EU sanctions tighten compliance scrutiny; could re-draw India’s diesel, jet fuel exports flows
Indian refiners will be forced to redirect diesel cargoes away from Europe, potentially flooding alternative markets such as Africa, Latin America or South East Asia
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YORUK ISIK
Even as the intended impact of the latest EU sanctions on India’s oil and gas sector will unfold over the next 12 months, analysts and market players point out that the effect is visible with respect to rising compliances, redrawing of global and regional trade flows as well as margins squeeze.
Another aspect highlighted by refinery officials and analysts is that there is no clarity on tracking the origin of crude oil — a technically and logistically complex process.
A top refinery official said: “This is a complex situation. Immediate impact is on freight and trade flows and considering Europe’s diesel stocks are tight. Cargoes will shift from India to Middle East, the US, etc raising freight rates and impacting margins. More clarity will come by year-end.”
Global real-time data and analytics provider Kpler places the EU’s latest sanctions as the “most comprehensive effort yet” to choke off Russia’s hydrocarbon revenues. For instance, sanctions on Russian crude processed in a third country directly affects India and Turkey that have supplied up to 20 per cent of Europe’s diesel demand in recent months.
The anticipated impact on India will be most visible at the intersection of compliance scrutiny, trade realignment and margin optimisation — particularly for private-sector refiners with strong export footprints along with state export-oriented refineries, it anticipated.
However, India can draw cues from its handling of the US sanctions on Iran in 2018-19, Kpler said adding, that refiners adjusted crude intake and product flows to maintain compliance while optimising refinery economics.
Sanction shake-up
Sumit Ritolia, Kpler’s Lead Research Analyst for Refining & Modeling, told businessline: “Immediate implication is a major reshuffling of crude and product flows, from diesel to Urals.”
Indian and Turkish refiners will be forced to redirect diesel cargoes away from Europe, potentially flooding alternative markets such as Africa, Latin America or South East Asia, which will likely trigger regional imbalances and distort pricing spreads, especially in the middle distillates segment, he explained.
“Despite these disruptions, the crude market is expected to remain resilient in volume terms. Russia’s reliance on non-Western logistics, including a shadow fleet and opaque financing mechanisms, limits the enforcement reach of the EU’s revised $47.50/bbl price cap,” Ritolia said.
Nevertheless, the cap — though porous — could depress FOB pricing structures in European-controlled freight markets, eroding Russian netbacks over time, he added. (Netback calculates the revenue generated from oil and gas sales against costs incurred to bring the product to market.)
“The sanctions will not cause an outright collapse in Russian oil exports, but they will increase transaction costs, complicate arbitrage, and further isolate Russia from premium markets. The full impact will unfold gradually over the next 6–12 months, with enforcement clarity, compliance behaviour and secondary sanctions likely to shape the outcome,” he emphasised.
Ritolia stressed that the immediate impact is more about compliance than physical disruption. The EU’s regulation mandates proof that products entering the bloc are free of Russian-origin crude, but it leaves room for operational flexibility.
Sanctions impact
For Nayara Energy, its reliance on Russian Urals as feedstock and a historical presence in middle distillate exports to Europe makes it inherently vulnerable. However, when contextualized by trade data, Nayara’s exposure to the European refined product market appears limited in scale, Ritolia said.
“In 2024, Nayara exported an average of around 10,000 barrels per day (b/d) of jet fuel, with total volumes peaking at approximately 30,000 b/d during select months. These exports primarily target the UK, the Netherlands and France. On an annualized basis, this accounts for less than 5 per cent of Nayara’s total refined product output,” he added.
The company’s primary market share lies in Asia and Africa, and it maintains a strong domestic market presence in India, alongside a relatively diversified export portfolio.
Trade sources said that Reliance Industries’ dual-refinery structure — domestic and export-oriented — offers strategic flexibility. It can allocate non-Russian crude to its export-oriented refinery and continue meeting EU compliance standards, while processing Russian barrels at the domestic unit for other markets.
RIL with its integrated trading arm and extensive global marketing network has the commercial agility and logistical scale to rebalance trade flows, similar to the adjustments made during the US sanctions on Iran in 2018-19, explained one of the sources.
Published on July 27, 2025
