Nayara Energy first Indian refinery to be hit by anti-Russia sanctions
NEW DELHI: Nayara Energy's refinery at Vadinar in Gujarat became the first in India to come under Western sanctions as the European Union on Friday announced fresh curbs on Russian oil exports with the aim of throttling funding for Moscow's war machine.
'For the first time, we're designating a flag registry and the biggest Rosneft refinery in India,' agencies quoted EU foreign policy chief Kaja Kallas as saying.
India responded by saying it 'does not subscribe to any unilateral sanction measures. 'We are a responsible actor and remain fully committed to our legal obligations. Government of India considers the provision of energy security a responsibility of paramount 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,' external affairs ministry spokesperson Randhir Jaiswal said in response to media queries.
The new measures include lowering the current price cap of $60/barrel, the threshold at which countries outside the G7 grouping of seven developed economies can buy Russian oil and access Western shipping as well as insurance services.
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Additionally, 105 off-radar vessels have been sanctioned, bringing the total to 223 out of a fleet of 400 oil tankers and limiting Moscow's ability to evade the price cap.
Rosneft, along with partners — commodities trader Trafigura and Russian investment firm UCP (United Capital Partners — had acquired the refinery with a capacity of 20 million tonne per annum from Essar Oil for $12.9 billion in 2017. Rosneft holds 49.1% in the venture.
An investment consortium SPV, Kesani Enterprises Company holds 49.13 per cent stake in Nayara. Kesani is owned by Russia's United Capital Partners (UCP) and Hara Capial Sarl, a wholly-owned subsidiary of Mareterra Group Holding (formerly Genera Group Holding S.p.A.
).
The sanction could have a crippling effect on the refinery and derail Rosneft's attempt to exit the venture because of sanctions made repatriation impossible.
The refinery depends on exports to Europe and Africa as a small retail network of 6,750 fuel stations limit domestic sales. Curbs on products derived from Russian oil could cloud exports, impacting operations and threatening jobs.
The curbs will also derail Rosneft's bid to exit the venture because sanctions made repatriation of profit impossible. As reported by TOI earlier, the Russian giant had initiated talks with Reliance Industries Ltd for selling its (deleting 49.1%) stake in Nayara but the asking price of $20 billion was proving to be a hurdle.,
The new price cap will be graded in a band to the market average as subdued prices rendered the present cap less effective. At current oil prices, the new cap is expected to be in the region of $47 reflecting a shaving of about 21% from the current cap, media reports said. The move is aimed at squeezing Moscow's oil revenue, the bulwark of Russian economy, without giving a supply shock to the market.
The lower cap will deepen the discounts and make Russian oil more attractive for other Indian refiners — the largest buyers, next only to China. Executives of refining companies, however, said more clarity is needed, especially on export of products, before coming to a view.
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