India will continue to buy Russian crude oil, expect GST reforms to soften US tariff impact, says Finance Minister Sitharaman

“Whether it is Russian oil or anything else, it’s our decision to buy from the place which suits our needs whether in terms of rates, logistics, anything. So, where we buy our oil from, especially (it) being a big-ticket foreign exchange-related item where we pay so much…we will have to take a call which (supply source) suits us the best. So, we will undoubtedly be buying it,” Sitharaman said in an interview with television news channel CNN-News18.

India is the world’s third-largest consumer of crude and depends on imports to meet around 88 per cent of its requirement. Russian crude, which usually comes at a discount, has helped India save billions of dollars’ worth of foreign exchange over the past three years.

The Indian government has consistently maintained that the country will buy oil from wherever it gets the best deal, as long as the oil is not under sanctions. There are no sanctions on Russian oil; it is only subject to a price cap imposed by the US and its allies that applies if Western shipping and insurance services are used for transporting the oil. India’s public sector refiners have stated that they have not received any signal or directive from the government on the issue, and they will continue to buy Russian oil as long as it remains economically and commercially viable.

Indian refiners’ hefty imports of Russian crude are seen as a lever that the Trump administration believes it can use to force the Kremlin’s hand into ending the Ukraine war. Oil exports are the biggest source of revenue for Moscow, and New Delhi is the second-largest buyer of its oil after Beijing. Early August, Trump announced an additional 25 per cent tariff—over and above the 25 per cent tariff announced on Indian goods—as a penalty for India’s Russian oil imports. The hit is expected to be significant for a bulk of India’s goods exports to the US, which were valued at around $87 billion in 2024-25.

While there is a domestic trade-off at play—the prohibitive cost of sky-high US tariffs on India’s small and medium exporters versus the relatively lower savings accrued by large refiners by buying discounted Russian crude—Trump’s public posturing has made it difficult for India to cut back on Russian oil immediately even if it wanted to. It is clear that New Delhi does not want to compromise on its strategic autonomy and is unwilling to be dictated to by Washington on whom it should be doing business with, particularly when it comes to Russia—an old and key strategic partner.

New Delhi has termed the Trump administration’s action “unjustified and unreasonable” and said these imports began as its traditional supplies were diverted to Europe, with the US having “actively encouraged such imports by India for strengthening global energy markets stability”. The Joe Biden administration had encouraged India to increase Russian oil imports following Russia’s February 2022 invasion of Ukraine as the West began shunning Moscow’s oil. The reason was simple: Russia is a major oil exporter and if a bulk of its oil goes off the market for dearth of buyers, international oil prices could shoot up, something that the US itself did not desire.

When Russia invaded Ukraine in February 2022, Moscow’s share in New Delhi’s oil imports was less than 2 per cent. With much of the West snubbing Russian crude following the invasion, Russia began offering discounts on its oil to willing buyers. Indian refiners were quick to avail the opportunity, leading to Russia—earlier a peripheral supplier of oil to India—emerging as India’s biggest source of crude within a matter of months, displacing the traditional West Asian suppliers. Currently, Russia accounts for more than a third of India’s oil imports by volume.