What drives Europe's smallest economy to rely on Asia's giant?

Iceland's Energy Appetite: How India Became the Nordic Nation's Second-Largest Fuel Supplier

When a nation's heating grid runs entirely on geothermal and hydroelectric power, the obvious question becomes: where does Iceland buy its aviation fuel? The answer tells a story not of legacy energy ties or geographic proximity, but of something far more consequential — the global reshaping of petroleum trade itself. In 2025, India exported $29.9 million in mineral fuels, oils, and distillation products to Iceland, establishing itself as the Nordic island's second-largest supplier in this category, behind only Denmark. That represents an 18% market share of Iceland's entire fuel import basket.

The numbers underscore a seismic shift in global energy architecture. In 2025, India exported 6.80 million metric tonnes of jet fuel, with 61.6% delivered to Europe, making the continent the primary destination for India's aviation fuel exports. What has transpired is not merely a commercial transaction but a structural redrawing of Europe's energy dependence — one that places India's refineries, not Middle Eastern producers or legacy suppliers, at the center of a critical supply chain.

The Anatomy of a Sector: From Jet Fuel to Petroleum Jelly

India's fuel exports to Iceland comprise three principal sub-products, each serving distinct but interconnected markets. Jet fuel dominates overwhelmingly, accounting for $29.6 million of the $29.9 million total — a concentration so pronounced that it represents 98.9% of all petroleum and distillation product shipments. The remainder consists of $336,000 in fuel purchased overseas by Icelandic aircraft and a modest $40,889 in petroleum jelly.

This composition reveals something critical about how modern trade works: Iceland is not buying a diverse basket of fuels for domestic consumption. Rather, it is sourcing jet fuel in volume to meet aviation demand — both commercial and military operations — that its own energy systems cannot suppress into reserves. As a result, around 62,000 barrels per day of jet fuel have been imported by the EU, going to Italy from India's Jamnagar refinery, yet Iceland captures its share through the same distribution networks and supply corridors.

Competing on a Tilted Court: India's Path to Second Place

Iceland's fuel market is contested territory. Denmark leads with $51.0 million in annual exports to the island — a position rooted in historical Nordic trade ties and pipeline infrastructure. India's $29.9 million places it second, ahead of Colombia ($18.2M), France ($13.6M), and Germany ($12.9M). Canada, Belgium, Ireland, the Faroe Islands, and Italy round out the top ten, collectively demonstrating that Iceland sources from a truly global marketplace.

What propelled India into second place is not geographic proximity but cost competitiveness and production scale. In 2023-24 India became the biggest supplier of refined fuel to the EU countries, overtaking Saudi Arabia. This ascent reflects a fundamental fact: India exported approximately 64.7 million tonnes of petroleum products in FY2024–25, equivalent to more than one million barrels per day. The scale of India's refining sector means it can undercut competitors on price while maintaining production stability — a winning formula for buyers like Iceland seeking reliability without premium pricing.

"India's fuel exports reached a record 1.28 million bpd in 2025."

Where the Fuel Is Forged: India's Refining Clusters

India's petroleum exports originate from a concentrated geography of industrial might. Nearly 48% of total refining capacity is situated in West India, enabling efficient export operations through proximity to major ports. The epicenter is Gujarat, home to the world's largest refining complex.

Around 62,000 barrels per day of jet fuel have been imported by the EU, going to Italy from India's Jamnagar refinery. This Jamnagar facility, operated by Reliance Industries Limited (RIL), is the linchpin of India's export machine. Reliance Industries Limited has undertaken a project with an estimated investment of ₹75,000 crore located at Jamnagar, Gujarat, to be involved in petrochemical production expansion, specialty chemicals, integration of renewable energy and value added downstream products at the world's largest refining complex. The facility's two-refinery design — one export-focused, one domestic — creates the operational flexibility needed to serve distant markets like Iceland while meeting India's own growing energy needs.

Beyond Gujarat, other crucial nodes shape the sector. Indian Oil Corporation (IOC) controls about 27% of total capacity across 9 refineries, followed by Reliance Industries at 26%, Bharat Petroleum Corporation Limited (BPCL) at 14%, and Hindustan Petroleum Corporation Limited (HPCL) at 9.5%, with other notable players including Nayara Energy at 20 MMTPA and Mangalore Refinery and Petrochemicals Limited (MRPL) at 15 MMTPA. This multi-refinery system, spread across Maharashtra, Odisha, Karnataka, Kerala, and Assam, ensures that fuel destined for Iceland flows from multiple production centers, reducing single-point supply risk and enabling India to commit to long-term export agreements.

