The on-going conflict in Ukraine has sent shockwaves through global energy markets, impacting everything from international relations to commodity prices. While the war has led to immense suffering and a humanitarian crisis, it has also created unexpected economic opportunities for countries like India. The remarkable surge in India’s fuel exports to the European Union (EU) exemplifies how geopolitical tensions can yield economic gains for nations that skilfully navigate the shifting landscape. In the first three quarters of 2024, India’s exports of fuels such as diesel to the EU soared by an impressive 58 per cent compared to the same period the previous year.

Much of this increase can be traced to Indian refineries acquiring Russian crude oil at discounted prices, a direct consequence of the sanctions imposed by Western countries on Russia. As European nations increasingly turned away from Russian oil, India capitalized on the opportunity, positioning itself as the largest exporter of oil products to the EU. Before the invasion, Europe imported approximately 154,000 barrels per day (bpd) of diesel and jet fuel from India. Since the onset of the war, that figure has nearly doubled; highlighting India’s newly gained prominence in the global oil market.

Refineries in Jamnagar, Vadinar and New Mangalore have ramped up their operations, relying heavily on Russian crude to meet this surging demand. This strategic manoeuvre has allowed India not only to enhance its foreign exchange reserves but also to play a pivotal role in the global oil supply chain during a time of crisis. The sanctions and price caps imposed by the G7 and EU aimed to limit Russia’s revenue from oil exports, a vital source of funding for its military operations. While these measures targeted crude oil directly, they inadvertently created a loophole: countries that did not participate in the sanctions could legally import Russian crude, refine it, and export the refined products to sanctioning nations.

India has adeptly taken advantage of this situation, purchasing Russian crude at attractive discounts and re-exporting the refined products to Europe at full market prices. This scenario is a perfect illustration of a classic game theory concept known as “one’s loss is another’s gain.” In this geopolitical chess match, the West sought to weaken Russia’s economic power through sanctions, but in doing so, they unintentionally facilitated India’s economic ascent. By navigating the complexities of the energy market, India has not only filled the gap left by reduced Russian oil exports to Europe but has also reaped significant financial rewards. The financial implications for India are substantial. With crude oil forming a significant part of its imports, acquiring Russian oil at reduced prices has provided a crucial buffer for the country’s foreign exchange reserves.

Recent data indicates that India purchased around 2 billion worth of Russian crude oil in October 2024 alone, making it the second-largest buyer after China, which accounted for approximately 47 per cent of Russia’s crude exports. However, while these developments represent a remarkable economic opportunity, they also raise ethical questions amid the on-going humanitarian crisis in Ukraine. The Indian government has approached this situation with caution, emphasizing the importance of energy security while balancing its international relationships. This pragmatic approach reflects a complex balancing act, weighing economic gains against the moral implications of engaging with a nation under widespread sanctions. As global pressure mounts on countries to isolate Russia, India finds itself in a precarious position.

The rising foreign exchange reserves from fuel exports symbolize a critical opportunity for India to bolster its economy, but this also risks potential backlash from Western nations that view its actions through a lens of scepticism. India’s response to this geopolitical pressure will be crucial in maintaining its diplomatic relations while ensuring its energy needs are met. Looking ahead, the sustainability of India’s energy trade with Russia remains uncertain. The dynamics of the Ukraine conflict and the global energy market continue to evolve, influenced by geopolitical developments and changes in energy consumption patterns. As Europe seeks to diversify its energy sources and reduce reliance on Russian imports, India must adapt its strategies to maintain its newfound role in the global energy market.

Moreover, as G7 nations and the EU continue to refine their sanctions on Russian oil products, India may face increased scrutiny regarding its role in refining and exporting Russian crude. Its ability to maintain its position as a key supplier to Europe will depend not only on diplomatic efforts but also on the adaptability of its energy strategies in a rapidly changing global landscape. In summary, the war in Ukraine has created a paradox: while it has inflicted suffering and turmoil, it has also opened avenues for economic growth for nations like India.

As India navigates this complex landscape, it must balance economic benefits with ethical considerations, establishing itself as a responsible global player. The interplay of game theory, economic gain, and moral responsibility will shape India’s role in the global energy market for years to come. By strategically leveraging its resources and refining capabilities, India can not only enhance its foreign exchange reserves but also contribute to global energy security in an increasingly multipolar world.

(The writer is Associate Professor, Centre for South Asian Studies, Pondicherry Central University