India’s petroleum exports to the European Union—valued at $14–15bn annually—are under threat following the EU’s latest sanctions package targeting Russian crude and its derivatives. The 18th round of sanctions, approved on July 18, 2025, introduces a sweeping import ban on all refined products derived from Russian oil, even if processed outside Russia, except for supplies from Canada, Norway, the US, the UK, and Switzerland. This move, according to a report by ICRA, is expected to significantly restrict market access for Indian refiners, particularly those reliant on discounted Russian crude.

India had become one of the largest buyers of Russian crude post-March 2022, with such imports accounting for 36% of total crude volumes in FY2025. The surge was driven by discounted pricing, with Russian oil initially available at $10–16 per barrel less than global benchmarks. However, ICRA notes that the discount has narrowed recently to around $2.5–4 per barrel, and the new sanctions could potentially widen it again as market access tightens.

Nayara Energy most directly impacted

Privately held Nayara Energy, majority-owned by Russia’s Rosneft, operates the 400,000-barrel-per-day Vadinar refinery in Gujarat—India’s third-largest. The facility, which accounts for nearly 8% of India’s refining capacity, has been directly named in the EU’s sanctions list, making it the most exposed Indian company under the new rules.

Following the sanctions, traders have grown wary of dealing with Nayara’s refined products. As reported by Reuters, at least two tankers skipped scheduled loadings at Vadinar last week, while a third vessel carrying Russian crude was diverted. Industry sources suggest Nayara has since cut operations to 70–80% of its capacity, down from over 100% earlier in 2025.

The company was also hit by the suspension of its IT services by Microsoft, which cited EU sanctions compliance. “This decision, based solely on Microsoft's unilateral interpretation of recent EU sanctions, sets a dangerous precedent for corporate overreach and raises serious concerns regarding its implications on India's energy ecosystem,” Nayara said in a statement.

Nayara had filed a lawsuit against Microsoft in the Delhi High Court. However, this lawsuit was withdrawn on July 30 after the US tech giant restored critical digital services that had earlier been suspended, Mint reported.

Export risks for Indian refiners

India exported about $14.3bn worth of petroleum products to the EU in FY2025, according to ICRA. This export flow had increased sharply over the past three years as Indian refiners capitalised on discounted Russian crude to meet European demand after Russian-origin supplies were banned in the EU. The new sanctions, however, close this route for Indian refiners—particularly those like Nayara, which processed Russian crude for EU-bound shipments.

ICRA warns that the EU sanctions will hurt refining hubs such as India, the UAE, and Turkey, which have been active in buying Russian oil, refining it, and exporting the finished products to European markets. Indian refiners have reportedly already halted transactions with EU-sanctioned tankers and trading entities.

Tighter price caps and vessel bans

The EU has also tightened its oil price cap mechanism, reducing the threshold from $60 per barrel to $47.6 to align with current market prices. A dynamic review process has been introduced to reassess the cap periodically. According to ICRA, the new rules prohibit EU-based operators from providing transportation, insurance, or financial services for Russian crude sold above the capped rate.

In addition, the EU has expanded its vessel ban, adding 105 more tankers to the list of restricted ships—bringing the total to 444. Many of these form part of the shadow fleet used to covertly ship Russian oil despite earlier bans. The new measures introduce broad port access restrictions and service bans for vessels and entities involved in moving sanctioned oil.

Stable prices, uncertain future

Despite the new restrictions, oil prices have remained largely stable. Brent crude has hovered in the $67–70 per barrel range in recent weeks. ICRA expects prices to average $65–75 per barrel in FY2026, reflecting market expectations that Russian supply will continue to flow—albeit through increasingly constrained and costly channels.

However, for Indian refiners, the impact is tangible. Loss of access to the EU—a high-margin export destination—adds commercial pressure. Refiners may be forced to seek alternative markets in Asia and Africa or deepen reliance on domestic consumption.

As the global oil trade realigns under tighter sanctions, companies like Nayara Energy will have to navigate both commercial isolation and regulatory complexity. For the broader refining sector, ICRA cautions that the sanctions could slow exports and erode margins, especially for those exposed to the Russian crude trade.