India Should Increase Oil Reserves Before Another Conflict

A month after the Ukraine War, then-US President Biden objected to India’s purchase of Russian oil, setting the American hypocrisy in motion.

And since last July, a month after the US bombed Iran’s three nuclear plants, the Trump administration started targeting India for buying Russian oil, resulting in the additional 25% tariffs slapped last August.

Four Big Red Flags

The US’s posturing against Iran and India had four big red flags.

Firstly, if Trump bombed Iran once, there was a high possibility that he could do it again, as the 460 kg of 60% enriched uranium was untraceable. A second, bigger attack was expected to engulf West Asia and disrupt oil supplies. 

Secondly, it was evident after the June bombing that Trump’s envoy Steve Witkoff was merely buying time from Iran under the pretext of nuclear talks so that the US could launch a surprise attack. 

Thirdly, Trump’s additional tariffs were imminent, considering the anti-India rhetoric of his top aides and the fact that his threats often turn into action.

Fourthly, the build-up of American military assets started way back in January, with Trump threatening to attack Iran on the pretext of the nationwide protests.

West Asia’s Share In Oil Imports

India is the third-largest oil importer and consumer, importing around 88% of its oil.

In 2024-25, the US imported 18,995 thousand barrels per day (18.7% of global oil imports), China 16,374 thousand bpd (16.1%) and India 5,621 thousand bpd (5.5%), according to the Energy Institute’s latest Statistical Review of World Energy.

India traditionally imported oil from West Asia, but started purchasing from Russia after the Ukraine War. 

Russia offered a $18-$20/barrel discount to counter Western sanctions. From 1% before the war, Russia’s share in India’s total crude oil imports jumped to 40-44%.

According to global commodity market analytics firm Kpler, India imported 2.08 million barrels per day (mb/d) of Russian crude in June, the highest since 2.07 million bpd in July 2024, when it overtook China as the biggest importer of Russian oil.

However, India gradually reduced its Russian crude imports and switched back to West Asia following the additional 25% US tariffs and sanctions on Rosneft and Lukoil.   

Russia’s Share in Oil Imports

According to the Union Ministry of Commerce and Industry, Russia’s share in oil imports dropped to 19.3% in January, the lowest since May 2022.

On the other hand, West Asia’s share increased to 53% in February with India receiving 2.8 mb/d from Saudi Arabia, Iraq, the UAE, Kuwait, and Qatar.

Though Russia remained the largest oil exporter to India in February at 1.042 mb/d, Saudi Arabia was very close at 1.009 mb/d, Iraq was third at 0.981 mb/d, and the UAE fourth at 0.554 mb/d.

Closure Of The Strait Of Hormuz

India faces a huge problem following Iran’s closure of the Strait of Hormuz, a global energy checkpoint through which 20% of oil and 20-25% of LNG pass daily. 

India faces three interrelated issues.

Firstly, around 2.5 mb/d, almost 50%, of India’s oil imports from West Asia transit through the Strait of Hormuz.

About 300 oil tankers are inside the Strait, according to Vortexa and Kpler, with a 90% reduction in transit.

Iraq and Kuwait have reduced oil exports after Qatar’s LNG supply reduction. Iraq’s output from its main southern oilfields ​has tanked by 70% to only 1.3 mb/d. Kuwait Petroleum Corporation has declared force majeure. The UAE and Saudi Arabia could join soon. 

Secondly, India’s situation is more critical compared to other big Asian consumers sourcing oil from the region. 

India has around 100 million barrels of crude oil stock to last for 40-45 days, as per Kpler. 

China, the world’s largest oil importer, gets around 50% of it from West Asia. According to Reuters, China’s strategic reserves, almost 900 million barrels, would last for three months. 

Japan, which gets about 95% of its oil imports from West Asia, can sustain for 254 days. 

South Korea, which buys about 70% of its oil from the region, has enough reserves to last for around 208 days.

Thirdly, India is one of the largest exporters of refined products. India exported 23.7 million tonnes (MT) of petroleum products (10% of its fuel consumption) in 2024-25 and 53.3 MT in April-January. As the oil supply decreases, India’s capacity to export refined products will also reduce as the government will prioritise domestic consumption.    

Fourthly, as oil becomes costlier, India’s import bill will increase. 

According to NITI Aayog’s former chief Amitabh Kant, “every $10 per barrel increase in global crude oil prices could add about $13–$14 billion to India’s annual import bill.”

Kant posted on X that the current account deficit will also increase, and the rupee will be under more pressure. “Geopolitical shocks will keep testing our energy security.”

US Relief Only Temporary  

The US has issued a 30-day ​waiver to India on buying Russian oil after Trump revoked the 25% tariffs in the impending US-India trade deal. 

India should utilise the relief to buy maximum crude from its time-tested partner. 

As per Kepler data, around 130 million barrels of Russian crude are afloat, including almost 27 million barrels in the Arabian Sea/Indian Ocean, approximately 20 million barrels near the Red Sea and Suez Canal routes and about 7.5 million barrels around Singapore. 

According to Reuters, Indian refiners have already purchased around 20 million barrels of Russian oil from traders. However, Russia has reduced the discount from about $13 per barrel in February to $4-$5.

The US relief to India is only for the short term for two reasons.

Firstly, the Iran War can continue beyond 30 days, and there’s no guarantee that the US will extend the waiver. 

While the US-India trade deal has been paused following the US Supreme Court ruling, making the 25% Russian oil tariffs on India meaningless, Trump could devise another way to coerce India. 

Secondly, India also faces Chinese competition as Beijing laps up more Russian oil. Last month, China purchased an average of around 2.09 mb/d of Russian crude, up 1.72 mb/d in January, and 1.39 mb/d in December, Bloomberg’s tanker-tracking data showed.

India shouldn’t wait for the next geopolitical turmoil or Trump’s unpredictability. India should have boosted its oil reserves by purchasing more from Russia last year, as the Trump administration started to object, and also from West Asia after the attack on Fordow, Natanz, and Isfahan.  

(The writer is a columnist with more than two decades of experience in journalism. Views are personal.)