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Informist, Tuesday, Jun. 17, 2025

 

By Pallavi Singhal and Ashutosh Pati

 

NEW DELHI – With physical supply and shipping reliability from the Gulf region increasingly at risk due to Israel-Iran hostilities, volumes of Russian oil in India's import basket are likely to increase further if the conflict intensifies, with Indian refiners expected to lean more heavily on Russian barrels, says Sumit Ritolia, lead research analyst, refining and modelling, at Kpler.

 

"Russian volumes are likely to rise further if the conflict intensifies... particularly Urals and oil from the Eastern Siberia–Pacific Ocean, which are already embedded in India's procurement and refining systems," Ritolia told Informist in an email interview. Kpler is a global real-time data and analysis provider, with a strong focus on commodities, energy, shipping, and supply chains. 

 

Over the past 30 months, Russian crude has comprised over 35% of India's total crude oil imports. This substantial share is poised to grow further, solidifying Russia's position as a pivotal oil supplier to India, Ritolia said. A key factor driving this trend is Russia's logistical advantage, as its crude shipments to India bypass the Strait of Hormuz, a critical waterway now under severe threat due to escalating Israeli-Iranian tensions.

 

Urals crude travels from Russia's Baltic and Black Sea ports, typically via the Suez Canal or around the Cape of Good Hope. Oil from the Eastern Siberia–Pacific Ocean and Sokol grades ship directly from the Russian Far East, including Kozmino and De-Kastri, across the Pacific and Indian Oceans to India's eastern coast. This logistical detachment from Hormuz, Ritolia said, insulates Russian flows from the immediate fallout of regional escalation, while price discounts, especially for Urals, provide cost stability.

 

"In Apr-May, India imported more than 1.9 million barrels per day of Russian oil, highlighting its pivotal role. As insurance costs and freight rates for Gulf flows surge, Russian grades are enabling India to maintain refinery throughput and shield domestic fuel prices from extreme volatility," he said.

 

Ritolia sees India rapidly diversifying its oil intake towards the US, West African countries such as Nigeria, Angola, as well as Latin American countries such as Brazil, Guyana, "should the Strait of Hormuz be disrupted."

 

As Israel intensifies attacks on Iran's military and nuclear facilities, Tehran is considering closing the Strait of Hormuz, a key shipping route in the West Asian region, said Al Jazeera citing Iranian news agency IRINN. Most recently, Israel launched airstrikes on Iran's most vital oil and gas facilities. According to a report by Delhi-based think-tank, Global Trade research Initiative, nearly two-thirds of India's crude oil and half of its liquified natural gas imports pass through the Strait of Hormuz.

 

"These flows are already tested and viable for Indian refiners, though they come with a significant freight cost premium--voyages are longer and tanker availability may tighten under global re-routing pressure. Still, energy security will take precedence over economics. Indian refiners will adapt quickly, even if per-barrel delivered costs rise," Ritolia believes.

 

India has also built flexibility in its crude contracts and payment systems, such as settling Russian cargoes in yuan or dirhams, which enhances its agility in crises, Ritolia said. "If Iran were to close Hormuz entirely, over 60% of India's Middle Eastern supply would be at risk, reinforcing the urgency of accelerating this diversification."

 

However, the likelihood of Iran closing the Strait of Hormuz remains low, according to Ritolia, due to both geopolitical and economic factors. "The Strait handles roughly 34% of global seaborne crude oil."

 

If the Strait of Hormuz does see even a short disruption, it could push Brent crude well above the $100 per barrel mark, he said. At 1631 IST, the most-active August Brent crude oil on the Intercontinental Exchange was at $74.66 per barrel, 2% higher from the previous close.

 

On its impact on India, Ritolia said if Iran were to close the Strait of Hormuz, the impact on India would be severe and immediate, both in terms of supply security and economic cost. "More than 60% of India's crude imports transit via the Strait of Hormuz, including volumes from Iran, Iraq, Saudi Arabia, UAE, and Kuwait. A full closure would force Indian refiners to urgently re-route procurement toward non-Gulf sources," he said.

 

This would lead to a freight and logistics shock, with freight rates sharply higher, especially for Very Large Crude Carriers, as global trade flows reconfigure, he said. "India would be forced to source longer-haul cargoes, often requiring additional 10–20 days of sailing time, increasing landed crude costs substantially. Insurance premiums would spike, adding another layer of cost to delivered crude."

 

According to Ritolia, this may cause the Indian fuel prices to face upward pressure, especially for diesel and gas, both of which are heavily dependent on supply from West Asia. "If the disruption persists, the government may need to increase subsidies to shield consumers, putting fiscal pressure on the exchequer. Broader inflation could follow due to increased transportation and manufacturing input costs," he said.

 

India would likely activate emergency planning measures, including drawing from strategic petroleum reserves, which cover roughly 9–10 days of imports, he said. "Diplomatic channels with the US, Saudi Arabia, and the UAE would intensify, as India seeks reassurances and alternate supply commitments. Trade ties with Russia and West African producers would likely deepen further, accelerating India's structural shift away from the Gulf," he said. A coordinated release, possibly alongside inventory drawdowns by key state-run refiners like Indian Oil Corp. Ltd. and Bharat Petroleum Corp. Ltd., would help cushion domestic markets from immediate price or availability shocks, Ritolia added.  End

 

Edited by Vandana Hingorani

 

 

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