The Ministry of Commerce and Industry of India is a government ministry that administers trade, commerce, and industrial policies. Its Department of Commerce publishes monthly import-export data, which is crucial for tracking India’s energy dependency and trade deficits.

Following U.S. and European sanctions that blocked Russia from the SWIFT global payment system, Indian refiners settled some crude oil purchases using the Chinese Yuan. While India prefers using UAE Dirhams or Indian Rupees, Russian exporters have frequently demanded Yuan because of Russia’s massive trade surplus with China. This creates geopolitical concerns for New Delhi, as it aids Beijing’s goal of internationalizing the Yuan.

India imports about 85% of its crude oil requirements. To protect itself from geopolitical supply disruptions and price volatility, India has historically pursued a diversified energy sourcing strategy, importing from various regions including West Asia, Africa, and South America. Over-reliance on a single source like Russia represents a significant departure from this risk-mitigation policy.

Crude oil is traded globally through two main channels: long-term supply contracts and the spot market. Long-term contracts (which historically accounted for 70% of India’s imports) provide guaranteed volumes and stable pricing over months or years. In contrast, the spot market involves one-off purchases for immediate delivery, offering price flexibility (such as buying discounted oil) but exposing buyers to high price volatility and geopolitical shipping risks.

Primary sanctions prohibit individuals and companies of the sanctioning nation (like the U.S.) from trading with a sanctioned country (like Russia). Secondary sanctions go further, targeting non-U.S. entities (such as Indian refiners or banks) that trade with Russia. If violated, the U.S. can cut off these foreign companies from its financial system and U.S. dollar transactions, causing severe disruptions in trade channels.

The Strait of Hormuz is a vital maritime chokepoint located between the Persian Gulf and the Gulf of Oman. It is the sole sea route connecting oil-rich Persian Gulf exporters with international markets. Approximately 20% to 30% of global oil trade passes through this narrow channel. Geopolitical disruptions or military conflicts in this region (such as hostilities involving Iran) threaten global energy security, causing Indian refiners to seek alternative suppliers outside West Asia.

Geopolitical tensions between Iran and the United States directly impact global energy markets due to Iran’s strategic location. Iran borders the Strait of Hormuz, and escalation in hostilities often leads to threats of blocking the shipping channel, attacks on oil tankers, or heightened maritime security risks. These disruptions increase shipping insurance costs and crude prices, directly threatening India’s energy security.

Strategic autonomy is India’s core foreign policy principle of making independent decisions based on national interest, without aligning with any superpower bloc. In energy security, this means avoiding dependence on a single supplier (such as Russia or Venezuela) or currency (such as the Chinese Yuan). Maintaining multiple sources of imports preserves India’s geopolitical leverage and bargaining power on the global stage.

After the 2022 invasion of Ukraine, Western countries imposed a price cap of $60 per barrel on Russian Urals crude. To attract buyers, Russia sold its oil to India at deep discounts (often $10 to $30 below international Brent crude). However, by mid-2026, due to strong demand and shipping disruptions, these discounts narrowed, and Russian oil was sold at a premium ($46 per ton over benchmark prices), reducing the profit margins of Indian oil refiners.

Gross Refining Margin (GRM) is a key performance indicator for oil refineries. It represents the difference between the total value of refined petroleum products (petrol, diesel, aviation fuel) and the cost of the raw crude oil imported. When the price of crude oil surges (as indicated by the 83% rise in import value) while volume drops, refiners pay more for input, which narrows their GRMs and hurts their overall profitability.

Russian Urals is a medium sour crude that naturally trades at a discount to Brent, the light sweet global benchmark. After 2022, U.S. sanctions widened this discount, allowing Indian refiners to buy cheap. However, as Urals discounts shrank and ‘product cracks’ (the profit margins of refining crude into specific fuels like diesel or gasoline) weakened globally due to lower demand, the profitability (margins) of Indian refiners declined.

For a country importing 85% of its oil, procurement risks include price spikes and supply disruptions. Long-term contracts provide security and volume guarantees but lack price flexibility. The spot market offers immediate flexibility and discount opportunities but exposes the country to extreme volatility. A balanced strategy combines both: core demand is met through stable contracts with multiple global producers, while spot purchases are used tactically when discounts are high.