Riyadh – In another major development in international oil trade, both Saudi Aramco and the Iraqi state oil company, SOMO, have stopped selling crude oil to the Nayara Energy Company of India. The move follows sanctions placed on the Russian-owned refiner in July by the European Union.

Stoppage of the supply of these two large exporters in the Gulf has left Nayara with no other option but to import the entire crude oil requirement in August, solely through Russia.

As LSEG (London Stock Exchange Group) and Kpler shipping data show, Nayara Energy usually receives an average of 2 million barrels of Iraqi crude and 1 million barrels of Saudi crude monthly. Yet it was confirmed by sources close to the issue that not a single shipment by either of the two suppliers was taken during August.

A major factor in this sudden supply disruption is the sanctions that have provided Nayara with significant difficulty in making payments to SOMO for purchases.

International Effect of the EU Sanctions

The action of Saudi Aramco and SOMO reflects the international effect of the EU sanctions. The two state-owned companies are actually following the rules and so will not get involved in any legal or financial difficulties by halting all trade with Nayara Energy.

This has forced Nayara, which is mostly owned by Russian companies such as the oil giant Rosneft, to have no other choice but to resort to complete reliance on Russian oil to cater to its operational requirements.

Being dependent on only one source of crude oil may cause both logistical and economic risks to Nayara Energy in the long term and make its activities more susceptible to fluctuations in the price and changes in geopolitics.

The lack of comment by SOMO and Nayara on the issue, as well as the denial by Saudi Aramco to comment, highlights the sensitive nature of the topic and the far-reaching consequences of the EU sanctions on international energy markets.

Also See : US Sanctions Network for Smuggling Iranian Oil, Underscoring Broader Pressure Campaign