Russia-backed Indian refinery Nayara Energy is faced with a fresh challenge. India’s largest public sector lender State Bank of India (
SBI) has stopped processing international trade and forex transactions for Nayara Energy following recent US tariff hikes. The bank's decision aims to avoid any potential sanctions from the US or the European Union, a source told ET. US President Donald Trump has announced a 25% additional tariff on India for its
crude oil trade with Russia.
Nayara Energy was formed after the Rosneft-led purchase of Essar Oil's Vadinar refinery (20 mtpa) in August 2017. The organisation sources crude oil internationally and holds approximately 8% of India's refining capacity, which exceeds 256 MMTPA, ranking second in Asia.
The company maintains a nationwide network of more than 6,500 fuel retail outlets.
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Symbol of India-Russia ties takes a hard hit! How Russia-backed Indian refinery Nayara Energy is navigating a perfect storm - big hurdles challenge growthWhy SBI has stopped Nayara transactions
Nayara Energy has been facing challenges since July, when the European Union enacted its 18th sanctions package which limited fuel imports from Russia and established a $47.6 per barrel ceiling on Russian crude prices.
"These European sanctions imposed on July 18 were the last straw. All banks with international branches and operations have to adhere to the government laws to ensure that they do not attract regulatory scrutiny," said the person cited above. "The last European sanctions along with the US tariffs imposed after that have made the processing of transactions for Nayara difficult."
"This call has been taken by the bank very recently after the US sanctions to ensure compliance with international rules," said the person cited above. "There has been no government direction, but every bank has to take a call on how to deal with these issues and SBI has done so."
Nayara Energy operates similar to Reliance Industries, processing imported crude oil into petrol and diesel for distribution across India, Europe and Middle East markets.
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Explainer: Donald Trump’s 50% tariffs - will India budge on Russia crude oil trade? State Bank of India's decision to limit transactions with Nayara Energy makes it improbable for other financial institutions to engage in business dealings with the company.
According to Bloomberg's report last week, Nayara has approached government authorities to facilitate a connection with a bank, specifically UCO Bank, to handle international transactions. This approach mirrors the arrangement UCO Bank previously employed for processing Iranian crude oil transactions.
Experts suggest that UCO Bank's minimal global footprint enables it to operate without significant concern about sanctions.
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