Rosneft says EU sanctions on its Indian refinery threaten energy security, stability

The EU's imposition of sanctions on India's Russian-owned Vadinar refinery violates international law and threatens Indian energy security and the security of the global energy market, Rosneft said in a statement over the weekend.

The new EU sanctions against Russia, unveiled July 18, are "the latest example of the extra-territorial use of politically motivated restrictions, flagrantly violating the norms of international law and damaging the economic interests of a sovereign state," Rosneft said. The Russian and Indian governments will work with the refinery's holding company, Nayara Energy, to get the sanctions overturned, Rosneft said.

It argued that it is not the "controlling" owner of Vadinar's parent, Nayara, having a stake of less than 50% -- the stake is thought to be 49%. The EU earlier described Rosneft as the "main" shareholder in the 400,000 b/d refiner, based in Gujarat state.

"The justification by the EU for imposing sanctions is completely fabricated and false. Nayara Energy is an Indian juridical entity with the economic goal of developing its asset," Rosneft said. "It pays its taxes entirely in India. The shareholders have never once received dividends, and the accumulated profit has been used exclusively for developing the refinery, as well as the company's retail network in India."

The refinery is a "strategically important asset for Indian energy, ensuring stable supplies of oil products to the country's domestic market. The imposition of sanctions ... directly threatens the energy security of India and negatively impacts its economy."

Red Sea route

India has become a major destination for Russian crude since G7 nations imposed sanctions on Russia in the wake of its invasion of Ukraine, outlawing the country's Urals crude in Europe. Russian oil tankers continue to make use of the Red Sea route for exporting oil from the Black Sea to Asia, while other shipping companies have shunned the route because of Houthi attacks. Platts, part of S&P Global Energy, last assessed Urals delivered on India's west coast at $68.46/b on July 18, well above the current $60/b price cap imposed on Russian oil deals by the G7.

The EU on July 18 announced it was lowering the price cap from Sept. 3 to $47.60/b, a move that the UK is joining, but not the US. The EU also announced a ban on oil products made in third countries out of Russian crude, a measure that could prove complicated to enforce, and could particularly affect Indian as well as Turkish refiners.