A recent State Bank of India (SBI) Research report projects that India could potentially save up to $3 billion annually on its crude oil import bill by strategically shifting a portion of its sourcing from Russia to Venezuelan heavy crude. This potential advantage hinges on Venezuela offering a discount of $10-12 per barrel to offset increased logistical costs.
The SBI report highlights that the savings are purely arithmetic and not based on geopolitical ideology. Currently, Venezuelan heavy crude is priced at approximately $51 per barrel. A discount in the range of $10-12 per barrel would make the proposition economically viable for Indian importers, neutralizing the impact of higher shipping, insurance, and handling expenses.
A key consideration is the increased shipping distance. Venezuela is approximately twice as far from India as Russia, and five times farther than the Middle East, leading to higher landed costs. This extended distance results in increased time charter rate premiums, insurance costs, fuel consumption, and potential port demurrage risks. Therefore, the discount on Venezuelan crude needs to be substantial enough to offset these logistical disadvantages.
India's refining capabilities also play a crucial role. Indian refineries are well-suited to process heavy, sulfur-rich Venezuelan crude. Many refineries are already configured to handle this type of crude, giving India an advantage over other countries. However, some refineries may require operational adjustments to process lighter US crude, which is an alternative to Russian oil.
India's dependence on Russian crude has increased significantly since 2022, when Western sanctions on Moscow led to discounted prices. In fiscal year 2025, Russia accounted for 35.1% of India's total oil imports, a significant jump from just 1.7% in fiscal year 2020. While diversifying its sources of supply to about 40 countries, India's reliance on Russian oil has been a subject of discussion, especially with the United States.
Recently, there have been reports indicating a potential shift in India's approach to Russian oil imports. Mangalore Refinery and Petrochemicals Ltd (MRPL), a state-run refiner, has reportedly halted Russian crude imports in preparation to replace them with Venezuelan supplies. This move aligns with a broader trade agreement with the United States, which includes reducing tariffs on Indian goods in exchange for increased imports of US energy and other products. As part of this agreement, India has committed to importing $500 billion worth of US goods over five years.
While reducing reliance on Russian crude, India must ensure its energy security. In fiscal year 2025, India imported 180 billion USD worth of oil, with Russia accounting for 30-35%. Other key suppliers include Iraq, Saudi Arabia, and the UAE. If India were to completely halt Russian oil imports, its fuel import bill could increase by $9-12 billion.
Therefore, a strategic shift towards Venezuelan crude, under the right economic conditions, presents a viable opportunity for India to reduce its import costs and diversify its energy sources.