India’s Russian-Oil Buy: Red Flag or Red Herring?

That could change if the murky international politics—and future price trajectory—of Russian oil clear up a bit.

India snapped up 3 million barrels of Russian crude at around 20% below global benchmark prices last week, with insurance and shipping costs borne by the seller. And on Wednesday Reuters reported that Indian Oil, the country’s top refiner, had bought an additional three million barrels of Russian Urals crude, and private refiner Nayara Energy had bought 1.8 million barrels.

With Brent crude-oil futures again near $120 a barrel, such enormous discounts are hard to decline for a country whose energy imports are equal to a full 4% of gross domestic product. India imports more than 80% of its overall crude needs—a net 1.25 billion barrels over the past 12 months, according to Credit Suisse, which estimates that annual imports could rise to 1.5 billion barrels as the economy opens up. At that rate, every one-dollar price rise could cost India $1.5 billion a year.

But despite India’s desperation to tank up, its bargain shopping in Russia will probably remain relatively small scale for now.

Processing significant amounts of Russian Ural crude might entail extra costs for Indian refiners. But the key uncertainty is the risks related to and emerging from the Ukraine situation, says Sushant Gupta, research director for Asia-Pacific refining and oil markets at Wood Mackenzie.

For one, oil prices have remained extremely volatile since the war began last month. Even if Indian buyers were considering dramatically shifting toward Russian oil, alienating the longtime Middle Eastern suppliers that provide more than 60% of its imports or investing in new transport capacity makes little sense until there is more clarity on future prices, transport and insurance costs—and whether Russian energy will ultimately be subject to strict sanctions. The longer trade route between Russia and India already makes purchases more prone to volatility, according to Prashant Vasisht, vice president and co-group head of corporate ratings at ICRA, an arm of Moody’s.

Western sanctions’ energy carve-outs mean India’s oil imports aren’t a violation. India’s oil minister, Hardeep Singh Puri, told lawmakers two days before the Reuters report that Indian buyers had contracted the equivalent of about three days’ oil needs from Russia, to be supplied over the next three to four months. Russia still accounted for less than 1% of the country’s total oil imports, he said.

New Delhi has faced criticism from the West for its longstanding political and security ties with Moscow. But its recent bargain-basement oil purchases probably shouldn’t keep drillers in Texas or politicians in Washington up at night—at least, not yet.

Write to Megha Mandavia at megha.mandavia@wsj.com