How Much Will It Cost To Say Goodbye to Russian Crude Oil? SBI Report Answers

India's fuel import bill could increase by an estimated $9 billion in FY26 and $11.7 billion in FY27 if the country stops importing oil from Russia. This analysis comes amidst a discussion of potential US tariffs on goods from India. India began purchasing discounted Russian oil to ensure its energy security after Western sanctions were imposed on Russia in February 2022. As a result, Russia's share in India's total oil imports grew from just 1.7% in FY20 to 35.1% in FY25, making Russia the country's top oil supplier, according to a report from SBI research.

The report notes that India could turn to its traditional Middle Eastern suppliers or other countries like Guyana, Brazil, and Canada to replace Russian oil.

India's Oil Imports and Russia

The report highlights India's changing oil imports, noting a significant increase in oil imports from Russia. In response to Western sanctions against Moscow following the invasion of Ukraine in February 2022, India began purchasing discounted Russian oil to ensure its energy security. This has led to Russia's share of India's total oil imports skyrocketing from a mere 1.7% in FY20 to 35.1% in FY25, making Russia India's largest oil importer. In terms of volume, India imported 88 MMT of oil from Russia in FY25 out of a total import of 245 MMT.

If India were to stop importing oil from Russia for the remainder of FY26, its fuel import bill would increase by an estimated $9 billion in FY26 and $11.7 billion in FY27. The report also notes that if all countries were to stop buying from Russia, which accounts for 10% of the global crude supply, crude prices could rise by 10% if other countries don't increase production. Before the conflict, India's main oil suppliers were Middle Eastern and African nations. India could revert to these traditional suppliers, which often offer annual deals with the option to request more supply each month. India has also diversified its oil sources to approximately 40 countries, with increased supply from Guyana, Brazil, and Canada.

Impact on India's Pharmaceutical Sector

The SBI Research report also details the potential repercussions of a 50% tariff on India's pharmaceutical exports to the US. With approximately 40% of India's pharma exports going to the US in FY25, a tariff could negatively impact the earnings of Indian pharmaceutical companies by 5-10% in FY26. Many large pharma companies generate 40-50% of their revenue from the US market. Such a tariff would also reduce India's competitiveness in the US market and put pressure on profit margins, as companies may not be able to pass on the increased costs.

However, the report suggests the US would also be impacted by such a tariff. India is a vital part of the global supply chain for affordable, high-quality, and essential medicines. particularly for life-saving oncology drugs, antibiotics, and treatments for chronic diseases. India supplies nearly 35% of the generic pharmaceutical needs of the US. While generic drugs constitute 90% of prescriptions in the US, they account for 26% of drug spending. Given the average annual health expenditure per person in the US is around $15,000, a tariff on India's generic drugs would significantly impact US citizens. The report also states that it would take a minimum of 3-5 years for the US to shift its manufacturing and API production to other countries or domestic facilities.

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