How India’s oil basket has changed over the years

Source: The post  “How India’s oil basket has changed over the years’’ has been created, based on “How India’s oil basket has changed over the years” published in “The Hindu” on 31st December 2025.

UPSC Syllabus: GS Paper-3- International Relations

Context: India, the third-largest oil consumer globally, has historically relied on geopolitical navigation and economics to secure its energy needs. Over the decades, India’s crude oil imports have shifted from heavy dependence on West Asia to a diversified global basket, with Russia emerging as a major supplier in recent years. The changes reflect India’s efforts to balance energy security, economic viability, and geopolitical considerations.

Early Dependence on West Asia:

1. Before 2005, over 70% of India’s crude oil came from West Asian countries, primarily Saudi Arabia, Iraq, Iran, Kuwait, and UAE.
2. Even in 2011-12, more than 60% of crude oil imports came from seven West Asian nations, while African countries like Nigeria and Angola contributed around 20%.
3. This heavy reliance made India vulnerable to regional geopolitical tensions, sanctions, and supply disruptions.

Impact of Iran Sanctions:

1. In 2010-11, UN and U.S. sanctions on Iran restricted its oil exports, reducing India’s imports from Iran from 11.3% to under 6% by 2013-14.
2. Sanctions were lifted in 2016, temporarily increasing India’s imports from Iran to 12.7%.
3. Renewed U.S. sanctions in 2017 forced India to diversify further, boosting imports from the UAE and the U.S. and sharply reducing Iranian purchases by 91.8% in 2019-20.

Gradual Diversification (2005–2015):

1. India began sourcing oil from Africa (Nigeria, Angola) and Venezuela to reduce dependence on West Asia.
2. By 2025, India’s imports were 40–45% from the Middle East, 8–10% from Africa, and 10–12% from the Americas, showing increased diversification.
3. Diversification helped India mitigate geopolitical risks, maintain economic efficiency, and ensure stable refinery operations.

Emergence of Russia as a Major Supplier:

1. Following Russia’s sanctions from the EU and U.S. after the Ukraine crisis in 2022, India continued to purchase Russian oil due to discounted prices and compatibility with refineries.
2. Russia’s share in India’s crude oil basket rose from less than 2% in 2021-22 to 21.6% in 2022-23, further increasing to 35.9% in 2023-24 and 35.8% in 2024-25.
3. Russian crude, especially Urals, declined in price from $79.41 per barrel in April 2022 to $66.49 per barrel in March 2025, enhancing its economic attractiveness.
4. Currently, Russia accounts for about one-third of India’s total crude imports, while Iraq, Saudi Arabia, and UAE maintain marginal declines in their share.

Challenges in India’s Oil Basket:

1. Reducing dependence on Russia is difficult, costly, and risky due to:
   • Need to rapidly scale imports from multiple suppliers at higher costs.
   • Potential compression of refinery margins and increase in retail fuel prices, causing inflation and political backlash.
   • Pressure on domestic operating budgets and credit lines of refiners.
2. Heavy reliance on a single supplier or region exposes India to geopolitical and market vulnerabilities.

Way Forward:

1. India should continue diversifying its crude oil sources, including Africa, the Americas, and emerging suppliers, to reduce over-dependence on any single country.
2. Strategic petroleum reserves should be strengthened to buffer against global supply shocks.
3. Investments in refinery upgrades can enhance the ability to process a wider variety of crude types, ensuring flexibility in sourcing.
4. India should expand long-term supply contracts to ensure price stability and predictability.
5. Accelerating the transition to renewable energy and alternative fuels can gradually reduce import dependence and enhance energy security.
6. Strengthening geopolitical and diplomatic engagement with oil-exporting countries can secure stable, diversified supplies without compromising economic viability.

Conclusion: India’s crude oil basket has evolved from over-reliance on West Asia to a more balanced, diversified portfolio including Russia, Africa, and the Americas. While Russia currently plays a strategic role, diversification remains key to ensuring energy security, economic efficiency, and geopolitical stability. Combining supplier diversification, strategic reserves, refinery adaptability, and renewable energy transition will help India navigate future energy challenges effectively.

Question: Examine the changes in India’s crude oil import basket over the years. Discuss the challenges and suggest the way forward to ensure energy security.