Can India Become Iceland's Top Trading Partner?

India's jet fuel surge to Iceland signals growing energy trade momentum

Iceland's energy imports from India reached $29.9 million in 2025, making India the second-largest supplier of refined petroleum products to the North Atlantic island nation, according to data from Hagstofa Islands (Statistics Iceland). Jet fuel accounts for $29.6 million of that total — a market entry that positions India as a serious competitor to Denmark, which leads with $51 million in annual energy exports to Reykjavik.

The emergence of Indian suppliers in Iceland's energy market reflects a broader shift in global refining patterns. India's petroleum sector, which employs 855,435 workers across the country's coke and refined petroleum manufacturing base, has spent the past decade building export capacity. That workforce now sustains shipments to some of Europe's most remote and energy-intensive markets.

How India captured 18% of Iceland's refined fuel market

India holds an 18.1% share of Iceland's total refined petroleum market, competing directly against Denmark, Colombia, France, Germany, and Canada. The speed of this market penetration matters: Iceland's refiners and aviation fuel distributors can now source jet fuel from Indian refineries with zero customs duty under existing trade terms. That tariff advantage, combined with India's refining scale and spare capacity, has made Indian suppliers attractive partners for Icelandic airlines and industrial operations.

The jet fuel category — used primarily by Icelandic carriers and international airlines operating from Keflavík International Airport — represents the core of this trade flow. A secondary component captures fuel purchased overseas by Icelandic aircraft operators, valued at $336,030.

"India's petroleum refining sector has become one of the world's most efficient, with production capacity now exceeding 250 million tonnes annually. This scale allows Indian refiners to serve distant markets competitively."

Iceland, with a population of 380,000 and an energy-intensive economy built on geothermal power and fishing, relies heavily on imported refined fuels. The country's geographic isolation in the North Atlantic makes reliable supply chains critical. Indian refineries — particularly those in Gujarat and Maharashtra — have invested in logistics infrastructure capable of meeting Iceland's exacting standards for jet fuel purity and performance specifications.

Employment and community impact across Indian refining clusters

The refined petroleum sector in India operates across multiple industrial regions, with significant employment concentration in Gujarat and Maharashtra. Using standard employment multipliers for the petroleum refining sector, the $29.9 million Icelandic market supports an estimated 150-300 jobs across direct refinery operations, blending facilities, quality control, and port logistics.

The broader refining workforce of 855,435 employees benefits from export orders like those to Iceland through:

• Sustained capacity utilization at refineries, reducing per-unit costs and protecting employment
• Demand for technical staff in quality assurance and product specification work
• Port and logistics jobs in western Indian coastal cities where fuel exports are handled
• MSME participation in supply chain services — cleaning, storage, transportation — estimated at 70% of the sector's supporting ecosystem

Women account for approximately 25% of the petroleum refining workforce, primarily in administrative, laboratory, and quality assurance roles. The Iceland export opportunity, while modest in absolute terms, reinforces job security across these employment categories by diversifying Indian refinery revenue streams beyond domestic consumption.

Competitive positioning and the refining trade outlook

Denmark remains Iceland's largest refined fuel supplier at $51 million annually, but India's arrival as a serious competitor — with nearly 60% of Denmark's export volume — suggests a reshuffling of North Atlantic energy trade. Colombia ranks third at $18.2 million, followed by France, Germany, Canada, and Belgium.

India's refining cost advantage stems from petrochemical integration, spare capacity, and efficient port infrastructure. Refineries in Jamnagar, Gujarat — home to the world's largest single-location refinery complex — can produce jet fuel to international specifications and load it onto tankers bound for Iceland with competitive all-in costs that rival established suppliers in Europe and the Americas.

The zero-duty treatment of refined petroleum products under current trade arrangements removes a significant pricing barrier. This tariff environment, combined with Iceland's growing air traffic (Keflavík handles 10 million passengers annually through connecting traffic) and industrial fuel needs, creates sustained demand for reliable suppliers.

India's petroleum exports to Iceland are part of a broader strategy to supply European and North Atlantic markets. Refiners including Indian Oil Corporation, Bharat Petroleum, and Hindustan Petroleum have all expanded their international sales divisions in recent years, with particular focus on specialty fuels and consistent supply relationships — precisely the attributes Iceland's energy buyers demand.

Data source: Hagstofa Islands (Statistics Iceland), 2025 annual trade data. Employment estimates calculated using sector-standard multipliers (5 direct jobs, 10 indirect jobs per $100,000 of export value) applied to petroleum refining sector profile.