Economy

Uco Bank to the Rescue: How India’s Move Keeps Nayara Energy Refineries Running Amidst EU Sanctions

Uco Bank will process Nayara Energy’s payments after EU sanctions cut its banking access, aiding India‘s energy security.

byAndres Castro

September 16, 2025, 9:11 AM

The webpage of Nayara Energy Limited, an Indian petroleum company, shown on a mobile phone screen in front of the company's logo. By T. Schneider / Shutterstock.com.

Executive Summary

The Indian government has instructed state-run Uco Bank to manage payment processing for Nayara Energy, an Indian refiner partially owned by Russia’s Rosneft, following EU sanctions.

EU sanctions, imposed due to Nayara’s ties to Rosneft, have led to its exclusion from major financial institutions, forcing it to reduce refinery runs and seek government aid.

This government intervention is critical for India’s energy security, as Nayara Energy contributes significantly to the nation’s refining capacity and retail fuel network.

The Story So Far

Nayara Energy, an Indian refiner with significant ownership by Russia’s Rosneft PJSC, has been severely impacted by European Union sanctions imposed in July, leading to major Indian and international financial institutions ceasing to process its transactions due to fears of Western reprisals. This financial blockade threatens Nayara’s operations, even though it accounts for a crucial 8% of India’s refining capacity. Consequently, the Indian government is intervening to ensure the company’s continued operation, balancing its energy security needs against the complexities of global sanctions.

Why This Matters

The Indian government’s intervention, by tasking Uco Bank to manage Nayara Energy’s transactions, directly counters the impact of EU sanctions, ensuring the continued operation of a crucial refiner and safeguarding India’s energy security. This move highlights India’s strategic imperative to maintain vital energy supplies amidst global geopolitical pressures, while potentially exposing the state-run bank to increased scrutiny from Western financial institutions.

Who Thinks What?

The Indian government views Nayara Energy’s continued operation as crucial for national energy security and has tasked Uco Bank with managing its payment processing to circumvent EU sanctions.

Nayara Energy is facing severe operational and financial challenges due to EU sanctions, leading to reduced refinery runs and a need for government intervention to access banking and shipping services.

Major financial institutions, such as the State Bank of India, are unwilling to process Nayara’s transactions, citing concerns over potential Western reprisals and the risk to their access to the global financial system.

The Indian government has reportedly tasked state-run Uco Bank with managing payment processing for Nayara Energy, an Indian refiner partially owned by Russia’s Rosneft PJSC, following European Union sanctions that have severed the company’s access to both domestic and international financial institutions. This strategic intervention aims to maintain operations for Nayara, which accounts for a significant portion of India’s refining capacity, after it faced severe banking restrictions due to its Russian ties.

Government Intervention and Uco Bank’s Role

According to a report by The Economic Times on Tuesday, senior executives from Uco Bank met with top officials at the finance ministry, who specifically requested the mid-sized state-owned lender to take the lead in executing Nayara’s transactions. Uco Bank was reportedly chosen for this critical role due to its prior experience in facilitating oil trades with Iran, another nation subject to international sanctions.

The move is expected to provide Nayara with a vital channel to sustain its operations amidst the financial blockade. While the core mandate has been established, operational specifics, including the preferred currency for transactions, are still under discussion and being finalized.

Impact of EU Sanctions on Nayara Energy

The European Union imposed sanctions on Nayara Energy in July this year, citing its significant ties to Russian oil giant Rosneft PJSC, which holds just over 49 percent of the company. These sanctions have had a profound impact on Nayara’s financial dealings, leading to its exclusion from major lenders.

Key financial institutions, including the State Bank of India, have ceased processing Nayara’s trade and foreign currency transactions. This reluctance stems from concerns about potential Western reprisals that could jeopardize their access to the global financial system. Consequently, Nayara has been compelled to reduce refinery runs and demand advance payments from buyers to manage its cash flow.

The challenges extend beyond banking; last month, Nayara sought government assistance in securing vessels after local shipowners reportedly stopped working with the company, highlighting the pervasive ripple effect of the sanctions.

India’s Energy Security Imperative

Nayara Energy plays a crucial role in India’s energy landscape, contributing approximately 8 percent of the nation’s refining capacity and 7 percent of its retail fuel network. Ensuring its continued operation is therefore considered vital for India’s energy security.

The situation underscores the broader dilemma faced by India as it navigates the complex global market dynamics. The nation is actively working to balance the risks of compliance with Western sanctions against its fundamental need to secure reliable energy supplies amidst the far-reaching impact of sanctions on Russian-linked entities.