Surviving the Flashpoint

Essar Oil Ltd was rebranded as Nayara Energy in mid-2018, following its acquisition the previous year, by a consortium led by Russia’s Rosneft along with Trafigura and UCP Investment Group. The new name, "Nayara," was coined from the Hindi words "Naya" (new) and "Era," symbolising the start of a new era under international ownership.

Past: India’s Oil Play and Nayara’s Russian Links.

India’s rapid growth has driven a thirst for affordable energy, making oil imports and refining a cornerstone of its economy. Nayara Energy, owning one of India’s largest refineries (Vadinar, Gujarat), became crucial by processing discounted Russian crude, especially after Western sanctions on Russia, 2022 onwards. This approach helped India bolster its energy security while keeping fuel prices manageable, despite mounting Western scrutiny over its growing ties to Russia.

Present: EU Sanctions Hit Nayara and Reshape Flows

In July 2025, the European Union (EU) intensified sanctions on Russia by targeting Nayara directly because of its 49.13 per cent Rosneft (Russian) ownership. The fallout was immediate:

✼ Operational disruption: Nayara cut refinery runs, reportedly to 70-80 per cent of capacity, down from over 100 per cent just months before, as traders and shipowners distanced themselves in fear of secondary sanctions and legal complications.

✼ Export shock: Shipments bound for Europe were cancelled, with tankers diverting mid-route, and cargo tenders (naphtha and diesel) went unawarded due to stricter terms and banking constraints.

✼ Legal and digital complications: Nayara sued Microsoft after it suspended digital services, intensifying threats to operational reliability and underscoring the reach of secondary sanctions—even involving non-EU/US companies acting in alignment with EU policies.

Present 2: Geopolitical Stakes and India’s Response

The EU’s move, openly condemned by India as an “overreach” and breach of sovereignty, highlights the weaponisation of global trade networks and marks a turning point in energy geopolitics. India argues Nayara is an Indian-registered company paying Indian taxes, serving India’s market, and not distributing profits abroad. The episode has:

✼ Exposed how foreign stakeholding and global conflicts can endanger domestic energy infrastructure and supply chains.

✼ Triggered debate about diversification: India is now even more motivated to seek new suppliers (U.S., Latin America, Middle East, Africa) and grow investment in its own refining and alternative energy projects (petrochemicals, renewables).

Future: Lessons For India

Going forward, India faces tough choices. It must balance affordable energy needs, geopolitical relationships, and expectations from both Russia and Western partners. Nayara's experience amid EU sanctions offers lessons for India’s energy security and geopolitical resilience. Briefly:

1. Diversification is Essential

Nayara’s experience shows how overdependence on any single crude source, or a limited set of export markets, can threaten operations. When Western markets and trading partners withdrew due to sanctions, Nayara was forced to cut its refining runs to as low as 70–80 per cent of capacity, with storage and export bottlenecks growing rapidly. To cushion against such shocks, India must diversify both its suppliers (beyond Russia) and its export destinations.

2. Domestic Ownership and Control Matter

Sanctions were (are) applied to a company that is majority Russian-owned - even if legally Indian, paying Indian taxes, and serving Indian markets. Protecting critical energy infrastructure may require limits on foreign stakeholding or stricter rules to ensure operational control remains firmly Indian, especially over strategic assets.

3. Geopolitics Overshadows Commercial Logic

Global political currents can rapidly override market-based trade. Nayara’s experience shows that commercial arrangements and investment treaties offer limited protection when global powers use sanctions as tools of leverage. Legal recourse, as Nayara’s suit against Microsoft suggests, may have little practical impact when digital, financial, and logistical services are withdrawn by foreign corporations aiming to comply with overseas laws.

4. The Need for Technological and Strategic Autonomy

Reliance on foreign-origin technology (as with Nayara’s dependence on Microsoft), or global supply chains vulnerable to sanctions, can paralyse essential operations overnight.

5. Agility in Policy and Diplomacy

India’s strong diplomatic response—openly rejecting the “extraterritorial” nature of EU sanctions and defending Nayara as an Indian entity—signals the importance of assertive, agile diplomacy. Future resilience will depend on skilfully balancing relations with Western, Russian, and new energy partners, leveraging India’s large market and strategic location.

6. The Role of Alternative Energy & Innovation

Long-term strategies to buffer against external political risks include increasing investments in renewables, green hydrogen, and crude-to-chemicals projects; areas in which Nayara and other refiners are now pushing forward.

Conclusion

Overall, Nayara’s case underlines that energy security is no longer just about supply—it is about controlling ownership, technology, diplomatic narratives, and market agility. Robust, forward-looking policies that address these risks will be essential for India to ensure uninterrupted growth and global negotiating strength. India’s energy strategy, now more than ever, needs agility, robust diplomatic engagement, and safe domestic investment to withstand further shocks and remain on its growth path.

The writer is Visiting Faculty, IMT Ghaziabad, and former Advisor, NHAI, GoI. Views expressed are personal