The European Union’s (EU) latest sanctions on Russian oil have significant implications for Indian companies Nayara Energy and Reliance Industries Limited (RIL). The EU’s 18th sanctions package, which reduces the Russian oil price ceiling to $47.6 per barrel, effective September 3, creates operational difficulties for Nayara Energy and challenges for RIL. Both companies, which are leading fuel exporters in India, may face exclusion from EU markets.
RIL, which has a long-term agreement to purchase crude from Rosneft, must decide whether to abandon access to discounted Russian oil supplies or lose entry to Europe’s profitable diesel market. Either choice would likely affect the company’s refining profit margins. Industry specialists suggest that enforcing import restrictions could prove challenging for the EU, as Indian refiners typically work through trading intermediaries rather than dealing directly with European customers.
Nayara Energy, which is 49% owned by Rosneft, faces comprehensive sanctions, including difficulties with banking transactions and accessing European technical support for refinery operations. The sanctions prevent Nayara from selling refined products to Europe. Industry experts note that the EU’s decision may be inconsistent, as European nations dependent on Rosneft would likely have secured alternative supply arrangements before implementing this measure.
The Indian government has opposed the sanctions, emphasizing the priority of energy security. The Ministry of External Affairs (MEA) stated that India maintains its position against unilateral sanctions and prioritizes energy security as crucial for meeting citizens’ essential requirements. The EU’s decision may advantage Indian state-operated companies like Indian Oil, HPCL, and BPCL, which have minimal European exports whilst being significant purchasers of Russian oil.
The EU’s implementation of the price cap without US support may face difficulties, as oil transactions are denominated in dollars and processed through American financial systems. The US has not endorsed the EU’s initiative but is independently increasing pressure on Russia by proposing a 100% secondary tariff until it negotiates peace with Ukraine. Industry sources indicate that the EU’s decision was perceived as inconsistent, and the Indian government’s stance against unilateral sanctions may lead to further discussions and potential solutions.