State Bank of India (SBI) has stopped processing trade and foreign currency transactions for Nayara Energy, citing concerns over potential sanctions in the wake of recent U.S. tariff hikes and European Union restrictions.

According to sources quoted by The Economic Times, the decision was taken in recent days as part of SBI’s internal compliance strategy to avoid possible U.S. and EU curbs. The move was not prompted by any government directive but stemmed from the bank’s own assessment of risks following tightening sanctions. SBI, which has significant overseas operations, is required to align with global regulatory norms.

Nayara Energy, which operates a 20-million-tonne-per-annum refinery in Vadinar, Gujarat, is partly owned by Russian oil major Rosneft, holding a 49.13% stake. In August 2017, Rosneft led a consortium to acquire Essar Oil and rebrand it as Nayara Energy. The company commands about 8% of India’s refining capacity and runs over 6,750 fuel stations nationwide.

Mounting Sanctions Pressure

Nayara’s challenges have intensified since July, when the EU’s 18th sanctions package against Russia came into effect. The measures not only tightened restrictions on Russian fuel imports but also introduced a $47.6 per barrel price cap on Russian crude. For Nayara, which imports crude oil from international suppliers including Russia, these sanctions complicated its ability to process and export fuel, particularly to Europe.

The sanctions have also put pressure on global banks involved in clearing transactions linked to the company. SBI’s move mirrors a broader trend among financial institutions to exercise caution when dealing with entities exposed to geopolitical sanctions risk.

The latest setback comes after the U.S. imposed higher tariffs last month, adding another layer of compliance complexity for companies and banks with cross-border dealings. The combined effect of EU sanctions and U.S. tariffs has significantly restricted the processing of Nayara’s trade and foreign exchange transactions.

Nayara Pushes Back

Responding to the EU action, Nayara Energy issued a strongly worded statement on Monday, calling the sanctions “unilateral” and based on “baseless assertions.” The company argued that the EU’s measures amounted to an “undue extension of authority” that ignored both international law and India’s sovereignty.

“Nayara Energy operates in full compliance with the laws and regulations of India,” the statement read. “While many European countries continue to import Russian energy through various sources, they chastise and sanction an Indian asset for processing Russian crude largely used domestically by 1.4 billion Indians and businesses.”

The company said it is exploring all legal avenues to challenge the restrictions, framing the EU’s move as discriminatory.

For now, SBI’s suspension of trade and FX transactions adds to the operational headwinds for Nayara, underscoring how geopolitical tensions are increasingly reshaping the commercial and financial environment for Indian energy companies with Russian links.