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Nayara Energy – An Indian target of western sanctions against Russia

Since the beginning of the Russian military operation in Ukraine, many countries have slapped sanctions of various magnitudes on the Russian government and mainstream politicians. Along with renowned personalities, several companies and business entities based in Russia also faced the heat of Western sanctions.

Numerous multinational companies owned by Russian entities faced difficulties in doing business as their customer entities feared sanctions will apply to them if they continue doing business.

One such company gravely impacted indirectly by Western sanctions is Nayara Energy.

Nayara Energy based in Mumbai operates the second-largest refinery in the country in Vadinar, Gujarat.

According to a report by Reuters News Agency, oil traders from across the world and various international and domestic banks have reportedly declined to do any kind of business or transactions with Nayara Energy.

Nayara Energy which was formerly known as Essar Oil was acquired by Russian oil giant Rosneft, Trafigura and United Capital Partners in 2017.

Even though no country has specifically put on sanctions against Mumbai-based entity, Rosneft oil company based in Moscow has sanctions against it due to its close relationship with the Russian government. Financial statements suggest that Rosneft oil company owns a 49.13% stake in Nayara Energy through a Singapore-based company named Rosneft Singapore Pte Limited.

The fear of sanctions has forced several trading firms and oil producers in the Americas and Europe to decline any kind of trade of crude oil with Nayara energy.

Various multinational commodity trading firms such as Glencore PLC based in Switzerland, and Vitol based in Geneva, has suspended the trade of oil with Nayara Energy since the beginning of the Russian special military operation in Ukraine.

Major oil firms including Occidental Petroleum Corp, Petrogal, Shell, Ecopetrol and total energy have declined to conduct oil trade with refining company.

As Western countries began sanctioning Russia and companies based in Russia, numerous top management officials have left Nayara energy including the chief financial officer of the company. Dr. Alois Virag is the current chief executive officer of the company.

The company which has close ties with Russian oil producers and similar companies are also finding it difficult to finance and settle bills of its business as multinational banks including Citygroup, Morgan Stanley, J.P. Morgan and BNP Paribas have refused to work for the refining company.

Various new agencies reported in April that HDFC Bank based in India has also stopped offering services such as trade credits for oil imports and banking services to Nayara energy.

The company is currently depending upon oil producers in Middle East countries and commodity traders from China for the supply of oil.