‘Exaggerated’: India’s gains from discounted Russia oil just $2.5 bn, says CLSA; far below estimates

India’s much-talked-about savings from importing discounted Russian oil is not as large as believed. The gains are estimated to be just $2.5 per annum, far lower than the $10–25 billion, which is often quoted in media reports, a CLSA report showed on Thursday.“Benefit from Russian oil imports is way less than exaggerated media numbers,” CLSA said in its report.According to the brokerage, while “some media outlets have estimated the benefit in the range of $10 billion to $25 billion for India from Russian crude imports, we calculate the net annual benefit to India from Russian crude imports to be much smaller at just $2.5 billion or a small 0.6 bpc of India’s GDP.”India, the world’s third largest oil importer and consumer, increased its Russian fuel supply after the Ukraine war, going from less than 1% to almost 40%. This steep increase was fuelled by sharp discounts offered by Moscow, after some Western nations chose to punish Russia for invading Ukraine, PTI reportedHalting Russian imports to the country would force India to turn towards limited alternatives, spiking global crude prices to $100 per barrel amid already rising demand and tight supply.At present, Russian oil accounts for 36% of India’s 5.4 million barrels per day of imports in 2024–25. Russia displaced traditional suppliers such as Iraq (20%), Saudi Arabia (14%), the UAE (9%) and the US (4%).India maintained its stance that buying Russian crude does not violate any global laws, as no sanctions prohibit such trade. The European Union has only recently banned fuel refined from Russian crude, while the US has not sanctioned crude purchases or exports of refined products.The shift to Russian fuel has helped New Delhi to secure affordable energy supplies, however, the Trump administration has criticised the purchases, alleging that India profits buy buying the discounted oil and exporting refined fuel to other regions, including Europe.While several EU nations have banned Russian oil imports, a price cap was set for countries that continue to buy Russian crude. India’s imports have so far stayed within this cap, PTI reported.The overall benefit for IndiaCLSA argued that the real benefits to India are much smaller than the visible headline discounts. The note explained that Russian oil sold under the $60 price cap often appears cheaper when Brent crude rises above $75 per barrel. Yet, extra costs for shipping, insurance and reinsurance reduce the savings.“Indian refiners import Russian crude on a cost, insurance and freight (CIF) basis, landed in India. Thus, the landed price of Russian crude is at a far lower discount,” the report said.Indian oil marketing companies revealed that discounts averaged $8.5 per barrel in FY24, fell to $3–5 in FY25, and dropped further to about $1.5 per barrel in recent months. “Using an average discount of $4 per barrel would imply a total annual advantage of just $2.5 billion captured by Indian importers in FY25, ie, equal to 0.6 bps of India’s GDP. However, current discounts would take down the annualised gains from this import to just $1 billion,” the report said, as cited by PTI.The report also noted that importing more Russian crude, which is of relatively inferior quality, forces Indian refiners to balance it with better, more expensive grades of oil. “To our surprise, the import data of the government reveals no clear gains from Russian oil imports, as the unit price of Indian crude oil imports has moved from a discount versus Dubai pre-FY22 to a premium over the past couple of years. So, any such large gain is not discernible from the Indian oil import data,” it said.CLSA warned that a sudden stop in Russian oil imports could cause crude prices to surge to $90–100 per barrel. “With only a few buyers purchasing Russian crude, any stoppage from India may make it difficult for Russia to find buyers for possibly 1 million bpd or 1 per cent of global supply in the near term. Although India should be able to easily secure supply from other sellers, such a supply disruption could drive a spike in crude oil price to $90–100 per barrel and would drive up inflation across the world, in our view,” the report said, as cited by PTI.It added that Indian purchases of Russian crude help keep global oil markets stable by providing a “check on crude oil prices” and limiting inflationary risks. “Economics aside, we believe the issue of Russian crude oil imports has now become a political one with India reiterating its freedom to choose its trade partners within the purview of global trade rules.”