EU’s New Sanctions On Russian Oil May Hit USD 14 Bn Indian Refining Exports: ICRA

New Delhi, Aug 1 (KNN) The European Union’s latest sanctions on Russia are expected to have far-reaching implications for Indian refiners, according to a recent report by credit rating agency ICRA. 

The EU's 18th sanctions package, implemented on July 18, prohibits the import of refined petroleum products processed fr0m Russian crude oil by third countries. 

Exemptions have been granted only to select nations, including the US, UK, Canada, Norway, and Switzerland.

ICRA noted that Indian petroleum product exports to the EU stood at approximately USD 14.3 billion in FY2025. 

Over the past three years, India emerged as a key processor of discounted Russian crude, capitalising on reduced Russian oil supplies to Europe. 

Exports to the EU surged to around USD 14–15 billion annually during this period.

However, the new EU restrictions could significantly constrain market access for refiners in India, as well as those in Turkey and the UAE, who have relied on Russian crude to meet European demand. 

ICRA warned that the development could reduce export volumes and margins for Indian refiners.

While discounts on Russian crude had previously ranged between USD 10–16 per barrel, they have narrowed to USD 2.5–4 per barrel in recent months. 

The latest price cap and associated enforcement measures, however, may prompt wider discounts once again, potentially impacting sourcing economics for Indian importers.

The EU has also lowered the price cap on Russian crude fr0m USD 60 to USD 47.6 per barrel, aligning it with prevailing global market rates. A new dynamic pricing mechanism has been introduced to enable more responsive adjustments in the future.

In addition to trade restrictions, the regulations bar EU-based entities fr0m providing transport and insurance services for Russian oil traded above the capped price. 

The updated sanctions list includes 105 newly restricted vessels, bringing the total to 444. These ships are now subject to access limitations at EU ports and associated maritime services.

Indian refiners, according to ICRA, have already taken precautionary measures by ceasing business ties with sanctioned traders and shipping firms.

Despite Russian crude accounting for roughly 7 percent of global liquid fuel consumption, international oil prices have remained stable, suggesting markets foresee limited disruption to overall supply.

The impact of the EU’s action is expected to be most pronounced for Indian refiners in terms of reduced export opportunities and tighter margins in a competitive global landscape.

(KNN Bureau)