The TEPA Advantage: Zero Duty Access Reshapes Trade

Beneath this commercial success lies a policy bedrock: the India-EFTA Trade and Economic Partnership Agreement (TEPA). Under this framework, zero-duty access means Indian petroleum products enter Iceland and other EFTA nations tariff-free. This preferential treatment is not incidental — it is structural to India's competitive advantage. India has established itself as a global refining hub with 23 refineries, and further expansion is planned to leverage foreign investment for export-oriented infrastructure, including product pipelines and export terminals.

When tariff barriers evaporate, cost structures determine winners. India's refineries, operating at scale and using discounted Russian crude prior to recent EU sanctions on Russian refined products, could undercut legacy suppliers on price. For a buyer like Iceland seeking to minimize fuel import costs while maintaining supply security, India's duty-free entry into EFTA markets made it an obvious choice.

Jobs and Livelihoods: The Multiplier Effect Across Indian Communities

Behind every barrel of jet fuel shipped to Iceland stands a network of Indian workers, families, and communities. The petroleum refining sector is a substantial employment generator — one whose human impact extends far beyond the refinery gates.

Using industry-standard employment multipliers, an estimated 855,435 workers are directly employed across India's coke and refined petroleum products industry as of FY2024. When indirect employment is factored in — workers in logistics, storage, petrochemicals ancillary manufacturing, port operations, and transportation — the multiplier effect is substantial. Using conservative multiplier assumptions (5 direct jobs and 10 indirect jobs per $100,000 of exports), Iceland-bound fuel exports of $29.9 million generate an estimated 1,497 direct jobs and 2,994 indirect jobs in India's export supply chain — roles that span refinery operators, truck drivers, port workers, and logistics coordinators.

These jobs concentrate in specific geographic clusters. Gujarat's Jamnagar complex alone employs thousands directly, with cascading employment effects across the state's port infrastructure in ports like Kandla and Mundra. Odisha's Paradip refinery cluster, operated by Indian Oil Corporation, creates similar employment ecosystems. Maharashtra's refineries, including the Bharat Petroleum facility near Mumbai, support workers and their families across the state's industrial towns. MSMEs comprise an estimated 70% of the sector's employment base, meaning that much of this work flows through small and mid-sized logistics companies, supply vendors, and service providers rather than large corporations.

Women's participation in the sector stands at an estimated 25% — concentrated in roles within product quality testing, laboratory analysis, administrative functions, and increasingly, in operational positions as refineries modernize their workforce practices. For communities surrounding Jamnagar, Paradip, and Mumbai's refinery zones, petroleum exports represent steady, multi-generational employment pathways that anchor household economies and support local schools, healthcare, and commerce.

The Forward Trajectory: Capacity, Competition, and Growth

India's refining sector is not static. India's refining capacity has steadily increased over the years, rising from 215.1 million metric tonnes per annum (MMTPA) in FY14 to 251 MMTPA in FY24, and reaching 258.12 MMTPA as of FY25. Further expansion is planned. This capacity increase matters directly for Iceland's fuel supply: as India adds refining capability, it locks in additional export volume, ensuring that Nordic demand can be met from Indian sources for decades to come.

Yet there are headwinds. New EU sanctions on refined products made from Russian crude, effective January 2026, will constrain the margin advantages that Indian refiners have enjoyed. However, India's exports of jet fuel to Europe have risen to levels seen since before an EU ban was placed on Russian-origin fuel in January, suggesting that refiners are adapting — either by sourcing non-Russian crude or by exploiting the window before sanctions take full effect. Iceland, as an EFTA member, remains a stable destination because its purchasing is not subject to the same restrictions.

Industry projections underscore the durability of this trade flow. ATF exports rose 32.4% year over year in October 2024, reflecting strong demand in international markets, particularly for products classified under the Aviation turbine fuel. As global aviation recovers and expands post-pandemic, jet fuel demand will remain robust. Iceland, as a hub for transatlantic aviation operations, will continue to source jet fuel, and India — with its large-scale, cost-competitive refining infrastructure — is positioned to retain and expand its market share.

The $29.9 million trade corridor between India and Iceland may appear modest in global energy terms. But it represents something profound: the integration of a major Asian economy into the energy security infrastructure of a Nordic nation, the triumph of tariff-free access over geographic proximity, and the employment of hundreds of thousands of Indian workers in the service of fuel supply chains that span continents. For Jamnagar, Paradip, and Mumbai, that flow of crude into refineries and refined products onto tanker ships is not abstract commerce — it is the engine of communities, income, and opportunity.

Data Source: Hagstofa Islands (Statistics Iceland), 2025 trade data. Employment estimates based on industry standard multipliers (5 direct, 10 indirect per $100,000 of exports) applied to the coke and refined petroleum products sector. State-level data reflects major refining hubs in Gujarat, Odisha, Maharashtra, and Karnataka.