Refiners up operational flexibility as US threatens to pile up more tariffs
Domestic refiners are exploring viable alternatives for Russian barrels
As India begins to counter US President Donald Trump’s tariff threats, domestic refiners have also upped operational flexibility and are exploring viable alternatives for Russian barrels in a bid to balance demand while protecting margins.
However, altering India’s crude oil flows in the short term is a “complex process fraught with operational uncertainties”. Alternatives to Russia are possible, but will come at a cost, said government officials, refiners and traders businessline spoke with.
Kpler data shows a notable decline in India’s Russian crude imports last month to around 1.6 million barrels per day (mb/d) — a drop of around 500,000 b/d from June 2025.
However, it is not all due to tariff threats as July cargoes would have been placed in “April-May”, aligning with seasonal refinery maintenance and weaker monsoon-driven demand.
“The drop is more pronounced among state-run refiners, likely reflecting maintenance, demand and heightened compliance sensitivity amid mounting geopolitical risk. Private refiners, who account for over 50 per cent of Russian crude intake, have also begun reducing exposure, with fresh procurement diversification underway as concerns over US sanctions intensify, the global real-time data and analytics provider explained.
Following India’s response to the US on Monday, traders and analysts said “at least” now there is clarity that Russian barrels will flow “until sanctioned”. However, they too point out that Trump’s threats have started to take effect with refiners exploring replacements.
Exploring options
It is not just about barrels, it is about balance, emphasises Sumit Ritolia, Kpler’s Lead Research Analyst for Refining and Modeling.
A top government official also agrees. He said “India’s stand is clear. It’s about strategic autonomy. Russia is also an old ally and such linkages cannot be done away in a whiff. Diversification is possible, but it takes time and has a cost. India will first ensure energy security for over a billion people. Having said that, it also adheres to global norms. We are in discussions (with US) on a bilateral treaty. Solutions will emerge in good time. We are also buying (energy) in good numbers from them now.”
Crude oil imports from the US rose by over 20 per cent month-on-month (m-o-m) and almost 40 per cent year-on-year (y-o-y) to around 364,000 b/d. Besides, imports rose by over 53 per cent y-o-y in H1 2025 and by 16 per cent y-o-y during Q2 2025. During April-June 2025, Indian refiners procured more than 900,000 b/d from the US, a record of sorts.
Kpler, too, emphasised that while a complete disengagement from Russian crude remains “unlikely in the near term”, a “measured reduction” in intake appears technically and commercially feasible.
Ritolia pointed out that replacing Russian barrels in full is “logistically daunting, economically painful, and geopolitically fraught”. Gulf barrels come with pricing rigidity, African grades add freight volatility, and Latin American flows face availability constraints,” he told businessline.
“The challenge is not just to keep crude flowing, but to do so without blowing a hole in margins or destabilising product economics. It is unlikely that Indian refiners will voluntarily halt Russian crude imports in the absence of a clear government directive. Russian barrels — particularly Urals — offer a combination of technical compatibility, favourable yield profiles, and strong refining margins that make them an attractive feedstock within the current refining slate,” he explained.
Going ahead
From a commercial standpoint, said Ritolia, the economics remain compelling. Russian crude continues to trade at a meaningful discount to West Asian official selling price-linked grades, helping refiners maintain margin resilience. This cost advantage has been central to India’s refining and fuel export competitiveness over the past two years.
Operationally, most refiners are in a “calibrated readiness” phase, closely monitoring geopolitical developments while optimizing for margin retention and product yield. For now, the sector remains in a cautious holding pattern, balancing diplomatic developments against the imperative of energy security, Ritolia said.
He also expressed hope that any escalation in sanctions would likely involve a phased or cooling-off period, rather than an abrupt cut-off, which would off the government and refiners time to assess the situation and adapt sourcing strategies accordingly.
Published on August 5, 2025
