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The conflict in West Asia and its impact on crude oil prices is taking attention away from Europe planning fresh Russian sanction measures, which like the European Union’s carbon tax on imports threaten to hurt India’s $63 billion in annual petroleum product exports, according to industry sources and Customs and shipping data. Fuel exports constituted 14 per cent of India’s total exports in FY25, according to calculations based on Customs data. Overall petroleum product exports were as high as $84.1 billion in FY24.
The European Union (EU) proposal to bar imports of diesel, gasoline and jet fuel derived from Russian crude oil processed in Indian refineries is of concern because it does not require Washington or the G7 bloc’s cooperation for implementation — it’s Brussels’ call and will be taken up later this month under the 18th Russia sanctions package. The EU has had little success in coopting US President Donald Trump’s administration in participating in recent Russian sanction measures to show support for Ukraine and has proceeded unilaterally. India does not recognise EU or UK sanctions on Russia, said a government official.
India’s Customs data shows diesel, petrol, jet fuel and naphtha together accounted for over $50 billion in exports in FY25, according to Customs data, of which Europe accounted for around $19 billion. Reliance Industries, which accounts for over 70 per cent of India’s exports of petroleum products, may be the most affected, shipping data shows. India exported around 368,000 barrels per day (bpd) or 29 per cent of its fuels to Europe in May; a fifth of all fuel exports in the entire 2024 calendar year was shipped to Europe. Reliance accounted for 89 per cent of all fuels exported to Europe at 213,000 bpd in calendar 2024, according to data from market intelligence agency Kpler. Reliance declined to comment.
The EU's latest sanction plan, coming on top of the controversial Carbon Border Adjustment Mechanism tax policy, further queers the pitch with India even as they attempt to conclude a bilateral trade agreement, industry officials said.
“The EU appears to be scraping the bottom of the barrel now for punitive actions against Moscow,” said Singapore-based global energy expert Vandana Hari. “I don't see how it can be implemented except as a blanket ban on product imports from China, India and Turkey, as those countries import Russian crude. Even then, these products can find their way into the EU markets via third countries.’’
“G7+ countries have displayed little political will to address the refining loophole and have increased their imports from non-sanctioning countries by simply switching their supplier from Russia to third countries that are essentially functioning as Russian middlemen merchants,’’ said Centre for Research on Clean Energy & Air, a Finnish think tank, supporting EU’s stance.
Enforcing such a ban may prove difficult in practice, market intelligence agency Energy Intelligence said, because it would be tough to prove that Reliance used Russian oil to make fuels exported to Europe. But Reliance is exposed to Russian oil purchases. It is set to receive a record 800,000 bpd of Russian oil this month, driven by discounts, accounting for over a third of all Indian imports of Russian crude, Kpler data showed as of Tuesday. These numbers may change by the end of the month. Reliance’s twin refineries at Jamnagar of around 1.36 million bpd of capacity may use 60 per cent Russian oil in converting crude to diesel, gasoline and jet fuel, with the rest sourced from West Asia, according to calculations based on Kpler data.
Reliance would need to document a process trail for European cargoes, said R Ramachandran, oil industry consultant and former refining head Bharat Petroleum.
Reliance has never ever depended on one crude oil grade to this extent in the past, said a Mumbai-based analyst. Nor has India for that matter: 46 per cent of India’s crude imports this month is accounted for by Russian crude oil grades, ship tracking data shows. Russian oil flows have surged in the last two months after the price of Russian export benchmark Urals fell to $50 per barrel levels, enabling Indian refiners and Russian traders to use western shipping services. Over half of Russian oil exports in May were transported on G7+ tankers, compared to 35 per cent in January, according to CREA data.
The sliding price of Russian oil has also prompted the EU to propose lowering the G7 price cap for exports of Russian seaborne crude from $60 per barrel to $45. Asked if the EU could lower the cap without US support, European Commission President Ursula von der Leyen said only that she “looked forward to discussions in Canada,’’ Energy Intelligence reported.
“By lowering the cap, we adapt it to changed market conditions and restore its effectiveness,” von der Leyen told a press conference in Brussels last week. She was referring to Russian oil trading at $10 per barrel, lower than the $60 per bbl ceiling introduced in the first price cap sanction regime in late 2022 and early 2023. Separately, the US Congress is proposing to set a 500 per cent tariff on countries importing Russian oil. India, China, the biggest importers of Russian oil, and Turkey will be the biggest losers if the Congress passes the Bill.
