Nayara seeks Indian bank as EU sanctions disrupt payments for crude oil

Nayara Energy, partly owned by Russia's Rosneft, is struggling to access banking services after EU sanctions and is in talks with Indian lenders like UCO Bank

Oil refiner Nayara Energy is reportedly seeking support from Indian lenders after facing banking restrictions triggered by European Union (EU) sanctions. An executive from the company recently met finance ministry officials to discuss enabling domestic payments for crude oil imports, Bloomberg reported.

Nayara is considering banks like UCO Bank, which helped facilitate oil trade with Iran in 2018, due to their lower exposure to Western financial systems.

Why it matters

Nayara, partly owned by Russia’s state-backed energy firm Rosneft, was targeted in the EU’s 18th sanctions package last month. The sanctions are part of broader measures imposed against Russia following its invasion of Ukraine in 2022.

 

With Rosneft holding over a 49 per cent stake, Nayara accounts for nearly 8 per cent of India’s refining capacity and 7 per cent of its retail fuel network. Since the imposition of sanctions, large banks have reportedly become hesitant to engage with Nayara, even for routine transactions.

Local lenders emerge as alternatives

Facing reluctance from major financial institutions, Nayara is now considering working with Indian banks that have minimal exposure to global financial systems. According to Bloomberg, UCO Bank has emerged as a potential partner, as it previously facilitated India’s oil trade with Iran in 2018 during a similar period of international sanctions.

These banks could help Nayara maintain wire transfers and other day-to-day transactions while avoiding the risk of additional penalties.

Supplies remain steady

Business Standard earlier reported that even though the company lost some of its export markets and rejigged the top management, Nayara has kept India’s domestic fuel market well supplied.

The refiner, which owns a 400,000-barrel-a-day refinery on the West Coast, is reducing run rates at its refinery after the EU's sanctions prompted buyers to keep their distance, the Bloomberg report said. However, Nayara maintained healthy liquidity in July, it added.

Nayara is also continuing supplies to local refiners, officials from state-run refiners said.

More challenges lie ahead

Nayara’s operational challenges could intensify further as US President Donald Trump’s proposed 25 per cent tariff and additional sanctions on Russian trade take effect. Imports of Russian oil had increased after Ukraine's invasion, as the Indian refiners were able to benefit from the discounted rates.