Indian Refiners Face Premium Costs as Record Russian Purchases Lose Their Discount
India's Russian crude share hit a record 55.5% of total imports in July, but vanishing discounts and US tariff legislation are straining the economics of the trade.
Indian refiners are paying premiums for crude after months of discount-driven buying, with reporting from August 18 (2026-08-18) showing ICE Brent crude front-month had risen around $10 a barrel over two weeks to cross $91, as spot prices moved above $93. Russian and Venezuelan crude, once available at meaningful discounts, became less competitive as Gulf suppliers demanded higher premiums amid shipping disruptions. Indian companies are turning to US, Brazilian, and Guyanese barrels to compensate, but tight supply from those producers is slowing the switch.6,7
That cost shift coincides with India's deepest reliance on Russian crude on record. Vessel-tracking data from Kpler showed India's imports from Russia rose to 2.8 million barrels per day in July, up from the previous high of 2.7 million bpd in June, representing 55.5% of total Indian crude imports of just over 5 million bpd for the month.5
The roots of that dependency stretch back to 2022. When Western countries boycotted Russian oil after the Ukraine invasion, India absorbed crude that had previously flowed to Europe at discounts that kept its refineries competitive and domestic fuel prices manageable. The Economist estimated in May 2026 (2026-05-17) that India was importing nearly 2 million barrels per day of Russian sour heavy crude, then representing 35 to 40% of its crude imports. By July the volume had reached 2.8 million bpd and the share 55.5%.1,5
In June, India's total crude imports reached a record 5 million bpd, with more than 2.6 million bpd from Russia alone, partly enabled by a now-expired US waiver on Russian oil already loaded on tankers, which allowed cargoes to arrive without immediate legal consequence, according to Kpler data cited in early July 2026 (2026-07-03).3
Washington has since moved to close that space. The US Senate passed legislation proposing tariffs of up to 100% on countries purchasing Russian oil, a bipartisan measure granting the president authority to set specific rates, according to reporting from August 18 (2026-08-18). President Trump imposed an additional 25% tariff on India on August 6th (2026-08-06), citing India's role in financing Russia's war effort, the Economist reported. People familiar with trade negotiations told Rigzone the Senate measure caught Indian officials off guard and was complicating bilateral talks with Washington.1,4,6
But India's room to pivot quickly is limited. Shipping disruptions in the Strait of Hormuz and the Bab el-Mandeb Strait have already narrowed Middle East and Red Sea supply routes. Iran's Hormuz restrictions, in place since early March 2026, pushed India's crude basket from $69 a barrel to more than $114 in April, per the Atlantic Council, demonstrating how exposed the world's third-largest oil importer is to maritime chokepoints. Analysts cited in August 3 (2026-08-03) reporting said Russian crude would remain a key supply source as long as both straits stay disrupted.2,5
India built some buffer when conditions allowed. Crude held in strategic, commercial, and refinery storage rose to 104 million barrels at the end of June (2026-06-30), up from 90.5 million barrels at the end of April (2026-04-30), per Kpler data. That remains below the 107 million barrels India held at end-February 2026 (2026-02-28), before Hormuz restrictions began.3
ICE Brent crude front-month stood at $92.09 a barrel as of August 25 (2026-08-25 00:48 UTC), with Urals crude at $85.87, a spread of around $6 — narrower than the discounts that made Russian barrels so compelling to Indian buyers in the years following the 2022 sanctions.7
Rigzone sources cautioned against reading current US tariff moves as definitive. One person familiar with the talks noted that American trade policy had shifted repeatedly and the ultimate tariff rate remained uncertain. The Senate bill grants authority for rates up to 100%; a separate congressional bill proposes rates as high as 500%, the Economist reported, though neither has yet become law.4,1
If tariff rates on Russian oil purchases escalate toward 100%, Indian refiners face a choice between absorbing the penalty cost and cutting Russian volumes. July's record 55.5% share shows that shift has not started. Whether alternative supply from the Americas can open up fast enough to give Indian refiners a credible exit from Russian crude before US policy forces the issue is the question procurement desks will spend the coming weeks trying to answer.5,4,7