U.S. Tariff Threat Triggers Operational Adaptability Among Refineries
Indian refiners are actively exploring alternatives to Russian crude oil barrels, aiming to balance demand while protecting margins amidst escalating geopolitical tensions.
In the first half of 2025, imports from the United States increased by over 53% year-on-year (y-o-y), and by 16% y-o-y during Q2 2025. This shift is part of a larger diversification strategy, as Indian refiners seek to reduce dependence on a single region and ensure energy security for over a billion people.
The Middle East, with countries like Iraq, Saudi Arabia, and the United Arab Emirates, remains the most logical and proximate option for Indian refiners. Middle Eastern crudes offer a wide range of qualities, and the geographical advantage allows for smoother logistics. Indian refiners can potentially renegotiate better terms as European demand stabilizes.
The United States is another significant supplier, with India’s crude imports growing more than 20% month-on-month (m-o-m) and almost 40% y-o-y to around 364,000 barrels per day (b/d). US crude tends to be lighter and sweeter, which suits Indian refineries aiming to produce higher-quality fuels. However, US crude is generally costlier, and Indian refiners are balancing prices and quality while increasing imports.
Brazil, Guyana, and Canada in the Americas, and West African countries like Nigeria and Angola, also offer viable alternatives. These sources add diversity and reduce dependence on any single region, although they introduce higher freight costs and logistical complexities.
However, this shift towards alternative suppliers comes with its own set of challenges. Russian Urals crude was discounted, offering a price advantage. Alternatives, particularly from the US and the Americas, tend to be higher-priced and can raise refining input costs. The shift may cause refiners to lose the benefit of cheap crude imports.
Operational disruptions are another concern. Switching crude types temporarily affects refinery operations due to differences in oil quality and processing requirements. Indian experts acknowledge short-term operational challenges but minimal long-term impact as refiners recalibrate.
Geopolitical and tariff pressures also complicate matters. US tariffs have increased on Indian exports, pressuring refiners to reduce Russian crude purchases. This complicates procurement decisions with an overlay of geopolitical risk and economic penalties.
In July 2025, India’s Russian crude imports decreased to around 1.6 million b/d, a drop of around 500,000 b/d from June 2025. Most refiners are in a "calibrated readiness" phase, closely monitoring geopolitical developments while optimizing for margin retention and product yield.
Despite these challenges, Indian refiners are pursuing a diversification strategy that balances price, quality, supply security, and geopolitical risk. The exploration of alternatives is a bid to ensure energy security while maintaining margin resilience.
[1] Reuters, "India's refiners explore alternatives to Russian crude as imports from US surge," 2025. [2] Bloomberg, "India's refiners grapple with Russian crude alternatives," 2025. [3] Financial Express, "US tariffs pressure Indian refiners to reduce Russian crude purchases," 2025. [4] Energy Intelligence, "India's refiners face operational challenges in shifting away from Russian crude," 2025.
- Indian refiners are actively seeking alternatives to Russian crude oil, aiming to strike a balance between demand and margins amidst escalating geopolitical tensions.
- In Q2 2025, India's crude imports from the United States increased by 16% year-on-year, forming part of a larger diversification strategy.
- Middle Eastern countries, such as Iraq, Saudi Arabia, and the United Arab Emirates, remain crucial options for Indian refiners due to the quality of their crudes and logistical advantages.
- US crude imports to India have grown significantly, reaching almost 40% year-on-year to around 364,000 barrels per day, despite being generally costlier than Russian crude.
- Brazil, Guyana, Canada, Nigeria, and Angola offer viable alternatives to diversify sources and reduce dependence on any single region, but they come with higher freight costs and logistical complexities.
- The switch to alternative suppliers presents challenges, including increased refining input costs due to pricier crudes and the operational impact of differences in oil quality and processing requirements.
- Geopolitical and tariff pressures, such as US tariffs on Indian exports, add complexity to procurement decisions, necessitating refiners to close watch geopolitical developments while optimizing for margin retention and product yield.