US penalty risk on Russian oil may add USD 9-11 billion to India's import bill
(You can now subscribe to our
(You can now subscribe to our Economic Times WhatsApp channel
India's annual oil import bill could rise by USD 9-11 billion if the country is compelled to move away from Russian crude in response to US threats of additional tariffs or penalties on Indian exports, analysts said.India, the world's third-largest oil consumer and importer, has reaped significant benefits by swiftly substituting market-priced oil with discounted Russian crude following Western sanctions on Moscow after its invasion of Ukraine in February 2022.Russian oil, which accounted for less than 0.2 per cent of India's imports before the war, now makes up 35-40 per cent of the country's crude intake, helping reduce overall energy import costs, keep retail fuel prices in check, and contain inflation.The influx of discounted Russian crude also enabled India to refine the oil and export petroleum products, including to countries that have imposed sanctions on direct imports from Russia. The twin strategy of Indian oil companies is posting record profits.This is, however, now under threat after US President Donald Trump announced a 25 per cent tariff on Indian goods plus an unspecified penalty for buying Russian oil and weapons. The 25 per cent tariff has since been notified but the penalty is yet to be specified.Coming within days of the European Union banning imports of refined products derived from Russian-origin crude, this presents a double whammy for Indian refiners.Sumit Ritolia, Lead Research Analyst (Refining & Modeling) at global real-time data and analytics provider Kpler termed this as "a squeeze from both ends".EU sanctions - effective from January 2026 - may force Indian refiners to segment crude intake on one side, and on the other, the US tariff threat raises the possibility of secondary sanctions that would directly hit the shipping, insurance, and financing lifelines underpinning India's Russian oil trade."Together, these measures sharply curtail India's crude procurement flexibility, raise compliance risk, and introduce significant cost uncertainty," he said.Last fiscal, India spent over USD 137 billion on import of crude oil, which is refined into fuels like petrol and diesel.For refiners like Reliance Industries Ltd and Nayara Energy - who collectively account for a bulk (more than 50 per cent in 2025) of the 1.7-2.0 million barrels per day (bpd) of Russian crude imports into India - the challenge is acute.While Nayara is backed by Russian oil giant Rosneft and has been sanctioned by the EU last month, Reliance has been a big fuel exporter to Europe.As one of the world's largest diesel exporters - and with total refined product exports to Europe averaging around 200,000 bpd in 2024 and 185,000 bpd so far in 2025 - Reliance has extensively utilised discounted Russian crude to boost refining margins over the past two years, according to Kpler."The introduction of strict origin-tracking requirements now compels Reliance to either curtail its intake of Russian feedstock, potentially affecting cost competitiveness, or reroute Russian-linked products to non-EU markets," Ritolia said.However, Reliance's dual-refinery structure - a domestic-focused unit and an export-oriented complex - offers strategic flexibility. It can allocate non-Russian crude to its export-oriented refinery and continue meeting EU compliance standards, while processing Russian barrels at the domestic unit for other markets.Although redirecting diesel exports to Southeast Asia, Africa, or Latin America is operationally feasible, such a shift would involve narrower margins, longer voyage times, and increased demand variability, making it commercially less optimal, he said.Kpler data shows a notable decline in India's Russian crude imports in July (1.8 million bpd versus 2.1 million bpd in June), aligning with seasonal refinery maintenance and weaker monsoon-driven demand. However, the drop is more pronounced among state-run refiners, likely reflecting heightened compliance sensitivity amid mounting geopolitical risk.Private refiners, who account for over 50 per cent of Russian crude intake, have also begun reducing exposure, with fresh procurement diversification underway this week as concerns over US sanctions intensify.Ritolia said replacing Russian crude isn't plug-and-play. The Middle East is the logical fallback, but has constraints - contractual lock-in, pricing rigidity, and a mismatch in crude quality that affects product yield