Sanctions, Sovereignty, and Strategic Pressure: India’s Energy Diplomacy at a Crossroads

The European Union’s decision to sanction Nayara Energy—a privately operated Indian refinery partly owned by Russia’s Rosneft—marks a troubling precedent in the global energy and diplomatic order. As part of its 18th sanctions package against Russia, the EU has extended its embargo to refined fuels made from Russian crude, even if they are processed in third countries like India. Nayara’s Vadinar refinery, responsible for nearly 8% of India’s refining capacity, now finds itself effectively blacklisted in Europe. This move has not only drawn condemnation from Rosneft, which labeled the sanctions “unjustified and illegal,” but also from India’s Ministry of External Affairs, which reiterated that New Delhi does not recognize unilateral sanctions and warned against the West’s growing double standards in energy trade.

What’s unfolding is more than just a commercial blockade; it’s a direct challenge to India’s energy sovereignty and strategic autonomy. The Nayara case illustrates how trade is increasingly being weaponized by global powers—sanctions are no longer limited to rogue regimes or illicit networks, but now target legitimate, law-abiding commercial entities in democratic nations, based solely on ownership ties or crude origin. Even though Nayara operates under Indian regulations, pays Indian taxes, and supplies Indian markets, it is now penalized for its shareholder structure. This approach, critics argue, is less about undermining Russia and more about creating a chilling effect on countries that refuse to align their energy policies with Western geopolitical agendas.

The implications for India are profound. Nayara is not a fringe player—it operates one of the country’s largest refineries, manages over 6,750 petrol pumps, and has pledged ₹70,000 crore in downstream investments. The sanctions cut deeper than just European exports; they potentially disrupt Nayara’s access to international shipping insurance, trade finance, and credit lines—all of which involve European intermediaries. According to the Global Trade Research Initiative (GTRI), India’s petroleum exports to the EU, valued at $15 billion in FY2024, are now under threat. Industry experts caution that the sanctions, framed as wartime policy, are in fact strategic protectionism—an attempt to carve out supply chains in a way that isolates Russia, even at the cost of collateral damage to third countries like India.

This damage may not stop with Nayara. Reliance Industries’ Jamnagar refinery—the world’s largest—could become the next target. In FY2025, Jamnagar imported around 405,000 barrels per day of Russian crude, nearly one-third of its intake. It exported ₹6,850 crore worth of Russian-linked fuel to the U.S. alone and entered into a long-term contract with Rosneft to import 500,000 barrels per day for ten years, a deal valued at approximately $13 billion annually. With the EU lowering the price cap on Russian crude and explicitly banning products refined from it—even in third countries—Reliance is watching closely. COO Srinivas Tuttagunta has already stated the company is evaluating how the EU defines “substantially transformed” products, implying that Reliance is bracing for a regulatory storm.

Adding to the pressure is Washington’s growing willingness to use economic blackmail. In a recent escalation, former President Donald Trump—who remains a dominant force in U.S. policy circles—threatened 100% tariffs on Russian-linked imports unless peace is brokered within 50 days. He coupled this with a quid pro quo: India must open its markets to American dairy and agricultural products, or face sweeping trade restrictions. This transactional diplomacy harks back to long-standing tensions between India and the U.S. over market access and food safety standards. India’s refusal to accept American dairy, which contains bovine growth hormones banned in India, has now become a bargaining chip in a completely unrelated energy dispute. This convergence of unrelated trade issues highlights the growing tendency of global powers to coerce emerging economies into compliance through economic force.

Underlying all this is a hard truth: India’s energy infrastructure, despite years of reforms and “Make in India” rhetoric, remains highly vulnerable to external shocks. Imports of Russian crude alone amounted to $50.3 billion in FY2025—accounting for 35–40% of India’s total crude bill. Simultaneously, exports to the European Union fell from $19.2 billion to $15 billion, a steep 27.1% drop that reflects the gathering storm clouds of geopolitical pressure. This dependence, though born of pragmatic energy economics, now risks exposing India to external diktats. As Ajay Srivastava of GTRI has warned, India must navigate a fine line between economic necessity and strategic exposure. If energy imports continue to come with political conditions, India’s economic diplomacy must evolve to safeguard autonomy while mitigating fallout.

Some have suggested reviving the Russia-India-China (RIC) axis to counterbalance the Western energy architecture. While attractive on paper, this strategy faces major roadblocks. India’s relations with China remain tense, particularly along the Himalayan border regions of Doklam and Arunachal Pradesh. Any pivot toward a RIC energy bloc would require not only diplomatic finesse but also a willingness to overlook deep-seated strategic frictions. Furthermore, closer alignment with China may alienate Western partners just as India seeks to boost manufacturing, attract global capital, and secure its place in critical supply chains.

India’s best path forward lies in a triad of diplomatic assertiveness, supply diversification, and domestic investment. First, it must assert its sovereign right to determine commercial partnerships based on national interest, not external coercion. Second, India should accelerate efforts to diversify crude sourcing—from the U.S., Brazil, Saudi Arabia, and even emerging producers like Guyana—to reduce overreliance on any one supplier. Third, it must double down on its domestic energy goals: enhancing refining capacity, expanding petrochemical ecosystems, and investing in cleaner alternatives like ethanol, biogas, and hydrogen. Nayara’s own pledge to invest ₹70,000 crore in downstream projects can be seen as part of this broader resilience strategy.

Ultimately, the EU’s sanctions on Nayara and the U.S.’s trade ultimatums reveal a sobering truth: energy is no longer neutral ground. In today’s geopolitics, pipelines, refineries, and cargoes are as politically charged as treaties and alliances. India must confront this reality with strategic clarity and economic strength. Whether defending Nayara’s right to operate or shielding Reliance’s exports from retaliation, the underlying goal must be to preserve the independence of India’s energy decisions. Because when fuel flows become bargaining chips, energy security becomes a test of national sovereignty.