EU Sanctions Nayara’s Gujarat Refinery in Russia Crackdown, Raises Concerns Over India’s Energy Security

The Gujarat-based refinery owned by Nayara Energy became first in India to come under western sanctions by European Union on July 18. This move comes as part of a fresh curbs announced to target Russia’s energy sector to weaken its ability to continue the war in Ukraine.

According to The Hindu, the announcement comes just as the US Congress debates tightening sanctions on purchasers of Russian crude oil with India, China and Brazil being named by US lawmakers as countries that could face penalties. The new EU sanctions also include a lowering of the oil price cap from $60 per barrel to $47.6 per barrel. The sanctions also imposed an EU-wide import ban on refined petroleum products made from Russian crude oil and a full transaction ban on Nord Stream 1 and 2, natural gas pipelines that connect Russia and Germany.

Slovakia’s Prime Minister Robert Fico said on July 17 that his country will end its blockade of a new EU sanctions package against Russia. Slovakia had been holding up the 18th EU sanctions package against Russia over concerns regarding a separate EU plan to stop gas imports from Russia beginning in 2028, reported DW.

Listing the highlights of the 18th sanctions package, EU foreign policy chief Kaja Kallas, wrote on X, “For the first time, we’re designating a flag registry and the biggest Rosneft refinery in India.”

Russian state oil firm Rosneft holds 49.13% stake in Nayara Energy’s refinery (formerly Essar Oil Ltd.), based in Vadinar, Gujarat.

The remainder is owned by SPV Kesani Enterprises Co. Ltd., and individual investors. The refinery is India’s second largest, producing 4,00,000 barrels per day and operating 6,300 plus petrol pumps across India, as per its website, reported The Hindu.

The company has reportedly been in talks with Reliance Industries Ltd. regarding a sale of its stake.

Responding to the developments, India’s foreign ministry spokesperson Randhir Jaiswal wrote on X that the country does not subscribe to any unilateral sanction measures.

“We are a responsible actor and remain fully committed to our legal obligations,” Jaiswal stated.

“Government of India considers the provision of energy security a responsibility if 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,” Jaiswal added.

India’s Energy Security Challenge

Analysts warn the EU’s move could strain India’s energy security and increase costs, given Nayara’s significant market share.

According to Reuters, India has emerged as Russia’s top oil buyer since 2022, capitalising on discounts. India received about 1.75 million barrels per day of Russian oil in January-June this year, up 1% from a year ago.

Experts say balancing geopolitical pressures with domestic fuel needs will be a growing challenge for India.