Russia-supported Indian refinery Nayara Energy is now dealing with a new problem. India’s biggest public bank, SBI, has stopped handling international trade and foreign currency transactions for Nayara Energy because of recent US tax increases. The bank made this decision to avoid possible penalties from the US and the European Union, according to a source from ET. US President Donald Trump announced an extra 25% tax on India’s crude oil trade with Russia.
Nayara Energy was created after Rosneft bought Essar Oil’s Vadinar refinery (20 mtpa) in August 2017. The company gets crude oil from around the world and owns about 8% of India’s refining ability, which is more than 256 MMTPA, making it the second biggest refiner in Asia. The company has a network of more than 6,500 fuel stations across the country.
Why SBI stopped Nayara’s transactions
Nayara Energy has had problems since July, when the European Union introduced its 18th set of sanctions. These sanctions restricted fuel imports from Russia and set a price limit of $47.6 per barrel for Russian crude oil.”These European sanctions on July 18 were the final push. All banks with international operations must follow government laws to prevent regulatory problems,” said the person mentioned earlier. “The last European sanctions along with the US tariffs that followed made doing transactions for Nayara very hard.””This decision was made by the bank recently after the US sanctions to follow international rules,” the same source added. “There was no government order, but every bank has to decide how to handle these issues, and SBI chose its path.”
Nayara Energy works like Reliance Industries, taking in imported crude oil and turning it into petrol and diesel for sale in India, Europe, and the Middle East.The decision by SBI to limit dealings with Nayara Energy makes it less likely that other banks will do business with the company. A report from Bloomberg last week said Nayara has reached out to government officials to connect with a bank, specifically UCO Bank, to handle international transactions. This is similar to how UCO Bank used to handle Iranian crude oil deals. Experts think UCO Bank’s small global presence lets it do business without worrying much about sanctions.
