Is India’s fuel export in trouble as the EU eyes Russian-origin crude bans?

India’s lucrative petroleum exports may be the next flashpoint in geopolitical tensions, as the European Union prepares to ban imports of fuels refined from Russian crude, including those processed outside Russia.

The move could hit a major chunk of India’s outbound shipments, worth over $63 billion in FY25, according to official customs data reviewed by Reuters.

The proposed curbs, part of the EU’s 18th Russia sanctions package, come at a time when oil prices are already surging due to the Israel–Iran conflict, adding further volatility to global trade.

EU targets refined fuels, India caught in the crossfire

According to Indian Customs data cited by Reuters, petroleum products made up 14 per cent of India’s total exports in FY25, driven largely by refiners like Reliance Industries and Rosneft-backed Nayara Energy. India’s total fuel exports stood at $84.1 billion in FY24, with Europe emerging as one of the largest buyers.

The EU measure, expected to be discussed later this month, would bar imports of diesel, jet fuel, and gasoline derived from Russian crude, regardless of the refining location. The proposal has raised alarm bells in New Delhi because it does not require cooperation from the US or G7, and is being independently driven by Brussels, as reported by Reuters.

Trump’s disengagement from sanctions gives the EU more space

Unlike during the Biden presidency, the current US administration under President Donald Trump has shown limited enthusiasm for expanding Russian sanctions, especially those that could affect energy markets. According to Reuters, Brussels has struggled to get Washington on board with recent rounds of punitive measures.

This divergence has led the EU to act unilaterally, creating fresh risks for India, which has continued to import discounted Russian oil while keeping trade ties with the West intact.

Conflict in West Asia complicates timing

The move comes amid escalating tensions in the Gulf. The Israel–Iran conflict, now entering its second week, has pushed Brent crude above $86 per barrel, with fears of shipping disruptions in the Strait of Hormuz, as reported by Bloomberg.

India, which imports over 85 per cent of its crude, faces rising freight costs and oil-linked inflation. New sanctions, if passed, could choke off key markets for Indian refiners and raise input costs simultaneously.

Strategic dilemma for India’s oil diplomacy

New Delhi has walked a fine line so far, which is buying Russian crude at a discount while publicly rejecting unilateral sanctions. But experts say the EU’s move could force Indian refiners to pivot, possibly rerouting cargoes to other destinations or facing compliance hurdles.

An energy trade expert told Reuters, “Even if the fuel isn’t labelled Russian, the EU could trace its origin through cargo documentation and refinery disclosures.”

This would not only complicate exports but also raise transparency and compliance costs for private players.

India’s export outlook at risk

India’s fuel exports have been a lifeline for its trade balance, especially amid tepid global demand for other goods. Losing access to European markets, analysts warn, could shave billions off its annual earnings.

With fuel exports contributing $63 billion in FY25 so far, as per Indian Customs and shipping data sourced by Reuters, the stakes couldn’t be higher.

As geopolitical tensions mount, India must navigate the fine print of sanctions diplomacyand decide whether to push back, comply quietly, or look east.

What’s next?

The European Commission is expected to finalise the 18th Russia sanctions package later this month, with a formal vote scheduled before the summer recess, according to EU diplomatic sources quoted by Reuters.

If adopted, the ban would be the first of its kind to target refined products derived from Russian crude, a shift from previous sanctions that focused on crude oil directly exported from Russia.

(With inputs from the agencies)