India's energy landscape in 2025 reflects the complexities of a rapidly growing economy reliant on imported fuels. As the world's third-largest energy consumer, the country requires approximately 5.5 million barrels of crude oil per day to power its industries, transportation, and households. This demand is projected to rise to 6 million barrels daily by the end of the decade, driven by economic expansion, urbanization, and increasing vehicle ownership. However, domestic production meets only about 10-12% of this need, leaving India heavily dependent on foreign suppliers. This vulnerability exposes the nation to global geopolitical shifts, supply disruptions, and price volatility. In recent months, US-imposed sanctions on Russian oil entities have prompted a significant adjustment in India's import strategy, including a reduction in Russian crude purchases and a new agreement to source liquefied petroleum gas (LPG) from the United States.
To understand the current situation, it is essential to review India's historical oil import patterns. For decades, the Middle East has been the primary source, accounting for around 60% of imports in the financial year 2019-2020. Countries like Iraq, Saudi Arabia, the United Arab Emirates (UAE), and Iran supplied reliable volumes due to geographical proximity, which reduces transportation costs and time. Crude oil from these regions is often lighter and lower in sulfur content, making it easier and cheaper to refine into products like petrol, diesel, and aviation fuel. However, geopolitical tensions in the Middle East—such as conflicts involving Iran, instability in Iraq, and disruptions from groups like the Houthis in Yemen—have prompted India to diversify its sources. This strategy aims to mitigate risks associated with over-reliance on any single region, ensuring energy security amid potential supply chain interruptions.
The diversification efforts gained momentum in the early 2020s. India began exploring alternatives from the Americas, Africa, and Russia. For instance, imports from the United States increased gradually, supported by advancements in shale oil production that made American crude more competitive globally. Similarly, Venezuela emerged as a supplier, offering heavy crude suitable for India's complex refineries. However, external pressures soon influenced these choices. In 2018, during the first Trump administration, the US withdrew from the Iran nuclear deal (formally known as the Joint Comprehensive Plan of Action) and reimposed sanctions on Iranian oil exports. Iran, then India's third-largest supplier, saw its exports to India plummet as secondary sanctions threatened penalties on any entity dealing with sanctioned Iranian firms. Secondary sanctions are a key tool in US foreign policy, extending penalties to third-party countries or companies that engage with the primary target, thereby amplifying the economic isolation of the sanctioned nation.
A similar pattern unfolded with Venezuela. In 2019, the US imposed sanctions on the Venezuelan state oil company PDVSA amid political turmoil in the country. India, under pressure to comply, reduced and eventually halted imports from Venezuela, despite the oil's compatibility with Indian refineries designed for heavy crudes. During the Biden administration (2021-2025), some limited waivers allowed resumption of minor imports from Iran and Venezuela, but the overall trend toward diversification persisted.
The Russia-Ukraine conflict, which began in February 2022, marked a pivotal shift in global energy markets and India's import strategy. Russia's invasion—termed a "special military operation" by Moscow—prompted swift responses from Western nations. The United States and European Union (EU) imposed comprehensive sanctions on Russia, including expulsion from the SWIFT international banking system, asset freezes, and bans on energy imports. Prior to the war, Russia supplied about 30% of the EU's oil needs, earning it the moniker "Europe's petrol pump." The sudden loss of this market forced Russia to redirect exports, offering deep discounts to attract new buyers. Discounts reached $5-6 per barrel below global benchmarks like Brent crude, making Russian oil economically attractive.
India capitalized on this opportunity. Before 2022, Russian crude constituted less than 2% of India's imports. By 2024-2025, this figure surged to around 35-40%, according to data from the Centre for Research on Energy and Clean Air and India's Ministry of Petroleum and Natural Gas. Major refiners, including Reliance Industries' Jamnagar refinery—the world's largest single-site refinery—ramped up purchases. Jamnagar's advanced technology allowed it to process Urals crude, a Russian grade high in sulfur content, which requires specialized refining to remove impurities and meet environmental standards. This influx of discounted oil helped India save billions in import costs, with estimates suggesting reductions of up to $5 billion annually during peak periods. Payments to Russia ballooned from $8 billion pre-war to over $65 billion by 2024, bolstering bilateral trade.
However, this shift was not without controversy. Western nations questioned whether India's purchases indirectly funded Russia's war efforts, though India maintained that its decisions prioritized national energy security. External Affairs Minister S. Jaishankar articulated this stance in international forums, emphasizing that India would source energy based on affordability and availability, without external dictation. Behind the scenes, a nuanced dynamic emerged: much of the refined products from Russian crude processed in India were exported back to Europe and the US, helping those regions maintain supply stability amid their own sanctions. This "refining loophole" allowed Western countries to indirectly access Russian-origin energy while adhering to direct import bans, highlighting the complexities of global supply chains.
