India’s annual export earnings of $14-15 billion, or roughly ₹1.2-1.3 lakh crore, from the supply of refined petroleum products to the European Union (EU) is expected to decline in the current financial year — a first since FY23.
ICRA in its latest report projected that the 18th sanctions package may restrict Indian refiners access to the EU market. This is due to a sanction clause which restricts products made from Russian crude oil that are processed in a third country.
“The EU sanctions package will hurt nations such as India, Turkey, and the UAE, which have been refining Russian crude and selling refined products to Europe,” the ratings agency said.
India’s exports to the EU rose sharply in the last three years as supplies from Russia were reduced. India exported around $14-15 billion of petroleum products to the EU every year in the last three years, it added.
Since the Russia-Ukraine war, which began in February 2022, the erstwhile Soviet Union’s supplies to the EU were restricted through sanctions, which led to re-routing of its crude oil cargoes to China, India and Turkey.
In turn, Indian and Turkish refiners processed this discounted Russian crude oil into diesel and jet fuel and shipped in to the EU earning hefty margins. For comparison, India and Turkey have accounted for 20 per cent of Europe’s diesel cargoes in the last few months.
From below 2 per cent before 2022, Russian crude oil now accounts for more than one-third of India’s imports.
In FY25, India exported about $14.3 billion worth of petroleum products to the EU, slightly lower than the earnings a year-ago. In FY23, the export earnings were a little short of $14 billion. For comparison, India exported refined petroleum products worth around $6 billion in FY22.
Silver lining
On the brighter side, ICRA expects Russian discounts to rise as the EU lowered the price cap for crude oil from $60 a barrel to $47.6, to align it with the current global oil prices. The sanctions also introduced an automatic and dynamic mechanism for future reviews of the price cap.
As per data from the Commerce Ministry, Russian crude was available at a discount in the range of $10-16 per barrel earlier. However, the same has declined and now stands at around $2.5-4 per barrel.
The agency pointed out that Russian oil exports account for around 7 per cent of the global liquid consumption. If its supply is cut off from the market, oil prices would surge. However, Brent crude oil spot price had remained range-bound at $67-70 a barrel over the last few weeks.
“As Russian exports of oil account for 7 per cent of the global consumption any restrictions on supply could lead to a surge in oil prices but despite the approval of the 18th package of sanctions by the EU, crude oil prices have remained largely steady, indicating an expectation of minimal impact on supplies,” it added.
ICRA expects crude prices to average at $65-75 per barrel in FY26.
