Refined and Restricted: How India’s $15Bn Oil Exports Caught in EU’s Sanctions Net

The European Union (EU) has adopted a fresh round of sanctions against Russia on Friday. The 18th package of the 27-nation bloc is designed to punish Moscow for its ongoing war with Kyiv, banning transactions with 22 more Russian banks, blocking any future operation of the Nord Stream gas pipelines, and restricting imports of Russian petroleum refined in other countries.

"The EU just approved one of its strongest sanctions packages against Russia to date. Each sanction weakens Russia's ability to wage war. The message is clear: Europe will not back down in its support for Ukraine. The EU will keep raising the pressure until Russia ends its war," said Kaja Kallas, High Representative for Foreign Affairs and Security Policy and chair of the Foreign Affairs Council, EU.

Most notably, the EU and Britain slashed the price cap on Russian crude, lowering it from $60 to $47.60‑a‑barrel—a figure pegged at roughly 15 % below prevailing market rates—and made it dynamically adjustable every six months. This package also brought in a blanket ban on refined petroleum products made from Russian crude if processed outside Russia—such as in India—and sanctioned 105 additional vessels from the so-called “shadow fleet”, marking an intensification of measures designed to close every loophole.

Even the EU claims that it wants to weaken Russia's war aggression, the sanctions also reflect protectionist goals that may disrupt global energy trade.

India Caught in Crossfire

India is the second-largest oil buyer from Russia and the main buyer of its flagship Urals oil. Kpler's ship tracking data shows that New Delhi also imports ESPO Blend oil, Sokol and Arctic grades from Moscow. Its overall imports of Russian oil are at about 1.8mn barrels per day. Major Indian refiners like Reliance Industries (RIL)—which operates the world’s largest refinery—and Gujarat-based Nayara Energy, partially owned by Rosneft, are heavily reliant on Russian supply.

Reacting cautiously, RIL’s Chief Operating Officer for Supply and Trading, Srinivas Tuttagunta, told The Economic Times that the company would first examine the detailed text of the sanctions before responding formally. “There will be a wind-down period, we hope, and we’ll need to assess how the sanctions define restricted products,” he said.

India's potential fallout could be significant. The country's petroleum product exports to the EU stood at $19.2bn in FY24, which has dropped by 27.1% to $15bn in the next fiscal. "With the EU now closing the door on refined fuels made from Russian crude, Indian refiners may face further declines. Worse, the U.S. may follow with similar measures, especially under President Trump’s trade tactics that link trade deals to geopolitical compliance," said Ajay Srivastava, founder at New Delhi-based trade policy think tank the Global Trade Research Initiative (GTRI).

The lower cap forces Russia to sell crude more cheaply. Any Russian oil sold above $47.6 cannot use Western shipping, insurance, banking or port services. Even if Russia wants to sell oil above the cap, then it can only do so by using its own or non-Western ships, insurers and financiers called the “shadow fleet.”

On the other hand, the EU ban on third‑country refined fuel slams the door shut on India’s refined‑fuel exports. India imported $50.3bn of crude oil from Russia in FY2025—over a third of its total $143.1bn crude bill. The loss of the European export market could impact refinery margins, export revenues, and downstream employment.

Understandably, Russia has cried foul. Rosneft, Russia's biggest oil producer, branded the EU move as “unjustified and illegal”, going as far as asserting that it threatens India’s energy security and economy. Reportedly, plant operators also emphasise that distancing India from the lucrative EU market could harm both export revenues and jobs—all while India’s refinement cost savings from cheap Russian oil remain substantial.

Trade Barriers Disguised as Sanctions

While presented as a moral stance against Russia’s war, the EU’s latest sanctions also reflect a calculated attempt to restructure energy supply chains. "By blocking fuel refined from Russian oil in countries like India and the UAE—while continuing imports from select Western partners—the EU is steering supply chains toward more expensive sources. This reduces competition and raises costs," it notes.

Instead of enforcing a full ban on Russian oil, which it still relies on to an extent, the EU has opted to selectively restrict certain supply routes while leaving others untouched. This piecemeal approach is expected to create an uneven playing field, pushing up energy costs for European consumers and undermining global trade efficiency. It also disadvantages emerging economies such as India, which find themselves edged out of key markets.

GTRI further warned that these moves highlight a broader trend, i.e., globalisation is being replaced by strategic protectionism. "Although India continues to engage in legitimate trade with Russia, the political optics of such transactions are shifting in Western capitals. As energy ties deepen, India will have to walk a fine line between economic pragmatism and geopolitical pressure," Srivastava noted.