It takes a lot to shake confidence in Reliance Industries Ltd, 500325 0.80% India’s most valuable company. An unprecedented windfall tax on fuel exports, which pushed the stock down by as much as 9% on Friday, seemed to do the trick.

But even a big new tax isn’t enough to end bumper profits at the firm’s energy wing—thanks to cheap Russian oil.

On Friday, India joined the U.K. and Italy in announcing new taxes on energy companies to finance a ballooning fiscal deficit. India’s government said diesel and gasoline exports would attract levies of 13 rupees—equivalent to around 16 cents—and 6 rupees per liter, respectively. No sunset date has been given. Reliance shares, after their steep drop, regained a bit of ground by the end of the day Friday and were flat Monday.

Reliance’s stock performance since 2021Source: FactSetNote: $1= 78.91 Indian Rupees
2021’221700180019002000210022002300240025002600270028002900Indian Rupees

Reliance, India’s top fuel exporter, has seen its gross refining margin shoot through the roof as an energy crisis has gripped the world following Russia’s invasion of Ukraine. Last week, Reliance’s GRM stood at a sky-high $24 to $26 per barrel, according to Morgan Stanley estimates. It isn’t surprising the government wants a share of the wealth.

Reliance exports about 58% of its refined products, according to brokerage Jefferies, meaning it is particularly exposed to this new tax. Analysts expect Reliance’s GRM to contract by $7 to $12 per barrel.

However, GRM levels are already at extreme levels. Reliance’s GRM stood at only $9.7 per barrel in fiscal year 2022 and $5.9 per barrel in fiscal year 2021, according to Nomura estimates. It expects Reliance’s GRM at $16.5 per barrel in fiscal 2023, helped by a sharp increase in discounted Russian crude in the mix

Reliance’s Jamnagar refinery has increased Russian crude imports substantially in the past three months, according to a Bernstein analysis of Kpler data. Russian crude now accounts for 25% of the total imported oil being refined at Jamnagar, up from just 5% historically.

The performance of Reliance shares, even after the windfall tax was introduced, actually tells a pretty compelling story about investors’ expectations. The stock has gained 2% since the beginning of the year versus the broader Indian benchmark S&P BSE Sensex’s 9% loss.

Extraordinary refinery earnings will get capped by the new taxes. But Reliance will continue to benefit from the West’s deteriorating relationship with Russia.