Shadow tankers are a growing concern as they enable the continued flow of Russian crude despite sanctions.
India’s fuel exports to the European Union (EU) have surged dramatically, jumping 58% in the first three quarters of 2024. A significant portion of these exports is believed to be derived from Russian crude oil, which is refined in India and sold to the EU at full price despite ongoing sanctions against Moscow. This shift has made India the biggest exporter of fuel to Europe, raising concerns about the effectiveness of sanctions and the continued flow of Russian revenue from oil exports.
How India Capitalized on Russian Oil Discounts
In December 2022, the EU and the G7 nations imposed a price cap and an embargo on Russian crude oil in response to Russia’s invasion of Ukraine. The aim was to cripple Russia’s revenue and limit its ability to finance the war. However, a loophole in the sanctions on refined products has allowed countries like India to import discounted Russian crude, refine it, and export it to Europe at full price, bypassing the embargo.
Since the war began, India’s purchases of Russian crude have skyrocketed. What was once less than 1% of India’s total oil imports is now nearly 40%. This dramatic increase is driven by the steep discounts on Russian oil, which is priced well below other international oil sources due to the price cap and reduced demand from European countries.
India Emerges as the EU’s Leading Fuel Supplier
India has quickly become the second-largest importer of Russian crude oil, after China. The country’s refining capacity, especially at major facilities like Reliance Industries’ Jamnagar refinery and Nayara Energy’s Vadinar plant, has played a key role in refining this oil into products like diesel and jet fuel for export to Europe. According to the Centre for Research on Energy and Clean Air (CREA), Indian fuel exports to the EU increased by 58% in the first three quarters of 2024, largely due to this practice.
The refineries in Jamnagar, Vadinar, and Mangalore are increasingly dependent on Russian crude, and their output is filling the growing demand for refined products in Europe. Pre-war, India exported around 154,000 barrels per day (bpd) of diesel and jet fuel to the EU. By 2024, this figure has nearly doubled.
The Fuel Trade Loophole and Its Impact
Despite efforts to limit Russian oil revenues, Indian exports of refined products derived from Russian crude continue to flow into the EU. This trade has raised questions about the effectiveness of sanctions aimed at reducing Russian oil revenue. In the 13 months since the price cap was imposed, India’s exports of products like diesel to the price-cap coalition countries (EU, G7, Australia) have totaled €8.5 billion—equivalent to 68% of the EU’s annual financial commitment to Ukraine between 2024 and 2027.
These exports highlight a key issue: there are no sanctions on purchasing or using Russian crude for refining purposes. This refining loophole means that countries like India can continue to buy Russian oil at a discount, refine it, and export the refined products at full price, effectively funneling Russian oil revenue through a third-party market.
The Shadow Fleet: A Growing Concern
To circumvent the price cap on Russian crude, many oil shipments are transported using what is known as the “shadow fleet”. These are second-hand oil tankers, often with opaque ownership structures, that operate outside of international shipping regulations. According to CREA, in October 2024, over 83% of the total value of Russian seaborne crude was transported by these tankers, which are not subject to Western laws.
This shadow fleet has become a key enabler of Russian oil exports, undermining the sanctions mechanism and making it more difficult to track and control the flow of Russian fossil fuels to global markets.
India’s Role in Global Energy Markets
India’s increasing role as a major fuel exporter to the EU highlights its growing influence in the global energy market. As one of the world’s largest oil-consuming nations, India imports over 85% of its crude oil, and its dependence on discounted Russian oil has become a pivotal element of its energy strategy.
In October 2024, India purchased €2 billion worth of Russian crude oil, accounting for 37% of Russia’s total crude exports. India’s oil trade with Russia remains significant despite global efforts to isolate Moscow economically. This trade also continues to fuel Russia’s ongoing war effort by providing a critical source of revenue.
