Decoding UK Sanctions On Russian Oil Companies, Nayara: What Indian Firms Should Know

On October 15, 2025, the United Kingdom government announced its most comprehensive sanctions targeting 90 entities, individuals and ships, involved in supporting the Russian energy sector. The measures directly designate Rosneft and Lukoil — two of the world's major oil companies, which were recently sanctioned by the United States — with the aim of cutting off the energy revenues that finance Russia's war campaign in Ukraine.

This sanctions package encompasses not only the Russian petroleum giants themselves but also the international entities that facilitate their operations, including 44 tankers in the “shadow fleet” transporting Russian oil, four Chinese oil terminals, seven specialised LNG tankers, and Nayara Energy Ltd — an Indian refining facility that imported 100 million barrels of Russian crude oil valued at more than $5 billion during 2024.

Additionally, the UK has introduced a ban on importing petroleum products that have been refined in third countries using Russian-origin crude oil, with the government declaring that they are removing Russian oil from global markets to bolster Ukraine's strategic position and enhance British national and energy security.

The sanctions demonstrate coordinated action with the UK’s allies, with the Chancellor meeting G7 Finance Ministers and attending a Ukraine roundtable to rally global partners to cut off revenues reaching the Russian regime. By systematically dismantling Russia's ability to fund its war through energy revenues and military supply chains, and coordinating with international partners, the UK aims to force an end to the conflict whilst simultaneously strengthening European and British security.

The UK sanctions represent a significant escalation in Western efforts to curtail Russian oil revenues, with Indian companies caught in the crossfire. Whilst India maintains its sovereign right to purchase energy from any source and rejects unilateral sanctions, the practical impact may include increased compliance costs, potential difficulties in payment mechanisms and shipping arrangements, and mounting pressure to gradually reduce Russian oil imports.

The Office of Financial Sanctions Implementation has published a “General Licence – Russian Oil Majors Wind Down” permitting a wind-down of transactions involving Rosneft or Lukoil by 29 November 2025. Also, a separate wind-down licence applies to transactions involving energy entities like Nayara Energy Limited and other designated entities, expiring on 13 November 2025. This necessitates Indian Companies to break all their ties with these “Designated Persons” by the respective deadlines, requiring urgent review of existing contracts, supply arrangements, and payment obligations.

The announced UK sanctions prohibit the import of oil and oil products that are consigned from Russia and goods that originated in Russia. This means that even if the immediate place the goods were shipped from was not Russia, the prohibition may still apply. The impact is further amplified by the UK's ban on imports of petroleum products refined in third countries from Russian-origin crude oil, creating complex supply chain tracing requirements.

As the world's third-largest oil-importing and consuming country, India relies on Russia as its single largest crude oil supplier, accounting for approximately 36 per cent of total imports in financial year 2025. The UK sanctions regime threatens to disrupt these critical energy supplies and eliminate the substantial economic benefits derived from discounted Russian crude, which have generated savings of approximately $5 billion annually for the Indian economy.

The sanctioned 44 tankers in the “shadow fleet” transporting Russian oil loaded approximately 89.1 million barrels of crude and refined products from Russian ports between January and September, or 327,000 barrels per day, demonstrating the significant logistical impact these sanctions could have on Russian oil flows to India and other Asian markets.

Also, Russian oil traders have indicated that the UK sanctions will impact ship insurance availability for Russia, and ships enroute to Asia, which are being insured by British companies. This will in turn affect Indian companies' crude oil imports in the near future, potentially leading to supply disruptions and increased freight costs.

The UK sanctions on Russian oil companies have created various difficulties for Indian companies as Western shipping companies, insurance companies, banks and other involved entities have refused to provide their services for transactions related to Russian oil.

Furthermore, considering the geopolitical trend, Russia-related EU sanctions and with Washington exerting pressure on China, India and Japan to reduce their Russian oil purchases, similar U.S. sanctions targeting Russia’s energy sector is a likely possibility. Considering India’s substantial dependence on Russian oil imports, the global sanctions framework may effectively bring the industry to a halt, at least for the time being.

The UK sanctions specifically targeted Nayara Energy, a leading petroleum company, which operates one of India's largest refineries in Vadinar, Gujarat. Rosneft, itself a direct target of the UK sanctions, owns a 49.13% stake in Nayara, and is responsible for 6% of the global and nearly half of all Russian oil production as per the Foreign, Commonwealth and Development Office (FCDO).

Nayara already faced severe hardships after the imposition of European Union Sanctions and had to rewire its ownership structure and business relationships while facing difficulties in securing non-Russian crude supplies.

