Indian state refiners halt Russian oil purchases amid narrowing discounts and US tariff threats

India's state-owned oil refiners have paused purchases of Russian crude over the past week, a significant shift attributed to narrowing price discounts and mounting pressure from the US President Donald Trump, reports Reuters. India, the world's third-largest oil importer and the largest buyer of seaborne Russian crude, is now turning to alternative sources to meet its energy demands.

Sources familiar with the refiners' procurement plans told Reuters that major state entities including Indian Oil Corp (IOC), Hindustan Petroleum Corp (HPCL), Bharat Petroleum Corp (BPCL), and Mangalore Refinery and Petrochemical Ltd (MRPL) have not sought Russian crude in approximately the last seven days.

These refiners typically purchase Russian oil on a delivered basis and are now actively exploring spot markets for replacement supplies, primarily focusing on Middle Eastern grades like Abu Dhabi's Murban crude and West African oil.While private refiners such as Reliance Industries and Nayara Energy remain significant buyers of Russian oil in India, state refiners collectively manage over 60 per cent of the country's substantial 5.2 million barrels per day refining capacity. This pause by state-owned companies could significantly impact Russia's oil revenues.The decision comes in the wake of a stern warning issued by US President Donald Trump on July 14, where he threatened 100 per cent tariffs on countries that continue to buy Russian oil unless Moscow reaches a major peace deal with Ukraine. Earlier this week, Trump announced a 25 per cent tariff on all goods imported from India, effective August 1, along with an unspecified "penalty" for India's trade with Russia, including energy and military equipment. He expressed frustration with India's tariffs and its continued energy and defense ties with Russia.This development adds a new layer of complexity to India's energy procurement strategy. India had significantly increased its imports of discounted Russian oil following Western sanctions imposed after the conflict in Ukraine, with Russian crude comprising 35-40 per cent of India's total oil imports at its peak, up from a mere 0.2% before the war. Neither IOC, BPCL, HPCL, MRPL, nor the federal oil ministry have immediately responded to requests for comment on this evolving situation. The move highlights the geopolitical pressures influencing global energy markets and India's balancing act between its energy security needs and international relations.