In a first for India, Nayara Energy's Vadinar refinery in Gujarat has been brought under Western sanctions as the European Union implemented a new set of sanctions on Russian oil exports. The restrictions are aimed at the financial resources that are supporting Russia's military campaigns.
“For the first time, we’re designating a flag registry and the biggest Rosneft refinery in India,” said EU foreign policy chief Kaja Kallas, as quoted by news agencies.
India reacted quickly, distancing itself from the unilateral nature of the sanctions. External affairs ministry spokesperson Randhir Jaiswal underscored the nation's position: "We are a responsible actor and remain fully committed to our legal obligations. Government of India considers the provision of energy security a responsibility of paramount importance to meet the basic needs of its citizens. We would stress that there should be no double standards, especially when it comes to energy trade."
The new sanctions tighten the price cap on Russian crude from $60 a barrel to a lower band in line with prevailing market levels. The cap determines the conditions upon which non-G7 nations are allowed to buy Russian oil without losing access to Western shipping and insurance facilities. The new cap is reported to be near $47 per barrel — roughly a 21% drop — to take account of further declining global oil prices.
Furthermore, the EU has blacklisted 105 additional ships used in sanction evasion, which has increased the number of sanctioned ships to 223 out of Russia's 400-tanker fleet. The action aims at cutting off Moscow's capacity to circumvent current price caps and keep oil revenues — a lifeline for its economy.
Nayara Energy refinery, which has an annual capacity of 20 million tonnes and is one of the largest facilities, was bought in 2017 from Essar Oil for $12.9 billion. The group comprises Russian energy behemoth Rosneft with a 49.1% shareholding, Trafigura and United Capital Partners (UCP). Further 49.13% is held through Kesani Enterprises Company, which is a special purpose vehicle financed by UCP and Hara Capital Sarl, a unit of Mareterra Group Holding (earlier Genera Group Holding S.p.A.).
The sanctions would severely impact Nayara's business, mainly its export to Europe and Africa. Having a fairly small domestic presence — a mere 6,750 retail fuel stations — the company relies heavily on international markets. The curbs can not only tighten exports of Russian crude-produced refined products but also hinder Rosneft's plans to exit the joint venture. Earlier, as reported by the Times of India, Rosneft had initiated talks with Reliance Industries Ltd. to offload its interest, but the projected $20 billion price tag has become an issue.
The new pricing policy is designed to slice deeper into the earnings of Russian oil without causing market disruption. Indian refiners, the world's second-largest importers of Russian oil after China, could find the cheaper barrels even more attractive. But company officials emphasize that additional information — most importantly about export provisions — is needed before deciding how the new sanctions will impact operations.
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