Sanctions-Hit Nayara Energy Struggles to Keep Operations Running With Help From New Delhi

Nayara Energy, a Russian-backed oil refiner in India, is facing one of its toughest crises in years. Since the European Union imposed sanctions on July 18, 2025, the company has been shut out of many international markets. These penalties have forced Nayara to divert more fuel to the domestic market and find alternative ways to continue operations. The situation has also brought the Indian government into close support, helping the company while trying to avoid conflicts with Western nations.

Railways and Coastal Ships: Emergency Workarounds

Since late August, Nayara has increased its use of railway transportation for fuel. Two or three trains, each carrying 50 tanker cars, now ship fuel daily from the Vadinar refinery in western India to inland depots. This is more than double the previous rail usage.

Because the refinery is not connected to pipelines, it has also relied on coastal ships to transport fuel. India has temporarily allowed the use of four ships, including the E.U.-sanctioned Leruo and two other vessels, to help keep operations moving. Nayara is seeking approval for two more ships to continue its work.

Reduced Refinery Output

Nayara’s Vadinar refinery, which can process 400,000 barrels per day, is running at 70-80% of capacity, down from over 100% previously. This drop reflects the difficulty in finding international buyers and in arranging bank payments, which have been blocked due to the sanctions.

The refinery, whose biggest shareholder is Russian state oil giant Rosneft, has had to rely exclusively on Russian crude oil after supplies from Iraq and Saudi Arabia were cut off. This dependence makes Nayara vulnerable to any further sanctions or disruptions.

Financial Challenges

One of the biggest immediate issues for Nayara is making international payments. The State Bank of India, the company’s main banker, stopped processing foreign transactions in August due to the sanctions. Nayara officials have met with finance ministry and bank representatives to resolve the problem but have not yet found a solution. Without access to banking, the company struggles to import crude oil and export fuel.

Export Challenges and Adjustments

Before the sanctions, Nayara exported about 30% of its output, sending fuel to Asia and northwest Europe. Since the penalties, exports have been redirected to the Middle East, Turkey, Taiwan, and Brazil. Some shipments are handled through alternative trading arrangements, but payments are limited because bank accounts are blocked.

In September, Nayara exported 2.23 million barrels of fuel, compared with an average of 3.3 million barrels per month earlier in the year. The company continues to search for buyers and workarounds, but the daily operations feel like “firefighting”, according to a company official who asked not to be named.

Government Support

The Indian government has stepped in to support Nayara without provoking Western backlash. Support measures include:

Providing tanker trains for fuel transportation.

Approving coastal vessels for moving products.

Helping the refinery source equipment and materials needed for maintenance.

The government’s involvement reflects the close ties between New Delhi and Moscow, as well as the strategic importance of Nayara in India’s growing energy sector.

Future Risks

Experts warn that long-term support for Nayara may not be sustainable unless global politics shift. A resolution between Russia and the U.S. or progress in the Russia-Ukraine conflict could ease pressure. Meanwhile, the company remains under constant threat of additional sanctions, and every day brings new operational challenges.

Importance in India’s Energy Sector

Nayara operates over 6,500 gas stations and accounts for about 8% of India’s refined products output. Its ability to continue operations is critical not just for the company but for India’s domestic fuel supply. Maintaining refinery runs and exports while navigating sanctions is a delicate balancing act for the company and the government.