Entering 2025, the re-election of Donald Trump as US President in November 2024 brought renewed focus on pressuring Russia to end the Ukraine conflict. Initial talks between Trump, Russian President Vladimir Putin, and Ukrainian President Volodymyr Zelenskyy aimed at a ceasefire but yielded limited progress. To escalate pressure, the US targeted Russia's energy sector more aggressively. In August 2025, a 25% tariff was imposed on India's Russian oil purchases, layered on top of existing reciprocal tariffs, resulting in a cumulative 50% duty—the highest globally for such imports. This move was intended to discourage third-party buyers like India from sustaining Russia's economy.
The pressure intensified in October 2025 when the US sanctioned Rosneft and Lukoil, Russia's two largest oil exporters, responsible for about 80% of the country's oil shipments. Sanctions froze US-based assets and imposed secondary penalties on entities trading with these firms. Importers worldwide, including in India, were given until November 21, 2025, to wind down dealings. The impact was immediate: Russian oil shipments to India dropped by 66% in the weeks following, per industry reports. Provisional data from tanker-tracking firm Kpler indicates November 2025 imports at 1.855 million barrels per day (bpd), but projections for December show a plunge to the lowest levels in three years, around 1 million bpd or less.
Major Indian refiners responded accordingly. Reliance Industries announced it would cease Russian crude imports for its Jamnagar facility, citing compliance with upcoming EU regulations rather than directly acknowledging US pressure. The EU, in alignment with the US, plans to enforce a ban from January 2026 on refined products derived from Russian oil, even if processed in third countries like India. Other state-owned entities, such as Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum, have also scaled back purchases from sanctioned Russian suppliers. To offset the shortfall, India has increased imports from traditional Middle Eastern sources and explored alternatives from Angola, Brazil, and the US. Discounts on non-sanctioned Russian crude have widened to $10-12 per barrel, potentially softening the economic blow, but logistical challenges persist, including insurance and shipping risks for "shadow fleet" tankers evading sanctions.
Amid these adjustments, India signed a landmark deal on November 17, 2025, to import 2.2 million tonnes of LPG from the US starting in 2026. This volume represents about 10% of India's annual LPG imports, marking the first structured term contract for US LPG. LPG, or liquefied petroleum gas, is primarily used for household cooking and consists of propane and butane. India's demand stands at around 28 million tonnes annually, with 50% imported. Traditionally, 90% comes from the Middle East, where the gas is butane-heavy, ideal for India's hot climate as it vaporizes effectively at higher temperatures.
US LPG, conversely, is propane-dominant due to the country's shale gas boom, requiring additional processing in India to adjust the propane-butane ratio for safe use. Transportation from the US Gulf Coast also incurs higher freight costs compared to Middle Eastern shipments. Despite these drawbacks, the deal—secured by state-run oil companies with suppliers like Chevron, Phillips 66, and TotalEnergies—aims to diversify sources and reduce vulnerability to regional disruptions. Petroleum Minister Hardeep Singh Puri described it as "historic," emphasizing enhanced affordability and risk mitigation. Analysts view it as a strategic move to address the US-India trade imbalance, where India enjoys a surplus of about $30 billion annually. By increasing US energy imports, India may gain leverage in ongoing trade negotiations, potentially averting further tariffs on Indian exports like pharmaceuticals and textiles.
Comparatively, China—another major buyer of Russian oil—has been less affected by the 2025 sanctions. China imports over 2.1 million bpd from Russia, accounting for about 20% of its needs, up from pre-war levels. Much of this flows through overland pipelines like the East Siberia-Pacific Ocean (ESPO) line, bypassing maritime routes vulnerable to sanctions on shipping and insurance. China's independent "teapot" refineries, often without US assets, face lower secondary sanction risks. Additionally, Beijing's economic clout and prior tariff wars with the US (2018-2020) have led to a détente; a November 2025 agreement paused new tariffs between the two for a year. As a result, China saved an estimated $20 billion on discounted Russian oil since 2022, per Rosneft statements. This disparity underscores how infrastructure, economic scale, and diplomatic maneuvering influence sanction resilience.
These developments highlight broader geopolitical implications for India. The sanctions and LPG deal occur against a backdrop of shifting alliances. The US has deepened ties with Saudi Arabia and Pakistan, while India grapples with border tensions with China over Arunachal Pradesh. Russia's pivot toward China for energy exports further complicates India's position, as Moscow was once a key defense and energy partner. Economically, reduced Russian imports could raise India's oil bill by $2-3 billion annually if discounts erode, potentially fueling inflation in fuel prices. However, diversification fosters long-term stability; India's renewable energy push, targeting 500 GW of non-fossil capacity by 2030, aims to reduce import dependence.
In conclusion, India's energy decisions in 2025 exemplify the challenges of balancing national interests with global pressures. Sanctions on Russian oil have necessitated a pivot, while the US LPG deal signals proactive diversification. These moves, though costly in the short term, could enhance resilience. For policymakers, the lesson is clear: strengthening domestic production, investing in alternatives like green hydrogen and solar, and fostering multilateral diplomacy are crucial. As global energy transitions accelerate, India's ability to navigate such dynamics will define its path to sustainable growth.
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