Modi’s Masterstroke or Major Mistake? Is India heading for costlier oil by moving away from Russian crude?

New Delhi: The crucial trade deal between India(BHARAT) and the United States was announced by President Doland Trump on Monday evening. According to the US president, after talks with Prime Minister Narendra Modi, the US has reduced the tariff on India(BHARAT) from 50 percent to 18 percent. The US claims that this “big deal” came after India(BHARAT) agreed to stop buying oil from Russia. Now, the key question is how much India(BHARAT) would stand to lose if it stops buying oil from Russia and how much more it would have to pay if it shifted to purchasing oil from the United States.

All you need to know about the US-India(BHARAT) deal?

• After prolonged negotiations, India(BHARAT) and the US have finally agreed to a historic trade agreement.
• Under this, the tariff on India(BHARAT)n exports has been reduced from 25 percent to 18 percent.
• This became possible after direct talks between PM Modi and President Trump.
• According to the reports, the deal is linked to stopping purchases of Russian oil and reaching an agreement to increase the purchase of energy products from the US.
• Russian oil has so far been quite cheap for India(BHARAT).
• In 2024, 36 percent of India(BHARAT)’s total crude oil imports came from Russia—amounting to about 1.8 million barrels of oil per day at that time.
• Last December, when Russian President Vladimir Putin visited India(BHARAT), he had assured India(BHARAT) of uninterrupted oil supplies

How much costlier would oil become if India(BHARAT) shifts from Russia to the US?

It is important to note that Vladimir Putin has been supplying crude oil to India(BHARAT) at discounted rates. Now, if the Modi government starts buying oil from the United States, it would turn out to be significantly more expensive. Buying from the US means India(BHARAT) would have to pay prices based on prevailing global market rates.

The burden of higher transportation costs would also apply. As a result, India(BHARAT) would have to import oil at prices that are 5–10 percent higher per barrel, translating into a burden of billions of dollars.

Annual additional burden of USD 9–12 billion

• Russian oil has cost India(BHARAT) around $50–55 per barrel.
• Even after US sanctions, including transportation and insurance costs, the price remained around $62–65 per barrel.
• On an annual basis, this difference would add an extra burden of $9–12 billion to India(BHARAT)’s total oil import bill.
• This will also depend on how much oil India(BHARAT) imports from the US.

Rise in oil prices will impact inflation

The price difference could range from ₹600 to ₹1,200 per barrel, leading to losses worth crores of rupees. Higher oil prices would fuel inflation and increase the burden on government subsidies as well.

At what price has Russia been selling oil to India(BHARAT)?

Russia has been selling oil to India(BHARAT) at heavy discounts since 2022. Even after US sanctions, Russian oil was available at around USD 35 per barrel. This is why India(BHARAT)’s oil imports from Russia rose to over 35 percent by 2025.