India cuts Russian oil dependence: economic impact on Moscow and potential benefits for Ukraine

India cuts Russian oil dependence: economic impact on Moscow and potential benefits for Ukraine

Olha Konsevych

Retired U.S. Lieutenant General Ben Hodges once told Ukrainian media that the war in Ukraine will end only when Putin realizes he cannot win. To reach that point, one strategic goal must first be achieved — dismantling Russia’s oil and gas infrastructure that finances the aggression.

By February 2026, it had become clear that oil exports were no longer an inexhaustible lifeline for the Kremlin. Russia’s economy is grappling with slowing growth and rising inflation.

Losses for Russia

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Throughout the full-scale war against Ukraine, oil and gas exports remained the backbone of Russia’s federal budget. Now, however, those revenues have fallen sharply, reaching levels not seen in years.

The downturn reflects a combination of new U.S. and EU sanctions, tariff pressure from U.S. President Donald Trump on India, and intensified efforts targeting the tanker fleet Russia has relied on to circumvent restrictions and move its crude.

Shrinking energy income is forcing President Vladimir Putin to turn increasingly to domestic borrowing and higher taxes — measures that, for now, are keeping the federal budget afloat but underscore growing structural strain.

On February 8, 2026, Reuters reported that Indian refiners were “avoiding Russian oil purchases for delivery in April and are expected to stay away from such trades for longer,” explicitly linking the shift to efforts to secure a trade agreement with the United States.

The United States rescinded punitive tariffs that had been imposed over India’s Russian oil purchases after reaching a broader trade framework with New Delhi.

To provide context, India imports 85-90% of its crude oil. Pre-COVID-19, India wasn’t importing much from Russia, but the purchases ramped up nearly 40% following the Ukraine war, primarily due to the discount on offer.

In January 2026, Reuters reported that India’s imports of Russian crude had declined to roughly 1.215 million barrels per day, down from December levels. Russian sellers widened discounts in China as Indian demand softened. ESPO crude was trading nearly $9 per barrel below Brent, while Urals crude carried a discount of around $12.

There is risk involved

India has not officially announced plans to completely halt oil supplies from Russia. However, Bloomberg reports that Indian authorities have approached state-owned refiners and asked them to consider purchasing larger volumes of crude from the United States and Venezuela.

At the same time, there are limits to how much American and Venezuelan crude Indian refineries can realistically absorb. U.S. grades tend to be lighter and lower in sulfur, which is not always optimal for Indian refining units that were largely configured to process medium and heavier crude blends. Price will also remain a decisive factor in procurement decisions.

There are doubts about the economic viability of importing large volumes from the United States, particularly in the near term, as high freight rates reduce the profitability of long-haul shipments. Indian refiners also have access to cheaper alternatives from West Africa and Kazakhstan, which are geographically closer and therefore less costly to transport.

As for Russia, oil tankers are increasingly listing Singapore as their official port of destination. Investigative reports note, however, that Singapore itself does not purchase Russian crude due to sanctions risk. Instead, nearby waters are sometimes used for ship-to-ship transfers. In addition, a significant number of tankers ultimately discharge cargoes near Malaysia or transfer oil to floating storage facilities. So Singapore is often declared as the destination port to obscure the identity of the final buyers.

India had previously stated that it would not allow sanctioned tankers to unload at its ports, and carried out its first operation against Russia’s “shadow fleet” only after reaching agreements with the United States.

According to Bloomberg, the Coast Guard did not disclose the names of the detained tankers, but they are believed to be Chiltern, Asphalt Star, and Stellar Ruby. All three vessels were placed under U.S. sanctions in 2025 over links to Iranian oil trade.

Olha Konsevych: Journalist, researcher; Vital Voices; GMF; WZB Berlin ;  Max Planck Society alumna ;Mahabahu Correspondent

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