Stopping Russian oil imports may cost India $14B
What's the story
India's import bill could see a massive spike of up to $14 billion if the country stops buying Russian crude oil, according to ICRA. The estimate is based on the assumption that global oil prices would rise by about $10 per barrel. This potential increase in import costs comes amid threats from the US regarding penalties over India's trade with Russia, particularly its purchase of discounted Russian oil, which was influenced by sanctions and market conditions following the Ukraine war.
Financial implications
Real cost of stopping Russian oil imports could be higher
Prashant Vasisht, ICRA's Senior Vice President and Co-Group Head of Corporate Ratings, said that if India stops buying Russian oil, it could raise the price of oil by up to $10 per barrel. This would increase the country's import bill by some $13-$14 billion. However, Vasisht also warned that the real cost could be higher as prices for gas and other petroleum products would also go up.
Cost escalation
Gas prices to surge as well
Vasisht also highlighted that domestic gas and LNG imports linked to dated Brent prices would become more expensive, affecting all gas consumers. He said a $10/barrel increase in Brent prices could raise the annual cost of LNG bought under the RasGas contract by ₹3,900 crore. This further underscores how halting Russian oil imports could have far-reaching financial implications for India.
Market impact
Russia's over-supply absorbed by India
Between May 2022 and the present, India saved around $17.2 billion by buying discounted Russian oil, according to ICRA's calculations. This has helped stabilize international oil prices by absorbing Russian oversupply and easing pressure on global prices. However, if India stops importing Russian oil, competition for non-Russian oil will rise, and prices will increase as demand rises in proportion to supply.
Global repercussions
Western nations are likely to feel the pinch
The impact of India's potential decision to stop importing Russian oil could extend beyond its borders. Western nations could see a rise in oil prices due to increased demand and limited supply of non-Russian oil. Further, since 2022, Indian refiners have been processing Russian crude and selling finished products at cheaper rates to these countries. If discounted purchases end, their bills will rise as well.