Russian oil has transitioned from an opportunistic discount trade to a critical component of India’s energy security architecture – a position that New Delhi is likely to defend, regardless of Western pressure.
Indian energy security has faced new challenges as the standoff in the Strait of Hormuz has gained momentum and the Houthis have forced many tankers to avoid the Red Sea and the Suez Canal. Against this backdrop, India’s July 2026 crude import data confirms a structural shift in the country’s energy sourcing. As global risks arise, Russian crude oil, which accounted for nearly 55% of the total imports, has become a load-bearing component of the energy security architecture.
Shielding Economy from Global Shocks
This transformation can be traced back to March 2026 when the Strait of Hormuz was closed off due to the conflict between the US, Israel, and Iran, cutting off much of India’s traditional supply from the Gulf. Iraqi cargoes from the Basra terminal were trapped for months, Kuwaiti shipments disappeared almost entirely, and Saudi shipments fell sharply. Russian imports responded with striking speed. In the first three weeks of March alone, volumes rose 82.3% month-on-month to 1.9 million barrels per day (mbpd), lifting Russia’s share of India’s oil basket from around 20% in February to 45.2%. This enabled Indian refiners to absorb the shock without significantly disrupting refinery operations.
During the crisis, refining capacity remained at 85%. However, without Russian supplies, capacity could have fallen to 72%. This had a direct macroeconomic impact. According to estimates by the Ministry of Finance cited in the RBI’s analytical reports, without a prompt increase in Russian supplies, inflation in the country could have accelerated by an additional 1.8% in the second quarter of 2026 due to rising transportation and food prices. However, thanks to the stabilisation of diesel and gasoline supplies, this inflationary pressure was partially offset, with the actual CPI increase remaining in the range of 4.6%, whereas in stress scenarios it was estimated to exceed 6%.
Moreover, financially, more than 90% of payments for trade between Russia and India now move in rubles and rupees rather than dollars. The rupee-ruble mechanism resembles structural insulation. Regardless of how the exchange rate moves, a growing share of India’s largest import category no longer runs through the dollar system.
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Oil Diplomacy
The foreign policy dimension was equally important. A steady supply of oil enabled India to stabilize its own market and serve as a regional energy stabilizer. During the crisis, India increased its exports of petroleum products to South Asian countries. Between April and June of 2026, exports of diesel and jet fuel from India to Bangladesh, Sri Lanka, Nepal, and Maldives increased by 18-24%. Sri Lanka is a particularly telling case. Amid supply disruptions from the Middle East, India met up to 35% of the country’s diesel needs. This strengthened New Delhi’s role as the de facto guarantor of energy security in the Indian Ocean region. This case is very important in the context of Prime Minister Modi’s “Neighborhood First” policy, which was challenged amid regime changes last year.
Hard times prompt strong partnerships
Despite the alarmism surrounding growing dependence, the latest developments have also driven the India-Russia energy relationship towards genuine bilateralism. Ukrainian strikes have knocked out an estimated 30% of Russian refining capacity, prompting Moscow to import gasoline from India for the first time. By early July, at least 60,000 tons had been shipped.
Furthermore, as Kyiv attempts to disrupt Russia’s oil exports via Black Sea ports such as Novorossiysk, New Delhi and Moscow have begun formalizing a long-term supply strategy via the Arctic. During President Vladimir Putin’s state visit to New Delhi in December 2025, the two countries signed an agreement granting India access to Russian naval ports along the Northern Sea Route. Russia further strengthened this commitment in July 2026 by moving to expand cooperation on Arctic cargo transport. This route could cut shipping distances by up to 40% and reduce transit times by around two weeks compared to the Suez Canal.
What Comes Next
Three plausible trajectories emerge. In the base case, Russian oil production stabilises at 2.5 mbpd, with the potential to rise towards 3.0 mbpd if export availability permits. In a stress scenario, continued geopolitical tensions could increase India’s share of Russian oil to above 60%. In a normalisation scenario, a durable de-escalation in the Hormuz and Red Seas, alongside renewed Gulf discounting, could reduce India’s share to 45%. Across all three scenarios, the strategic conclusion remains: Russian oil has transitioned from an opportunistic discount trade to a critical component of India’s energy security architecture – a position that New Delhi is likely to defend, regardless of Western pressure.
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References
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3. https://thewire.in/trade/amid-strait-of-hormuz-crisis-indias-russian-oil-imports-see-82-3-increase
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7. https://discoveryalert.com.au/regional-energy-security-south-asia-2026/
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11. https://jamestown.org/russia-and-india-formalize-arctic-partnership/