RIL's Russian oil purchases may end soon

Indian oil refiners, including Reliance Industries Ltd (RIL), are looking to end their purchase of Russian crude following US sanctions. According to sources, RIL always abides by sanctions, and it did the same when sanctions were imposed on Iran. 

RIL earlier confirmed that it will recalibrate its oil imports from Russia in line with the Indian government’s guidelines. However, the government is yet to spell out it's position on US sanctions on Russian crude. US Presicent Donald Trump has majorly sanctioned two Russian oil producers, Rosneft and Luke Oil, to restrict funding Russia's Ukraine war.

However, the impact of stopping crude from Russia will not be as high as expected, said an executive with a public sector company. "The margin of $5-6 per barrel is set off against high freight rates from Russia and the high insurance premiums," he explained. The actual benefit of Russian crude is around $2-3 a barrel, another executive confirmed. 

The stakes are high as stopping Russian crude will affect fuel prices in India. The energy security, refinery profitability, and even macroeconomic stability are tied to how the country navigates this diplomatic and economic tightrope.

In the immediate aftermath of the Ukraine invasion in 2022, Indian refiners secured deep discounts of $10–12 a barrel. India was among the few large economies that seized the opportunity when western nations cut ties with Moscow’s energy sector. Refiners such as Reliance Industries Ltd (RIL), Indian Oil Corporation (IOC), Bharat Petroleum (BPCL), Hindustan Petroleum (HPCL), and Nayara Energy reaped the rewards of discounted grades like Urals and ESPO. In FY25, RIL, which operates the world’s largest refining complex, posted a gross refining margin (GRM) of about $8.5 per barrel. BPCL and HPCL followed with $6.8 and $5.7, respectively, while IOC averaged $4.8—all figures bolstered by cheaper Russian feedstock.

“If we shift completely to Middle Eastern supplies, the surge in demand will tighten the global market and push up prices for everyone,” says an analyst. The Brent crude price jumped 5% after announcing Russian oil sanctions. Replacing Russian barrels with costlier Middle Eastern or U.S. supplies could raise input costs by $5 per barrel, potentially eroding profit margins by over 20%. 

Access to discounted Russian oil saved the country an estimated $6–8 billion over FY24–FY25. Removing that cushion would sharply inflate the import bill, widening the current account deficit and fueling demand for U.S. dollars. A stronger dollar, in turn, would weaken the rupee, which is already hovering near record lows. A softer rupee would complicate the Reserve Bank of India’s efforts to contain inflation, as it raises the cost of all imported goods—from fuel to fertilisers.