Traders and banks shun Russia-backed Indian refiner Nayara Energy

New Delhi — Major global oil traders and banks have stopped dealing with Indian refiner Nayara Energy, an affiliate of Rosneft, due to concerns about Western sanctions imposed on Russia after its invasion of Ukraine, two people with knowledge of the matter told Reuters.

Nayara itself hasn’t been sanctioned as part of the international response to what Russia’s action but sanctions are in place against Rosneft.

The Russian energy giant owns about 49% of Nayara which is India’s second-largest private refiner. Kesani Enterprises, a consortium led by Trafigura Group and Russia’s UCP Investment Group, holds 49.13%.

Most trading firms including Vitol and Glencore as well as producers in Canada, Latin America and Europe have declined to directly sell crude to Nayara, according to one of the people.

The sources were not authorised to speak to the media and declined to be identified.

Nayara was now dependent on state-run Middle Eastern producers, Chinese traders, companies supplying Russian oil as well as local crude oil producers for its 400,000 barrels per day Vadinar refinery in western Gujarat state, they said.

“It is increasingly becoming difficult for the company,” said one of the sources, adding that it has been unable to hedge for cracks and inventory.

Companies that have declined to deal with Nayara include Phillips 66, Occidental Petroleum, Cepsa , Equinor, Gunvor, Koch, Petrogal, Respsol, Shell, Suncor Energy, Ecopetrol and TotalEnergies, the second person said.

Banks and other firms that have refused to work on new hedging positions for Nayara include Citigroup, Morgan Stanley, BNP Paribas, JPMorgan, France’s Engie as well as the core banking units of Mitsubishi UFJ Financial Group and Sumitomo Mitsui Financial Group, they said.

The trading firms, companies and banks either declined to comment or did not respond to emails seeking comment.

Nayara, which accounts for 8% of India’s refining capacity, said it has long-standing relationships with its suppliers, works with a diverse set of suppliers and has appropriate contracts for the purchase of crude oil.

“Apart from honouring the long- and shorter-term contracts, our suppliers are also offering, and we pick up crudes on a spot basis on competitive terms,” it said in an emailed statement.

Nayara has been a key buyer of Russian oil, snapping up the discounted product shunned by some Western companies and countries. The higher intake of Russian oil and improved product cracks helped Nayara’s quarterly profit climb to a record 35.6bn Indian rupees ($446m) in the April-June quarter.

Those results, however, mask concerns about its operating environment. Some foreign banks and India’s HDFC Bank have stopped offering trade credits for oil imports, banking and industry sources said in April.

India’s CARE Ratings has also placed Nayara’s long-term ratings on “credit watch with negative implications” due to the sanctions against Moscow.

Some of Nayara’s top management officials including its CFO officer have left since Western nations imposed sanctions on Russia. The company hasn’t elaborated on the reasons for the departures.

Reuters