and refinery configuration."The risk here is not just supply but profitability. Refiners will face higher feedstock costs, and in the case of complex units optimized for (Russian) Urals-like blends, even margins will be under pressure," he said.On the future course, Kpler believes India's complex private refiners - backed by robust trading arms and flexible configurations - are expected to pivot toward non-Russian barrels from the Middle East, West Africa, Latin America, or even the US, where economics permits.This shift, while operationally feasible, will be gradual and strategically aligned with evolving regulatory frameworks, contract structures, and margin dynamics.However, replacing Russian barrels in full is no easy feat - logistically daunting, economically painful, and geopolitically fraught. Supply substitution may be feasible on paper, but remains fraught in practice."Financially, the implications are massive. Assuming a USD 5 per barrel discount lost across 1.8 million bpd, India could see its import bill swell by USD 9-11 billion annually. If global flat prices rise further due to reduced Russian availability, the cost could be higher," it said.This would increase fiscal strain, particularly if the government steps in to stabilize retail fuel prices. The cascading impact on inflation, currency, and monetary policy would be difficult to ignore.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Economic Times
22 minutes ago
- Economic Times
Eris Lifesciences eyes ‘good' share in semaglutide generics, says COO
Mr. Krishnakumar Vaidyanathan, Executive Director & Chief Operating Officer Eris Lifesciences looks to leverage its experience in integrated diabetes portfolio to take a lead among the first wave of generic semaglutide anti-diabetic and weight-loss drugs to hit the market early next year, a top official said. The company is looking at a 'good' share of the market, Krishnakumar Vaidyanathan, executive director and chief operating officer of Eris Lifesciences, told ET in an interaction. Semaglutide is the active ingredient in Novo Nordisk's blockbuster drugs Wegovy and Ozempic. Its patent in India will expire in March 2026. 'We are gearing up to be among the first to enter the market post loss of exclusivity,' Vaidyanathan said. 'We expect the overall market for GLP-1 at the end of the first 12 months (after the loss of exclusivity) to be at least 10 million units… And we expect to get a good share of the market.' Semaglutide is a glucagon-like peptide-1 (GLP-1) receptor agonist. Eris Lifesciences' existing diabetes portfolio includes orals, insulin and GLP-1 in the form of liraglutide. Its network of field representatives, patient connect and service platform in this space gives the firm an advantage over others, Vaidyanathan said. 'We do this day in and day out because of insulin. That gives us the confidence that we'll be able to step this up for GLP-1 as well.'Globally, the GLP-1 market is dominated by Eli Lilly and Novo Nordisk, which are also the two biggest insulin companies in the world. 'Being successful and big in the insulin market provides a huge tailwind when it comes to selling GLPs,' Vaidyanathan said. 'We have combined service with technology and product to create a winning combination in insulin and GLP therapy entry is not any different, which also requires a lot of patient education over and above the service on using the pens,' he said. 'We have an integrated diabetes portfolio because we currently sell GLP-1 in the form of liraglutide.' Dr Reddy's Labs, Sun Pharmaceutical Industries, Cipla, Mankind Pharma, Torrent Pharmaceuticals, and Zydus Lifesciences are also among Indian drugmakers readying to launch generic semaglutide next year. Eris Lifesciences launched liraglutide, a once-a-week GLP-1 product, last September. 'We have taken very good market shares in all the other LOE (loss of exclusivity) opportunities that we have seen in diabetes,' Vaidyanathan said. 'We have taken market ranks of 1 to 5 in each one without exception – vildagliptin, sitagliptin, linagliptin, dapagliflozin and empagliflozin. That gives us the confidence that we should be getting a fair share of the market.' Vishal Manchanda, pharma analyst at brokerage Systematix Group, said its full portfolio of anti-diabetes drugs to offer to diabetologist, spanning all oral and injectable options, should give Eris Lifesciences 'a strong positioning in a market where the large pharma majors like Sun, Lupin, Dr Reddy's, Cipla, Mankind and Zydus come in with their dominant brand presence.'
