SBI report warns of sharp rise in crude costs as US–India trade tensions escalate over Russian oil purchases
Key Highlights
- Potential cost impact: $9 billion higher oil bill in FY26, $12 billion in FY27 if Russian imports stop.
- Tariff escalation: US raises duties on Indian goods to 50%, targeting Russian oil purchases.
- Supply shift: India may turn to Iraq, Saudi Arabia, UAE for replacement.
- Sector risk: Agriculture and pharmaceuticals could face major export setbacks.
SBI Estimates Sharp Rise in Oil Bill Without Russian Supply
India’s crude import bill could rise by $9 billion this year and $11.7 billion next year if Russian oil imports are halted, according to a State Bank of India (SBI) report.
The study suggests shifting purchases back to traditional suppliers like Iraq, Saudi Arabia, and the UAE if Russian supplies are cut.
Why Russian Oil Matters for India
- Russia’s share in India’s total crude imports rose from 1.7% in FY20 to 35.1% in FY25.
- India imported 88 million metric tonnes (MMT) from Russia in FY25 out of 245 MMT total.
- Russian crude is sold at a discount of over $5/barrel compared to Brent prices.
Impact of US Tariffs on Indian Economy
The tensions follow the US decision to impose an additional 25% duty — later doubled to 50% — on Indian goods over continued Russian oil imports.
Former US President Donald Trump signed an executive order stating:
“India has not been a good trading partner… I think I’m going to raise tariffs substantially because they’re buying Russian oil.”
India now faces the highest US tariff rate alongside Brazil.
Agriculture and Pharma at Risk
The SBI report warns that agriculture could face “predatory practices” from global conglomerates if tariffs weaken domestic protection.
For pharmaceuticals:
- A 50% tariff could reduce earnings by 5–10% this year.
- India supplies 35% of generic drugs used in the US.
- Tariffs may raise healthcare costs for US consumers, as generics make up 90% of prescriptions but only 26% of drug spending.
PM Modi’s Defiant Response
On Thursday, Prime Minister Narendra Modi reaffirmed India’s stance:
“India will never compromise on the interests of its farmers, fishermen and dairy sector… I am prepared to bear the cost if necessary.”
Possible Market Adjustments
While India can use existing Middle East contracts to replace Russian crude, the SBI report notes that reduced global supply could still push prices up by 10%, affecting the entire economy.
Energy Security vs. Trade Pressures
The SBI findings highlight the delicate balance India faces between energy security and trade relations. Cheap Russian crude has played a pivotal role in keeping fuel costs manageable, but Washington’s escalating tariffs signal growing pressure on New Delhi to alter its import strategy.
With the potential for a $12 billion annual hit to its fuel bill, alongside risks to agriculture and pharmaceutical exports, India’s challenge will be to diversify suppliers without compromising its economic stability. The outcome of this standoff may redefine the future of US–India trade ties and shape the nation’s energy roadmap for years to come.
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