What will India gain if it buys oil from Venezuela, not Russia? Savings of $3 bn, says SBI research

India’s crude oil import strategy could be at an inflection point as a new research report by State Bank of India Research suggests that shifting a part of oil sourcing from Russia to Venezuelan heavy crude could lower the country’s annual fuel import bill by nearly $3 billion under favourable pricing conditions.

The report traces how India’s dependence on Russian crude surged after 2020, accelerating sharply following Western sanctions on Moscow after its invasion of Ukraine  in February 2022.

With Russian oil capped at USD 60 per barrel, India turned to discounted supplies to safeguard energy security. As a result, Russia’s share in India’s crude imports jumped to 35.1 per cent in FY25, making it the country’s largest oil supplier.

However, SBI notes that the long-term success of any new trade or sourcing strategy hinges on India diversifying away from excessive dependence on a single supplier.

The report highlights Venezuelan heavy crude, particularly the Merey-16 grade, as a viable alternative, provided it is available at a discount of USD 10–12 per barrel. Such a discount, SBI says, would be sufficient to neutralise the current advantage enjoyed by Russian crude and ensure commercial viability for Indian refiners.

At present, Venezuelan heavy crude is trading at around USD 51 per barrel, according to OilPrice data cited in the report. While Venezuela is geographically much farther from India—entailing shipping distances roughly five times those from the Middle East and about twice those from Russia the report argues that competitive pricing could offset higher freight, insurance, and time-related costs.

SBI’s analysis underscores that substituting Russian crude with Venezuelan barrels carries clear positives for the domestic economy. Both public sector and private refineries in India are capable of processing heavy crude and could benefit from the associated discounts without triggering domestic inflation, even if the Russian discount is partially sacrificed.

Using a “brute force scenario” that preserves historical trends in India’s import basket, SBI modelled a situation where Russian crude imports are reduced to zero and fully replaced by Venezuelan crude. Under this assumption, the analysis estimates potential savings of approximately USD 3 billion annually.

The report also places the possible shift in a broader diversification context. Apart from Russia, India traditionally sources crude from Iraq, Saudi Arabia, and the UAE under annual contracts, with flexibility to lift additional volumes monthly.

Since the imposition of sanctions on Russia, Indian refiners have also expanded purchases from the United States, West Africa and Azerbaijan. Overall, India now imports crude from nearly 40 countries, with new supply emerging from Guyana, Brazil, and Canada.

That said, SBI cautions that the economics of Venezuelan crude will remain sensitive to global geopolitics. Any easing of hostilities in Ukraine could compress the deep discounts currently offered by Russian oil, narrowing the relative advantage of Venezuelan supplies.

As a result, the report concludes that India’s future crude import basket is likely to evolve through a dynamic transition matrix, blending supplies from Russia, Venezuela, the Middle East, and other regions based on price discounts, logistics, and refinery compatibility.