by Tejasvi Sharma, Editor-in-Chief, EPC World
In a striking pivot, India’s major public‑sector oil refiners—including Indian Oil Corporation (IOC), Bharat Petroleum (BPCL), Hindustan Petroleum (HPCL) and Mangalore Refinery & Petrochemical Ltd (MRPL)—have halted spot‑market purchases of Russian crude oil in the past week. This development marks a significant shift in India’s energy procurement strategy, driven by geopolitical pressure, shrinking discounts, and looming U.S. tariffs.
Key facts and context
As of late July 2025, state‑run refiners paused purchasing Russian Urals crude due to rapidly diminishing discount margins—the lowest since early 2022—and direct warnings from U.S. President Donald Trump, who threatened up to 100 % tariffs on nations importing Russian oil, should Moscow fail to achieve a peace agreement by August 8, 2025.
Public-sector refineries account for over 60 % of India’s 5.2 million barrels per day refining capacity. Private refiners such as Reliance Industries and Nayara Energy—Nayara being partly owned by Rosneft—continue purchasing Russian crude under long-term contracts.
Policy shifts coincide with tighter EU sanctions targeting petroleum products refined from Russian crude, placing up to $14.3 billion in Indian petroleum exports at risk of loss of European access.
Economic repercussions: refining margins, trade balance and cost inflation
This abrupt cessation of Russian crude imports carries notable economic implications:
1. Compressed refining margins
Russian Urals crude has traditionally been 2–5 USD/bbl below Brent, enabling Indian refiners to enjoy strong gross refining margins. Switching to more expensive Middle Eastern or West African crude—such as Abu Dhabi’s Murban—will raise input costs, eat into margins, and undermine competitiveness.
2. Broader trade disruption and tariff fallout
The U.S. has imposed a 25% tariff on Indian exports effective August 1, 2025, tied directly to India’s Russian oil imports and defense procurement. This raises the spectre of a multi-sector export downturn—potentially trimming GDP growth by 25–40 basis points and undermining key sectors like pharmaceuticals, textiles, auto components, and capital goods.
3. Energy import bill surge
With Russian supply accounting for 35–40% of India’s crude imports by value (about $50–51 billion in FY 2024–25), substitution from higher-priced suppliers will elevate India’s annual oil import bill, increase fiscal pressure, and widen current account deficits .
Infrastructure sector impact
The ramifications extend beyond energy: India’s roads, railways, ports and industrial infrastructure will feel the ripple effects.
Freight and logistics costs rise: Diesel prices, used heavily in transportation, are already under strain amid tight global supplies exacerbated by EU sanctions on refined oil trade. Elevated diesel costs raise operating expenses for infrastructure contractors and logistics operators alike.
Procurement budgets under pressure: Infrastructure firms reliant on petroleum‑fueled equipment—from earthmovers to generators—must recalibrate cost assumptions in tenders. Higher fuel costs may dampen project viability, delay execution, and raise financing needs.
Export logistics for EPC firms: Contractors serving global clients (e.g., in the Gulf or Africa) must accommodate rising export logistics costs. Higher diesel and shipping expenses may erode margins on cross-border EPC engagements.
Strategic policy and long-term outlook
Diversification and supplier realignment
Indian Oil Ministry has directed refiners to plan for non‑Russian crude sourcing. Gradual onboarding of supply from the Middle East, West Africa and even expanded imports of U.S. crude aims to stabilise supply chains and mitigate sanction exposure.
Trade diplomacy and economic resilience
India’s carefully calibrated response—balancing energy security with pressure from the U.S. and EU—reflects its strategic aim to retain autonomy while avoiding punitive trade retaliation. Nonetheless, continued reliance on Russian military and energy ties may expose India to further economic coercion.
Infrastructure investment rebound
Long term, India’s pivot toward transparent global suppliers may attract more compliant international financing for infrastructure and energy projects. However, short-term cost inflation could delay capex across roads, ports, and petrochemical infrastructure until margins stabilise.
Summary
India’s public sector oil refiners have abruptly paused Russian crude procurement owing to tighter discounts and U.S. trade threats. While private players continue imports, the decision affects over 60 % of domestic refining capacity. Economics-wise, it levers up input costs, compresses margins, and risks higher inflation. For infrastructure, log‑chain costs surge, equipment budgets are strained, and cross‑border EPC projects grow costlier. Strategically, India is diversifying its crude suppliers and navigating complex geopolitical pressure while seeking to preserve energy security and trade autonomy.
As prices feed through to logistics, diesel markets, and export competitiveness, Indian policymakers and infrastructure stakeholders must handle a delicate balancing act—managing immediate disruptions while forging a resilient energy‑infrastructure ecosystem for the years ahead.
Indian state refiners, Russian crude halt, U.S. tariffs, refining margins, energy security, infrastructure cost inflation, supply diversification, EPC industry India, petroleum export disruptions, diesel supply chain.
