The State Bank of India (SBI) has halted processing trade and foreign currency transactions for Nayara Energy to avoid potential sanctions, following recent tariff increases by the United States, The Economic Times reported on Tuesday.
A person familiar with the matter told ET that the decision was taken to ensure compliance with international regulations.
“This call has been taken by the bank very recently after the US sanctions to ensure compliance with international rules. There has been no government direction, but every bank has to take a call on how to deal with these issues and SBI has done so,” said the person.
In August 2017, a consortium led by Russian oil firm Rosneft acquired Essar Oil’s Vadinar refinery and renamed it Nayara Energy. The company imports crude oil and accounts for around 8 per cent of India’s refining output, which totals over 256 million tonnes per annum, the second largest in Asia. Nayara also operates more than 6,500 fuel stations in India.
Like Reliance Industries, Nayara imports crude oil and refines it into fuels such as petrol and diesel for sale in India and in overseas markets, including Europe and the Middle East.
Impact of sanctions
The company’s challenges escalated in July when the European Union announced its 18th sanctions package against Russia, restricting fuel imports and introducing a price cap of $47.6 per barrel on Russian crude.“These European sanctions imposed on July 18 were the last straw. All banks with international branches and operations have to adhere to the government laws to ensure that they do not attract regulatory scrutiny,” the person cited above said.
The person added that the last European sanctions along with the US tariffs imposed after that have made the processing of transactions for Nayara difficult.
