Complete replacement of Russian crude appears unfeasible in the near term, says Moody’s Analytics

India has agreed to phase out imports of Russian crude and replace it with American and Venezuelan crude, US officials said | Photo credit: iStockphoto

In a commentary on Sunday, the Financial Intelligence Bureau pointed out that while the interim trade deal eases some pressure on Indian exports, many uncertainties remain.

It also emphasized that the lack of details on the interim trade deal means the US-India relationship is far from repaired.

According to US officials, India has agreed to phase out imports of Russian crude and replace it with US and Venezuelan crude. Indian officials did not confirm this statement, but major refiners have reduced purchases of Russian crude in recent months, it added.

Russian crude oil

India imports more than 30 percent of its domestic energy needs from Russia, so a switch to Russian crude will be pricey, Moody’s Analytics points out.

Differences in crude quality could force many Indian refineries, which are optimized for Russian blends, to bear higher processing costs. Moreover, the EU’s latest price cap of $44.1 per barrel for Russian crude means Urals crude will remain cheaper than US or Venezuelan supplies, it added.

“A shift will lead to higher domestic energy costs. This will feed into domestic fuel prices, but also into the budget balance, given India’s extensive fuel subsidies. While some substitution is possible, full substitution of Russian crude oil appears unfeasible in the near term,” the report points out.

Far from repaired

The deal with the US comes at a time when India is looking to forge other relationships in the unstable trading environment. In the wake of the recently signed trade deal with the EU, Modi has embarked on a tour of Southeast Asia, reaffirming ties with key countries in the region.

“The US deal appears to mask their recent rift in relations, but the lack of detail means the US-India relationship is far from repaired,” Moody’s said.

India’s obligations under the agreement appear more important, it added.

For example, the White House fact sheet noted that India plans to purchase more than “$500 billion of U.S. energy, information and communications technology, coal and other products.”

“For context, the Indian Union Budget for the financial year to March 31, 2027 had a total expenditure of around $590 billion. The procurement requirement would be a significant portion of the budget expenditure even if spread over years,” it explained.

Published on February 15, 2026