/Reuters Agency
Since the end of August, two or three trains with 50 tanker wagons have been transporting fuel every day from the Nayara Energy refinery, located on the west coast of India, to depots in the interior of the country, representing more than double the previous use of the railway to move diesel and gasoline.
Excluded from many international markets due to the severe sanctions imposed by the European Union on July 18, the Russian-owned refinery has been forced to divert more fuel to the domestic market and seek new export customers, among numerous alternative solutions, large and small, forced by the bloc’s penalties.
The ongoing crisis at Nayara has forced the Indian government to provide enough support to maintain its operations, while avoiding actions that may provoke a backlash from the West, according to government and company sources.
New Delhi’s measures to help the refinery, controlled by a friendly nation, include supplying tanker trains and approving coastal vessels to transport its products.
The ownership of Nayara places it at the center of the close historical ties between New Delhi and Moscow, a relationship that puts India at odds with its Western allies.
The refinery, whose main shareholder is the Russian state oil giant Rosneft, depends exclusively on Russia for importing oil, after Iraqi and Saudi crude supplies were suspended following the European Union’s measure, making it vulnerable if flows are disrupted due to stricter sanctions or increased pressure from the United States.
“The government is trying to cover two possibilities: backing Nayara while remaining aware of the fact that there will be sustained global pressure to tighten sanctions,” said Amitendu Palit, a senior researcher at the Institute of South Asian Studies at the National University of Singapore.
“Long-term support may not be sustainable unless the entire global dynamic changes, such as a resolution between Russia and the U.S. or progress in the Russia-Ukraine conflict,” he added.
Nayara, which has condemned the sanctions, did not respond to a Reuters email requesting comment for this story.
India’s Ministry of Petroleum and Rosneft also did not respond to requests for comment.
Headquartered in Mumbai, Nayara is a key player in India’s fast-growing fuels sector, accounting for 8% of refined products output and operating more than 6,500 service stations.
It has been forced to cut crude processing at its Vadinar refinery — which has a capacity of 400,000 barrels per day — to 70-80% of its capacity, from previously operating at 104%, due to difficulties finding export buyers for its fuel and banks to facilitate payments, according to sources familiar with the refinery’s operations.
Nayara, whose refinery is not connected to a pipeline network, increased the use of tank wagons to transport fuel after sanctions made it difficult to charter coastal vessels or sell products for export, forcing it to redirect output to the domestic market.
Access to more tank wagons was facilitated by New Delhi, which also temporarily allowed Nayara to use four coastal vessels, according to the sources, including the Leruo — sanctioned by the European Union — and two shadow fleet ships: the Garuda, flagged by Guinea-Bissau, and the Chongchon, flagged by Djibouti.
Nayara is seeking government approval to use two additional coastal vessels, according to sources. It is also requesting government assistance to acquire equipment and materials it is struggling to source due to sanctions, in preparation for a maintenance shutdown scheduled for February, Reuters reported. Meanwhile, it is considering postponing that shutdown until April while it seeks alternative raw materials, the sources said.
“We are under constant threat,” a senior company official said on condition of anonymity due to the sensitivity of the matter, pointing to concerns that the vessels the company is currently using could be targeted by future Western sanctions.
“We never anticipated we would be hit so directly. Now, every day feels like putting out fires.” Nayara – a name combining Hindi and English words for New Era – was called Essar Oil when it was acquired in 2017 by Rosneft along with a consortium that included the Russian fund UCP and the global trading house Trafigura, which later sold its stake. Until 2022, Nayara sourced oil from various countries.
That year, India began buying discounted Russian oil in bulk after the West began sanctioning Moscow for its invasion of Ukraine, becoming the largest buyer of sea-borne Russian crude.
Recently, these purchases have caused a deep diplomatic rift between New Delhi and Washington, with President Donald Trump doubling tariffs on imports from India to 50% as punishment.
Company sources have indicated that resolving the maintenance situation and being able to make international payments are the biggest immediate challenges for Nayara.
Its main bank, the state-owned State Bank of India, stopped processing commercial and forex transactions for the refinery in August due to concerns over EU sanctions, according to sources.
SBI did not immediately respond to a request for comment.
Nayara officials have met with representatives from the Ministry of Finance and banks in an attempt to resolve the banking problem, but have not yet found a solution, according to government sources, which limits Nayara’s ability to import crude and export fuel using foreign currencies.
Before the sanctions, Nayara exported about 30% of its production, mainly through transactions with trading firms from the West, Middle East and Asia for products shipped to Asia and northwest Europe, according to traders and shipping data.
Since then, Nayara’s shipments have been destined for the Middle East, Turkey, Taiwan and Brazil, with at least 16 shipments of diesel, gasoline and jet fuel shipped on EU-sanctioned vessels, data shows.
Some of those recent exports were made through traders with payments offset against crude supplies, industry sources said.
In September, Nayara exported 2.23 million barrels of fuel, according to Kpler data, compared to an average of 3.3 million barrels per month between January and June.
“We are interested in buying from them,” said a trader based in North Asia. “I was told they cannot receive payments because their bank accounts are blocked,” he concluded.
