SBI halts Nayara's overseas transactions over Russia sanctions risk

State Bank of India (SBI) stops Nayara Energy's overseas transactions to avoid possible US and EU sanctions linked to Russian ownership, as banks grow cautious

The State Bank of India (SBI) has stopped processing trade and foreign currency transactions for Nayara Energy to avoid potential fallout from US and European Union sanctions linked to Russia, The Economic Times reported on Tuesday.

 

According to the report, the move was taken recently to ensure compliance with global rules. “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,” the report said, citing a person familiar with the matter.

 

Why SBI took this step

SBI, India’s largest lender, has a significant international presence, including branches in the US and Europe. This means it must comply with sanctions imposed by Western authorities.

 

Why it matters

Nayara, formerly Essar Oil, was acquired in 2017 by a consortium led by Rosneft. It operates a 20 million tonne-per-annum (mtpa) refinery at Vadinar, Gujarat, one of the largest in India, and controls over 6,500 fuel retail outlets.

 

The company imports crude oil, refines it into products like petrol and diesel, and sells both domestically and overseas. It accounts for nearly 8 per cent of India’s refining capacity and 7 per cent of its retail fuel network, as earlier reported by Business Standard.

 

Why now

Nayara Energy is partly owned (around 49 per cent) by Russia’s state-backed oil company Rosneft. In July, the European Union rolled out its 18th package of sanctions against Russia, tightening restrictions on Russian fuel imports and introducing a $47.6-per-barrel price cap on Russian crude. The US followed with tariff increases and signals of stricter enforcement.

 

This triggered:

• Buyer reluctance: Many international customers reduced orders to avoid breaching sanctions.
• Banking hesitancy: Lenders with international exposure began scaling back services, fearing regulatory scrutiny.
• Bloomberg reported that Nayara has already cut run rates at its Vadinar refinery as a result of weaker export demand, though it continues to meet domestic supply needs.

 

The big picture

For banks like SBI, facilitating transactions for companies with substantial Russian ownership carries the risk of secondary sanctions — measures that could cut them off from key global payment systems or markets.

 

SBI’s decision mirrors a broader trend of financial institutions becoming cautious in dealing with Russian-linked entities.

 

What’s next

Nayara is exploring partnerships with Indian banks that have limited or no exposure to Western markets. UCO Bank has emerged as a potential option — it previously facilitated oil trade with Iran in 2018 during another period of sanctions.

 

Such banks could process payments domestically and reduce reliance on dollar- or euro-denominated transactions, lowering the risk of sanctions-related disruptions.