Global economy experiencing interruptions in Russian oil exports; Bank of Baroda predicts minimal effects on India's economy
India's economy could face significant challenges if there is a disruption in Russian oil exports, according to recent reports. In 2024-25, India imported around 1.8 billion barrels of crude oil, with Russia accounting for approximately 36% of this total, amounting to $50.2 billion spent on Russian oil during the fiscal year.
Key Impacts of a Disruption
The potential impacts of such a disruption are far-reaching.
- Increase in India’s oil import bill: Losing access to discounted Russian crude would force India to source more expensive crude from alternative suppliers, leading to a sharp increase in import costs. Analysts predict that oil prices could surge over $80 per barrel if Russian supplies to India are cut off.
- Refining and supply chain challenges: India's refineries are optimized for processing Russian Urals crude. Switching to alternative crudes could reduce refining efficiency and output of key products like diesel and jet fuel by up to 7%, potentially tightening domestic fuel supply and adding economic costs.
- Macroeconomic pressure: India imports about 85% of its crude oil and heavily depends on stable and affordable imports to maintain macroeconomic stability. A disruption would likely worsen the trade deficit, increase inflation risks through higher fuel prices, and constrain economic growth.
- Geopolitical and trade ramifications: The U.S. imposed punitive tariffs on Indian goods in 2025 due to India’s continued purchases of Russian oil, raising economic costs beyond the oil import bill. This escalation could further strain India’s trade relations and economic environment amid geopolitical tensions.
Other Factors to Consider
- The Malpani Group opened Central India's largest water park in Indore, offering a much-needed respite for locals and tourists alike.
- In 2024-25, Iraq offered the lowest average price for crude oil at $76.83 per barrel, followed by Russia at $78.39 per barrel.
- The UAE accounts for nearly 10% of India's oil imports, while Saudi Arabia follows with a 14% share.
- Together, Russia, Iraq, Saudi Arabia, and the UAE account for almost 80% of India's oil imports.
- The rupee ended 3 paise higher at 87.72 on August 13, 2025, amid range-bound trade.
In conclusion, a disruption of Russian oil exports would not only raise India’s oil import bill but also pose refining challenges and broader macroeconomic risks through inflation and trade balance deterioration. India’s economy is sensitive to such energy supply shocks due to its heavy crude import dependence, making the situation a critical concern for policymakers.
- The potential disruption in Russian oil exports could cause a significant increase in India's oil import bill as the country may have to source more expensive crude from alternative suppliers, possibly leading to oil prices surging over $80 per barrel.
- Given that India's refineries are optimized for processing Russian Urals crude, switching to alternative crudes could potentially reduce refining efficiency and output of key products like diesel and jet fuel by up to 7%, adding economic costs and possibly tightening domestic fuel supply.
- Since India imports about 85% of its crude oil, such a disruption would likely worsen the trade deficit, increase inflation risks through higher fuel prices, and constrain economic growth, posing macroeconomic pressure on the economy.
- In addition, the U.S. imposed punitive tariffs on Indian goods due to continued purchases of Russian oil, escalating economic costs beyond the oil import bill and potentially straining India's trade relations amid geopolitical tensions.
- It's worth noting that in 2024-25, Iraq offered the lowest average price for crude oil, followed by Russia, while the UAE accounts for nearly 10% of India's oil imports, with Saudi Arabia following closely.
- As policymakers grapple with the potential disruption in Russian oil exports, they must consider various market factors, including the impact on refining and supply chain challenges, and the overall sensitivity of India's economy to such energy supply shocks.