Hans India
24 minutes ago
- Hans India
Vedanta continues winning street confidence: Brokerages forecast strong earnings ahead
New Delhi: Major global and Indian brokerages remain optimistic on Vedanta Ltd's performance for FY26, citing stronger LME pricing trends, cost discipline, deleveraging, and a resilient aluminium business among the key growth drivers. These firms have also taken note of the several growth projects scheduled for commissioning or completion in the next few quarters. JP Morgan noted that Vedanta's first quarter consolidated EBITDA was largely in line with estimates, with key segments such as aluminium, oil and gas, and power faring better than its expectations, leading to an overall segmental EBITDA beat. On the earnings trajectory for the current and next fiscal, the firm expects various ongoing initiatives at Vedanta to aid growth. "Vedanta's capacity expansion journey in the aluminium business as well as vertical integration should bring cost advantages. LME prices have also bottomed out and should continue to move higher into FY26-27, likely aiding earnings growth." Echoing similar views on LME prices and its potential benefit, Citi Research cited that Vedanta's parent (Vedanta Resources) leverage is at comfortable levels. It listed potential upside in medium-term aluminium LME prices, lower cost, and the demerger as another positive for Vedanta, while adding that aluminium globally has a limited supply growth. Mumbai-based Nuvama Institutional Equities expects Vedanta to deliver quarter-on-quarter EBITDA growth in Q2. "Q2FY26 EBITDA is likely to increase 10 per cent-plus quarter-on-quarter on the back of higher prices and lower aluminium cost of production. Major aluminium projects are likely to be commissioned in Q2FY26. We reckon net debt/EBITDA ex-Hindustan Zinc shall fall to 1.7x by FY26-end, compared to 2.7x in FY25. Demerger of the business is likely to be concluded in Q4FY26," the firm said in its report. The brokerage expects Vedanta's all major projects except coal blocks to be likely commissioned in the current fiscal, providing volume growth and cost reduction visibility for the company. UK-based Investec stated in its post-earnings report that Vedanta is a key beneficiary of depreciation in the Indian Rupee. Other near-term positives listed by the firm include declining alumina prices and the company offering attractive yields. The firm has retained its buy recommendation on Vedanta. Research firms like Kotak Institutional Equities and IIFL have cited factors like cost efficiencies and deleveraging at both Vedanta Ltd and its parent Vedanta Resources as beneficial factors. Vedanta's adjusted profit after tax jumped 13 per cent year-on-year to Rs 5,000 crore. The company clocked its highest-ever first-quarter EBITDA of Rs 10,746 crore, which was up 5 per cent year-on-year.
The Hindu
24 minutes ago
- The Hindu
SIR in Bihar an 'invasive reconstruction of electoral roll:' Dipankar Bhattacharya
Describing the Special Intensive Revision (SIR) drive under way in Bihar as 'an invasive reconstruction of the electoral roll,' Dipankar Bhattacharya, general secretary of the Communist Party of India (Marxist-Leninist) Liberation, said States including Kerala should be on guard as it could be applied in other parts of the country as well. 'If they get away with it in Bihar, they will apply it everywhere,' he said, delivering the 24th memorial lecture in memory of the journalist N. Narendran on the topic 'Bihar: Trial run for Mass Disenfranchisement.' 'In fact, some people in Kerala and Tamil Nadu may still be believing that, well, this is something only happening in north India. If it is happening in north India, it is only a matter of time it happens here. No part of India is secure. Every State, every community, every political geography, every social equation, is vulnerable,' he said. The concept of citizenship as Indians have known it no longer remains valid as people will now be forced to prove their citizenship. The migrant workers of Bihar have emerged as one of the most vulnerable sections of electors in the SIR in Bihar, given the Election Commission of India's definition of 'ordinary resident.' This could have implications for Kerala as well, which has a large migrant population, he said. The SIR in Bihar, he said, was not just about rewriting the electoral roll, but it was about rewriting the electoral rules, he said. 'By rewriting the electoral rules, you are rewriting the entire grammar of elections in India,' he said. Mr. Dipankar Bhattacharya said that the INDIA Bloc was the need of the hour, observing that the BJP has grown at the expense of all other parties. 'If we cannot identify who the common enemy is, we will be doing so at our own peril,' he said. He underscored the need for a broad-based, sustained and multi-pronged resistance against what he described as the 'fascist offensive' of the BJP-RSS in the country. On the BJP's 'One Nation, One Election' proposal, Mr. Bhattacharya said it holds grave implications for the concepts of democracy and federalism. 'Every election has its own context. A Lok Sabha election has its own context, an Assembly election has its own context, a panchayat election will have its own context. If you bulldoze, flatten everything into one single narrative, and one single context for the whole elections, there will be nothing left of India's federalism and democracy as we have known it all these years,' he said, adding that the current challenges facing the Indian people is unlike any other in the post-Independence era.
