EU and US sanctions hit India’s oil market – what lies ahead for Nayara?

The Russian-owned Indian refinery Nayara announced on Thursday that it is in talks with the government and other partners about ways to maintain operational stability after being added to the EU sanctions list last month. The situation in India’s oil market continues to evolve.

The privately owned company, majority-owned by Russia’s Rosneft, sells around 70% of its refined products in the Indian market through a network of 6 600 petrol stations. In a public statement, the company said: “Our retail outlets are operating as usual while we work to ensure uninterrupted fuel supplies across India.”

The sanctions are gradually taking their toll on the company. Several executives have resigned, and some shipping companies are seeking to terminate their contracts with Nayara. The refinery is therefore reportedly in talks with India’s Ministry of Shipping to secure the transport of its oil. It is also facing payment problems and other complications arising from the sanctions policy.

Since Russia’s invasion of Ukraine began, India has become one of the main customers of Russian oil companies, after Western countries imposed sanctions on Russia. Donald Trump recently increased pressure on India with a 25% tariff, and some Indian companies, including Nayara, were included in the EU’s 18th sanctions package.

India’s evolving situation

Oil accounts for around 25% of India’s total energy supply, according to the IEA. Russian oil currently makes up around a third of India’s oil imports, a significant increase from before the invasion, when its share was minimal. Unlike state-owned refineries, which paused some purchases in early August and began resuming them after prices changed, private companies such as Reliance Industries and Nayara Energy have long-term contracts to buy Russian oil.

India has accused the EU and the US of hypocrisy and made clear that it will not change its policy towards Russia. According to The Hindu, India bought around 2 million barrels of Russian oil per day in August. However, some of these contracts had been agreed in advance, and any policy change will only become apparent in the coming months.

The situation changed little after Donald Trump met Vladimir Putin on Friday. Trump said, however, that he was considering imposing an additional 25% tariff on top of the 25% already in place. He also warned that countries buying Russian oil—the biggest buyers are China and India—could face further secondary sanctions.

According to The Hindu, some Indian companies are considering diversifying their supplies and buying more from the US, West Africa or Latin America. Similar reports have emerged about Reliance Industries, which is reportedly considering purchases from the Middle East.

Indian refineries are technically configured in such a way that around 60% of them would have difficulty processing Russian oil. Import shares are therefore unlikely to change significantly; companies are more likely to be seeking greater flexibility. Russian oil is thus likely to retain its current share of the Indian market.