Additionally, whilst the U.S. has not yet imposed sanctions on Nayara Energy Limited, the possibility remains significant given several converging factors — potential coordination amongst western allies on Russia sanctions policy, Rosneft's stake in Nayara establishing a clear link to sanctioned Russian entities and the recent imposition of a 25% tariff on Indian imports of Russian oil. Overall, these sanctions will have a huge impact on private companies in India, which are procuring about two-thirds of their crude oil requirements from Russia-origin crude.

The implementation of UK's new sanctions has created considerable geopolitical and economic uncertainty for Indian companies engaged in crude oil trading and refining, necessitating the adoption of the following strategic measures.

Indian enterprises should maintain continuous oversight of the shifting sanctions framework imposed by the UK, EU and other Western jurisdictions. Understanding these evolving legal and trade environments can aid companies in adjusting compliance strategies accordingly and anticipating future regulatory developments.

Given the UK government's stated intention to continue escalating pressure on Russia's oil sector, companies should expect further regulatory developments and maintain robust monitoring systems to track sanctions announcements, amendments to existing measures, and enforcement actions.

Indian companies must conduct comprehensive assessments of their import-export operations to ensure adherence to the final sanctions structure and regulatory requirements, thereby securing continued access to crude oil imports whilst avoiding prohibited transactions. The sanctioning of the 44 tankers and the UK’s ban on imports of oil products refined in third countries from Russian-origin crude oil, require companies to reassess the entire supply chain, from crude oil sourcing and transportation to refined product procurement.

The introduction of UK sanctions alongside pre-existing EU sanctions and the possibility of further Russia-related regulations from the US and other jurisdictions create complex regulatory landscapes requiring Indian companies to establish comprehensive compliance systems.

These systems should be designed to maximise benefits from available exemptions (such as the oil-price cap exception which allows the supply or delivery of Russian oil and oil products by ship, so long as the price paid for Russian oil or oil products is at or below the relevant price cap) or alternative approaches whilst ensuring full adherence to applicable restrictions. Key compliance components include:

Companies must implement rigorous screening protocols to – screen all counterparties against the UK Sanctions List, EU Consolidated List, and other relevant sanctions databases; verify ownership and control structures to identify entities owned or controlled by designated persons, including through indirect ownership arrangements; conduct enhanced due diligence on transactions involving high-risk jurisdictions, particularly those identified as facilitating sanctions evasion; and implement ongoing monitoring to detect changes in  ownership, control, or sanctions status of business partners.

Companies must exercise heightened vigilance regarding certificate of origin fraud and robust mechanisms to authenticate documentation and confirm the true origin of petroleum products, particularly refined products that may have been processed from Russian crude in third countries must be established.

On 17 July 2025, the OFSI introduced new online forms for submitting licence applications, reporting suspected breaches and other key reports, such as frozen asset reporting. Companies must report suspected sanctions breaches to the OFSI promptly upon discovery, maintain comprehensive records of all transactions involving Russian oil or oil products and submit frozen asset reports if holding funds or economic resources belonging to designated persons and cooperate fully with regulatory enquiries and investigations.

To navigate the constantly changing regulatory and compliance requirements efficiently, Indian legal counsel may be engaged to evaluate existing policy effectiveness and import-export operational strategies. Indian legal counsels possess the required expertise to provide guidance on the complexities of various policies and compliance requirements under both Indian laws and those of foreign jurisdictions such as the UK, especially to help comprehend the new trade environment and maintain adherence to related regulatory frameworks.

The UK sanction regime targeting Rosneft, Lukoil, and Nayara Energy Limited marks a significant escalation in Western efforts to curtail Russian oil revenues, with far-reaching implications for Indian companies that have become increasingly reliant on Russian crude imports. The new sanctions architecture creates a complex compliance environment that threatens India's energy security, and the substantial economic benefits derived from discounted Russian crude. The prospect of coordinated Western action, including potential U.S. sanctions, signals that the regulatory landscape will continue to evolve in ways that may further constrain India's energy procurement options.

Indian companies must therefore adopt a proactive approach by establishing robust compliance systems, conducting thorough supply chain due diligence, maintaining continuous monitoring of regulatory developments, and engaging experienced legal counsel to navigate this challenging environment. Whilst India maintains its sovereign right to pursue independent energy policies, the practical realities of operating in a global economy dominated by Western financial and logistical infrastructure necessitate careful risk management to preserve business continuity and protect long-term commercial interests in an increasingly fragmented global oil market.

The article has been authored by Faraz Alam Sagar, partner (co-head at White Collar & Investigations) and Yana Gupta, associate at Cyril Amarchand Mangaldas.

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