India May Cut Russian Oil Imports as US Waiver Regime Ends

India’s oil refiners are reassessing their procurement plans for Russian crude oil as the US waiver regime that had provided a degree of legal insulation for Indian purchases of Russian energy concludes, with analysts and industry sources indicating that refiners are expected to gradually diversify away from Russian crude to manage the elevated secondary sanctions risk that OFAC’s post-waiver posture creates. State-run refiners including Indian Oil Corporation, HPCL, and BPCL — which collectively account for the majority of India’s refinery crude throughput — are particularly sensitive to secondary sanctions exposure given their reliance on Western financial infrastructure for international transactions, trade finance, and the settlement of crude purchase contracts.

The timing is commercially complex. India tripled Russian crude imports in March 2026 — to approximately €5.3 billion monthly — as the Hormuz crisis eliminated Gulf crude supply and Russian Urals crude, available at persistent discounts via Cape-routed tanker deliveries, became the most accessible and cost-effective alternative. The shift was commercially rational and operationally necessary: without Russian crude scaling up, India’s refinery operating rates would have fallen significantly and domestic fuel supply would have been compromised. But the Russian crude discount has now narrowed to near-zero as global non-Gulf crude demand surge has competed away the price advantage, and the secondary sanctions risk from OFAC’s post-waiver posture adds a regulatory compliance dimension that was manageable when the commercial case was overwhelming.

The Diversification Roadmap

Sources indicate Indian refiners are focusing increased attention on three primary alternative supply corridors: Middle East crude accessible via Fujairah and Red Sea routing (Saudi Aramco via Yanbu, UAE crude via the expanded Fujairah terminal, Iraqi Basra crude via potential alternative routing); West African crude from Nigeria, Angola, and Gabon that can be shipped directly to India via Cape of Good Hope without any sanctioned country exposure; and US crude, which has been growing as a supply source and whose Atlantic routing to India is both commercially viable and entirely sanctions-compliant.

The Russian crude exposure will not disappear entirely: private refiners — particularly Reliance and Nayara Energy, which have more flexibility than state-run OMCs in their procurement and financial structures — are expected to maintain some Russian crude sourcing at reduced volumes as long as the commercial economics justify it. But the headline trend, if the US-Iran deal concludes and Middle Eastern crude routing normalises, is a gradual decline in Russia’s share of India’s import basket from the emergency-driven peak of March 2026 back toward the pre-crisis level of approximately 35-40 per cent. This rebalancing reflects the convergence of geopolitical, regulatory, commercial, and infrastructure factors that are simultaneously pulling Indian crude procurement away from its crisis-time Russian dependency and back toward a more diversified multi-source model.

Fleet Implications: The Tanker Ownership Question

The Russian crude diversification also has fleet implications. Many of the tankers that transported Russian crude to India over the past two years have operated within the ‘shadow fleet’ — vessels with opaque ownership, operating outside the Western insurance and classification infrastructure — which gave them Russian sanctions tolerance but creates compliance risks as OFAC tightens enforcement. India’s own tanker fleet expansion under the 437-vessel plan, the SCI Aframax tender, and the SCI-oil PSU JV directly addresses this vulnerability by creating an Indian-flagged, Indian-insured tanker capacity that can carry crude from any origin — Russian or non-Russian — under sovereign Indian commercial and regulatory frameworks rather than shadow fleet arrangements.