If India, the world's third-largest oil consumer, were to cease its imports of Russian oil, the global energy market and India's own economy would likely experience significant repercussions.

Impact on Global Oil Market

Russia accounts for a substantial 10% of the global crude oil supply. If India, a major buyer of Russian seaborne crude, were to halt imports, this could lead to a potential 10% surge in crude oil prices, provided other nations do not increase their production to compensate. Some analysts believe that if Russia cannot redirect its oil to other buyers, as much as 1.7 million barrels per day of supply could be at risk. This situation could wipe out the expected surplus in the global market and lead to a largely balanced market.

However, it's also plausible that Russia would be able to reroute a portion of its oil to smaller buyers, thus reducing the overall impact on oil prices. Some traders anticipate that Russia may offer even greater discounts to maintain its sales volume, potentially sending more cargoes to countries like China.

Economic Ramifications for India

Since the beginning of the Ukraine war in 2022, India has significantly increased its purchases of Russian oil, taking advantage of discounted prices. This strategy has helped ensure India's energy security and has also resulted in substantial savings. According to one estimate, India saved around $3.8 billion on oil purchases from Russia in the last fiscal year. However, this dependence has also made India vulnerable to external pressures.

A recent State Bank of India (SBI) report suggests that if India were to stop importing Russian oil, its crude oil import bill could increase by $9 billion to $12 billion. Specifically, the report estimates that the fuel bill might increase by $9 billion in FY26 and $11.7 billion in FY27 due to rising prices.

India's Potential Responses

Despite these challenges, India has options to mitigate the impact. The SBI report highlights that India's diversified supply network and established contracts with other oil-producing nations could cushion the blow. India could revert to its traditional Middle Eastern suppliers like Iraq, Saudi Arabia, and the UAE. Indian refiners can source oil from the United States, West Africa and Azerbaijan. New supply options have emerged from Guyana, Brazil and Canada.

Geopolitical Implications

India's decision to continue purchasing Russian oil has been a point of contention with the United States and other Western nations. Recently, the US President imposed a 50% tariff on Indian goods in response to India's continued oil trade with Moscow. This has created a complex situation for India, balancing its energy security needs with its trade relations with the US.

Some experts argue that India is unlikely to yield to external pressure and will continue to prioritize its national interests. They point out that India's oil trade with Russia is transparent and legal and that many other countries are also importing Russian oil.