IOC Halts Russian Oil Deal; Q4 Profit Jumps 50% on Inventory Gain

India’s oil strategy is shifting—carefully. And it’s not just about numbers. It’s about navigating a geopolitical maze.

Imagine you’re steering a ship through turbulent waters. The weather keeps changing, your maps may be outdated by the hour, and the winds of global politics push you off course. That’s exactly what India’s largest refiner, Indian Oil Corporation (IOC), is dealing with as it hits pause on long-term oil deals with Russia—even as it reports a 50% profit jump in the latest quarter.

At first glance, this sounds contradictory. But dig deeper, and you’ll uncover a calculated balancing act between business gains and geopolitical risks.

Russia on Hold: No Long-Term Deals for Now

Despite Russia becoming India’s top crude oil supplier in 2024—thanks largely to post-Ukraine war discounts—IOC is stepping back from a potential term deal with Russian oil majors like Rosneft. In simple terms, the company is holding off on any long-term oil supply agreements.

“As of now, we are not in any active negotiations,” said Arvinder Singh Sahney, Chairman of IOC, during a recent media briefing. “We are waiting and watching because the situation around tariffs and sanctions is changing every day.”

This statement comes amid a dynamic shift in global geopolitics. The return of Donald Trump to the U.S. presidency in January 2025 has brought stricter sanctions and a tougher stance on global trade involving Russia. For Indian state-run refiners, signing a long-term oil agreement under these circumstances could be risky—not just commercially, but diplomatically.

That’s why IOC is sticking to spot purchases for now. These are one-time transactions that give the buyer more flexibility, unlike term deals which fix volumes and pricing for extended periods. For IOC, flexibility is currently more valuable than price predictability.

Interestingly, this cautious stance comes in contrast to Reliance Industries—a private player—securing a term deal with Rosneft back in December 2024. But public sector companies, tied more closely to government sentiment and policy, must tread a different path.

No Pressure to Buy American—But Open to Good Deals

In the middle of the Russia conundrum, is there any push to shift oil imports toward the United States?

Not really, says Sahney.

“All purchases are made purely on commercial terms. There is no mandate to buy more American oil,” he clarified.

That being said, IOC is open to importing more U.S. crude, but only if the pricing is competitive. The company’s 10 refineries are highly adaptable and capable of processing various grades of crude, which gives it the agility to tap into multiple markets when conditions are right.

More interestingly, IOC is more inclined to ramp up U.S. natural gas imports rather than oil. The reason? Favorable LNG pricing and India’s rising demand make American LNG a compelling choice over suppliers like Qatar.

Profit Surge Amid Sanctions and Spot Purchases

Even with the uncertain global scenario and no long-term oil tie-ups, IOC had a strong financial quarter.

In the fourth quarter ending March, IOC posted a 50% year-on-year surge in net profit, reaching ₹7,265 crore, up from ₹4,838 crore a year earlier. This boost, largely attributed to inventory gains, came despite a small dip in revenue from operations—from ₹2,19,876 crore to ₹2,17,725 crore.

What makes this even more notable is that profit more than doubled from the previous December quarter, which saw earnings of ₹2,873.53 crore. IOC’s gross refining margin (GRM), a key metric in the oil industry, stood at $7.85 per barrel—slightly down from $8.39 last year, but still solid.

However, the bigger fiscal picture shows a mixed bag. For FY25, the net profit dropped to ₹12,962 crore from ₹39,619 crore in FY24. This was due to weaker refining and marketing margins over the course of the year. Annual GRM also declined to $4.80, compared to $12.05 in the previous fiscal.

Yet, IOC announced a ₹3 per equity share dividend, signaling confidence. The market responded positively too—IOC shares closed 1.58% higher at ₹137.90 on the BSE.

Operational Records Set Despite Headwinds

While profits saw ups and downs, IOC’s operational metrics painted a record-breaking picture.

• Highest-ever sales volume: 100.292 million tonnes in FY25

• Refining throughput: 71.564 million tonnes

• Pipelines handled: 100.477 million tonnes across the country

• Pipeline expansion: 260 km added, taking the total to over 20,000 km

These achievements underscore IOC’s scale and the critical role it plays in India’s energy infrastructure—even during volatile times.

But there were challenges too. The company faced under-recoveries of ₹19,926 crore on domestic LPG sales, which it hasn’t recognized as revenue. That’s a large gap in the books, one that points to the persistent strain of regulated fuel pricing in the domestic market.

What This Means for India’s Energy Game

For India, which imports over 85% of its crude oil, energy security is a tightrope walk. IOC’s strategy reflects this complexity—balancing price, risk, diplomacy, and supply diversity all at once.

The takeaway? While startups may move fast and break things, giants like IOC move carefully and hold the fort. And in a world where political decisions can change supply chains overnight, that caution might just be the edge India needs.

As Indian startups in clean energy, fuel tech, and logistics look to innovate in the space, the approach of legacy players like IOC sets the stage—and the infrastructure—for what’s possible. The bridge between traditional energy and new-age solutions has to be steady and smart.

For now, IOC is playing the long game. It’s not just about oil—it’s about foresight.