CHENNAI: Russian oil major Rosneft’s proposed sale of its 49.13% stake in India-based Nayara Energy has hit a significant obstacle following the European Union’s latest round of sanctions targeting Russia’s oil sector. The sanctions, announced on July 18, have directly impacted Nayara’s operations and complicated Rosneft’s efforts to divest its interest in the company.
Rosneft has been exploring exit options from Nayara for some time, citing difficulties in repatriating dividends due to existing sanctions. Preliminary discussions had reportedly taken place with several Indian conglomerates, including Reliance Industries, Adani Group, and JSW Group. However, the valuation of Nayara Energy—estimated at over $20 billion—and geopolitical considerations had already made the process complex before the latest sanctions.
It may be recalled that several governments and international organizations—led by the United States and the European Union—imposed sanctions on Russian individuals and entities in response to the annexation of Crimea by the Russian Federation and the 2022 invasion of Ukraine.
There were mainly three types of sanctions imposed on Russia, including ban on provision of technology for oil and gas exploration, ban on provision of credits to Russian oil companies and state banks, travel restrictions on the influential Russian citizens close to President Putin and involved in the annexation of Crimea.
Nayara’s Vadinar refinery in Gujarat has been designated for restrictions by the EU’s 18th sanctions, citing its ties to Rosneft and its role in refining Russian crude. The new measures include asset freezes, limits on financial and shipping services, and bans on importing petroleum products that are refined from Russian oil, even if processed in third countries such as India.
These developments have significantly raised the risk for any potential buyer. The restrictions have already begun to affect Nayara’s operations—most notably, a BP-chartered tanker reportedly left the port without loading crude following the sanctions announcement. Nayara has since adjusted its export payment terms, requiring advance payments to navigate the tightening compliance environment.
Rosneft has strongly criticised the EU’s actions, calling them unjustified and an infringement on Indian sovereignty. Nayara Energy also issued a statement opposing the sanctions and is reportedly exploring legal options to challenge the designation. Both entities have argued that Nayara operates as an independent company and that Rosneft does not exert control over its operations.
The latest sanctions now cast serious doubt over Rosneft’s ability to proceed with the stake sale. Indian companies that were previously approached are likely to reassess their interest due to legal and reputational risks. The potential for a deal has become increasingly uncertain unless the geopolitical climate improves or exemptions are carved out through diplomatic or legal channels.
In the meantime, the Indian energy sector faces broader implications, with Nayara needing to find alternative markets and methods for exporting refined products. Analysts suggest that Indian refiners may need to restructure supply chains and trading strategies to manage the evolving sanctions landscape.
While the path forward remains unclear, Rosneft’s attempt to exit its investment in Nayara Energy is now stalled amid growing international pressure. The sanctions complicate its ownership, operations, and deal-making.