How Geopolitics Has Shaped India’s Crude Oil Basket

Geopolitics has played a decisive role in reshaping India’s crude oil basket. As the world’s third-largest oil consumer and a country that imports over 85% of its crude oil needs, India’s energy security is deeply influenced by global conflicts, sanctions, diplomatic pressures, and shifts in great-power politics. Over the past two decades, India has moved from heavy regional dependence to a diversified, flexible, and interest-driven sourcing strategy, reflecting a clear preference for economic prudence and strategic autonomy.

West Asia: The Foundation of India’s Oil Security

For decades, West Asia formed the backbone of India’s crude oil imports. Countries such as Saudi Arabia, Iraq, Iran, Kuwait, and the United Arab Emirates together supplied more than 70% of India’s crude oil before 2005.

This dominance was driven by geographic proximity, lower transportation costs, long-term contracts, and established political ties. However, such concentration also exposed India to risks arising from political instability, conflicts in the Persian Gulf, and supply disruptions.

Iran Sanctions: When Geopolitics Trumped Economics

India’s oil relationship with Iran illustrates how geopolitical pressures can override economic logic. International sanctions imposed by the UN and later intensified by unilateral measures from the United States severely constrained India’s ability to import Iranian crude, despite Iran offering favourable pricing and flexible payment mechanisms.

Although the easing of sanctions in 2016 briefly revived imports, the reimposition of sanctions after Donald Trump assumed office again forced India to sharply cut Iranian oil purchases. By 2019–20, India had almost completely exited Iranian crude, highlighting how sanctions diplomacy can directly reshape national energy choices.

Diversification as a Strategic Response

The Iran episode served as a wake-up call. India began consciously diversifying its crude oil basket to reduce overdependence on any single country or region. This included:

• Expanding imports from African producers

• Increasing sourcing from the Americas, particularly the United States

• Combining long-term contracts with spot-market purchases

This phase marked a shift from politically constrained sourcing to risk-hedged energy diplomacy.

Russia–Ukraine War: A Structural Turning Point

The most significant transformation occurred after Russia’s invasion of Ukraine in 2022. Sanctions imposed by Western countries and the European Union forced Russia to redirect its oil exports at discounted prices.

India adopted a pragmatic approach, increasing imports of Russian crude based on economic considerations rather than geopolitical alignment. As a result, Russia’s share in India’s crude basket surged from negligible levels before 2022 to roughly one-third of total imports, making it India’s largest crude supplier.

Economics Meets Strategic Autonomy

Discounted Russian crude improved refinery margins, helped control domestic fuel prices, and reduced inflationary pressures. Importantly, Indian refineries were technically capable of processing Russian crude, allowing a smooth transition.

The rise of Russian oil did not eliminate West Asian suppliers; instead, it rebalanced India’s oil basket, reinforcing diversification rather than dependence on a new single source.

Why Russian Oil Is Difficult to Replace

Abruptly reducing Russian oil imports would be economically costly for India. Alternative supplies would likely come at higher prices, with increased freight costs and lower discounts. Such a shift could raise fuel prices, fuel inflation, strain refinery finances, and have political repercussions. Consequently, geopolitics has made Russian oil a structurally embedded component of India’s energy strategy.

India’s Current Crude Oil Basket

Today, India’s crude oil imports broadly consist of:

• 40–45% from the Middle East

• Around 35% from Russia

• 8–10% from Africa

• 10–12% from the Americas

This diversified mix cushions India against regional conflicts, sanctions volatility, and supply shocks.

Conclusion

Geopolitics has transformed India’s crude oil basket from concentrated dependence to strategic diversification. By navigating sanctions, wars, and great-power rivalry with economic realism, India has strengthened its energy security while preserving strategic autonomy. India’s evolving crude basket stands as a clear example of how global geopolitics directly shapes national economic resilience and policy choices—a crucial case study for policymakers and UPSC aspirants alike.

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