EU-India relationship faces challenges due to Russia sanctions: Will it withstand the pressure?
India, in response to the actions of US President Trump, has shown a growing desire to diversify its economic partnerships towards the European Union (EU). This shift comes amidst the EU's sanctions on Indian energy firm, Nayara Energy, for its involvement in the Russian oil trade.
The EU's sanctions on Nayara Energy have caused significant disruptions. The refinery, which is partly owned by Russian energy giant Rosneft, has seen a reduction in its crude oil shipments from Russia and complications in its petroleum product exports. August 2025 saw Nayara receiving its smallest crude oil shipment in history, and the refinery has been operating at reduced capacity, around 70% or less.
To adapt to these challenges, Nayara Energy has resorted to using "dark fleet" vessels for shipments, as regular traders and shipowners avoid dealing with the company due to EU restrictions. The refinery has also shipped a diesel cargo to China, marking the first such cargo from India since 2021, as a response to the pressures from EU sanctions and US tariffs.
Despite the difficulties faced by Nayara Energy, experts argue that the EU sanctions are largely symbolic and unlikely to significantly harm India's energy trade or its exports to the EU overall. The sanctions lack strong enforcement mechanisms, and India's economy can shift to refined products from Russian sources rather than crude oil imports.
The greater economic pressure on India is perceived to come from the US, which threatens tariffs of up to 50% on Indian goods due to the oil trade with Russia. This threat could strengthen the mutual interest between the EU and India in finalizing a free trade agreement, as India may now have an increased incentive to deepen ties with the EU to diversify its international economic partnerships away from the US.
The EU sanctions have not derailed negotiations for a potential EU-India trade deal. Instead, they may push India closer to the EU, as the trade tensions with the US could encourage India to finalize a free trade agreement with the EU.
This situation highlights the complex geopolitical balancing India maintains in its energy security strategy and trade relationships amid evolving Western sanctions on Russia. The EU has taken a more measured approach during trade negotiations, particularly in the agricultural sector which employs close to 44% of India's population.
Removing Russian oil from the global supply could lead to a spike in prices, hurting everyone, not just Russia. The overall momentum toward a trade agreement between the EU and India remains resilient, and the EU's single designation of Nayara Energy is unlikely to significantly impact India's energy trade or EU-bound exports.
Experts agree that the EU's designation of Nayara Energy is unlikely to shift the war calculus for Russian President Vladimir Putin. However, if India were to scale back purchases of Russian oil to avoid triggering punitive US tariffs, it could reduce a key Russian revenue stream for Moscow's war effort, aligning with EU and Ukrainian interests.
Nayara Energy has pushed back against the EU's sanctions, calling them hypocritical. The European Union has imposed sanctions on India as part of efforts to cut off funding for Russia's war in Ukraine. The sanctions target India's refining of discounted Russian crude and the export of those products.
As the geopolitical landscape continues to evolve, shifting dynamics could bring New Delhi and Brussels closer together. The bigger pressure on India right now is coming from the United States, and the threat of high US tariffs on Indian goods could further strengthen the mutual interest between the EU and India in finalizing a free trade agreement.
- The EU's sanctions, though symbolic, have not significantly harmed India's energy trade with the EU, but the threat of high US tariffs on Indian goods could make India more inclined to finalize a free trade agreement with the EU.
- India's economy might be facing greater pressure from the US, with the threat of tariffs of up to 50% on Indian goods due to the oil trade with Russia, which could encourage India to deepen ties with the EU and finalize a free trade agreement.
- The complex geopolitical balancing in India's energy security strategy and trade relationships has been highlighted by the EU sanctions on Nayara Energy, and the evolving Western sanctions on Russia could bring New Delhi and Brussels closer together.
