having spent $160.8 billion in FY25, as per the Petroleum and Natural Gas Ministry. How much the upward spike is a guessing game. None, however, disputed Petroleum and Natural Gas Minister Hardeep Puri’s warning that it may shoot up to $130-140 per barrel.

Also read: India gives US stern answer, but can do little to ward off Trump’s antics

As a free country, India has sovereign rights to trade and act to protect its “national interest and economic security”, as it told the US after the additional 25 per cent tariff was announced.

At best, the additional burden on India could then be $7-8 billion a year.

Sure, India can manage this cost. It is a $3.7 trillion economy (FY25, current price, at exchange rate of Rs 87), expected to grow over $4 trillion in FY26.

India’s sovereign rights and national pride

But the stakes are much higher.

As a free country, India has sovereign rights to trade and act to protect its “national interest and economic security”, as it told the US after the additional 25 per cent tariff was announced.

Here is a historic fact.

India began buying Russian oil with the US consent. This was revealed by US Ambassador to India Eric Garcetti at a public function in Washington in May 2024. Garcetti said this was “to ensure the prices did not go up globally.”

Indian refiners have had “windfall gains” by refining cheaper Russian oil and exporting to Europe. The Indian government fattened its kitty with “windfall gain tax”.

Also read: Trump imposes 50 pc tariff on Indian goods over Russian oil imports

Now if Trump is upset at India’s trade ties with Russia, so should he be at his own country.

According to the Office of the US Trade Representative (USTR ), the US’s total trade (goods and services) with Russia stood at $5.2 billion in 2024. India’s trade with Russia may be larger, at $68.7 billion in FY25 (rising from the pre-pandemic trade of $10.1 billion), but that is beside the point.

Windfall gains for refiners and government

Indian refiners have had “windfall gains” by refining cheaper Russian oil and exporting to Europe. The Indian government fattened its kitty with “windfall gain tax”.

How much money did the refiners save?

Hindustan Times used official data to estimate a gain of $25 billion in FY24, over FY23. Rating agency ICRA estimated the gain at $13 billion during FY23 and the first 11 months of FY24. Bloomberg reported that they saved $3.8 billion in FY25.

The gains reduced as the discount on Russian oil receded with the G7 imposing a price cap of $60 per barrel. According to S&P Global, spot market price difference between the Russian Urals and Dated Brent (specific delivery date) reached $42 per barrel in April 2022, gradually falling to $14.5 on March 13, 2025.

Trading Economics data show the difference was around $3.3 per barrel on August 7, 2025. (Spot market and FOB prices are different from landing price mentioned earlier.)

How much windfall tax did the government collect?

Indian Express reported that it was around Rs 25,000 crore in FY23, which declined to around Rs 13,000 crore in FY24 and further to Rs 6,000 crore until November in FY25. This was also because the government reduced the quantum of tax over the period.

Indian consumers lost

The cheap Russian oil didn’t benefit Indian consumers.

Retail prices of petroleum, diesel and other petroleum products have remained unchanged since February 2022.

Also read: Putin-Trump tango turns into fisticuffs; Modi trapped in between

Worse, India’s oil import price (FOB price of Indian basket) fell from $105.5 per barrel in FY14 to $84 in FY15, went below $50 in FY16-FY17, averaging $67.5 during the past 11 fiscals of FY15-FY25. Yet, retail price of petrol jumped from about Rs 60 a litre in FY14 to about Rs 100, and so is the case with other petroleum products like diesel and LPG.