Source Credit : Portfolio Prints
What’s happening?
- The EU’s 18th sanctions package, passed in July 2025, bans all imports of refined petroleum products made from Russian crude, regardless of where they are refined—even in third countries like India.
- A six-month transition period means enforcement will begin in early 2026
Why it matters to India
- India’s petroleum product exports to the EU dropped from $19.2 B in FY24 to $15 B in FY25, largely due to its reliance on Russian crude.
- Think tank GTRI warns that India’s $15 B in fuel exports are at stake because of the new restrictions.
Who are the major players?
- Nayara Energy (formerly Essar Oil), with its Vadinar refinery, is directly impacted and has been sanctioned as part of the EU package.
- Reliance Industries, India’s top Russian crude importer and fuel exporter, also stands to lose significant EU export volume.
Immediate impacts
- BP-chartered tanker Talara left Nayara’s Vadinar port empty, unable to load due to the sanctions.
- Nayara has altered its naphtha tender, demanding advance payments or letters of credit for August loading—reflective of stricter financing.
Broader implications
Revenue Compression
Refiners like Reliance and BP India-Pacific have seen margins fall: from $15–20 to $8–12 per barrel — a 25–30% revenue hit.
Trader-led workaround strategies
Refiners are now increasingly relying on traders, swaps, floating storage, and re-routing products to non-EU markets (Asia, Africa) to bypass sanctions.
Logistical and legal hurdles
Origin tracking for blended refinery output is complex. There's no foolproof system, and logistics tracking (IMO numbers, vessel flags) can be easily obfuscated.
India’s response & diplomatic maneuvering
- The Indian government and Nayara Energy have labeled the EU’s sanctions as “unilateral, unjust,” and warned they breach international law and sovereignty.
- India maintains it cannot support sanctions that conflict with its energy security needs.
- To cushion the blow, many refiners—like BP India-Pacific—are diversifying crude imports from Iraq, Nigeria, Saudi Arabia, etc., despite a $10–15/barrel premium over Russian oil.
Timeline of Key Sanction Rollout
| Milestone |
Date |
| EU’s 18th Sanctions package |
July 2025 |
| Transition period begins |
Immediately after July |
| Enforcement begins |
Jan 2026 (approx.) |
Outlook & Risks
1. EU market shrinkage: Indian export revenue to the EU may shrink further unless supply chains pivot.
2. Margin squeeze persists: Higher crude costs due to alternative sources → lower profitability.
3. Trader role expands: Increased fees and complexity raise final consumer costs globally—Europe faces winter fuel pricing pressures.
4. Legal and diplomatic face-offs: Nayara is considering legal challenges; India urges rule adjustments.
Alternate market expansion: Exports to Asia, Africa, Middle East likely to grow; traders may facilitate via floating storage and swaps.
Final Analysis
India now finds itself in a tough spot. While EU fuel export revenues—once around $19B—already dropped to $15B, they may contract further once EU enforcement becomes active in early 2026. The root cause: reliance on cheap Russian crude, which EU rules now block from re-export.
- Refiners must accelerate crude source diversification and adjust logistics.
- Government pressure, diplomacy, and possible legal appeals are underway.
- Traders will become more central as middlemen in new routes and storage mechanisms.
The next 6–12 months will be crucial. How effectively India can reconfigure supply chains, secure non-EU markets, and navigate EU legal and technical frameworks will determine the fate of its $15 B fuel export sector.
