India's Strategic Oil Import Shift Amid Global Uncertainties

According to a recent report by Bank of Baroda, India faces a manageable $5 billion annual increase in oil import costs if Russian supplies are disrupted. This scenario, however, poses a far greater risk to the global economy, especially if a full embargo on Russian oil exports is implemented.

The Changing Landscape of India's Oil Imports

Since the Ukraine conflict in 2021-22, India's crude import patterns have significantly shifted. Russia, once a minor supplier, has now become India's largest oil source by 2024-25, alongside Iraq, Saudi Arabia, and the UAE, which together account for 80% of India's imports. The United States has seen its share decline during this period.

Price Variations and Economic Implications

Oil prices vary by supplier due to factors like transport costs and quality. In 2024-25, Indian imports averaged $69 per barrel, with Russian and Iraqi oils priced slightly below this average. The report highlights that every $1 increase in oil prices adds approximately $1.8 billion to India's import costs, projecting a total impact of $4.5-5 billion annually—a figure deemed manageable within India's $720 billion total imports.

Global Economic Risks

With Russia contributing about 10% of the global oil supply, a full embargo could temporarily drive prices above $80 per barrel, causing widespread economic challenges until alternative supplies are secured.