Reliance Industries Head Mukesh Ambani Image Credit Source: Samir Jana/HT Via Getty Images
The European Union has recently decided to impose strict ban on crude oil and fuel made from Russia. This decision can affect two big oil companies of India, Reliance Industries Limited and Naira Energy. Both these companies are India’s largest fuel exporter and Europe has been their big market. This decision may cause financial loss to Reliance owner Mukesh Ambani.
EU has reduced the price cap of Russian oil from $ 60 per barrel to $ 47.6 per barrel in its 18th ban package. This new limit will be applicable from 3 September. Apart from this, EU has also imposed restrictions on ships and Naira Energy involved in the transport of Russian oil. Russia’s company Roseneft holds 49% stake in Naira Energy and will no longer allow it to sell oil products in Europe. Also, the company may also have problems with banking services and European technical assistance.
Difficulties for Reliance
Reliance Industries has a big agreement with Roseneft, under which she buys cheap Russian oil. But now Reliance will have to take a tough decision. If she continues to buy Russian oil, then the attractive diesel market of Europe can stop for her. And if she leaves Russian oil, it will be difficult to get cheap crude oil. In both situations, Reliance’s refining margin may be affected.
India protested against the decision
The Government of India has opposed this decision of EU. Foreign Ministry spokesman Randhir Jaiswal said that India does not accept any unilateral ban. He said that the country’s energy security is most important, because it is related to the basic needs of citizens. India also said that there should not be double standards in energy trade.
However, it will not be easy for EU to implement this price limit, as oil trade is in dollars and America has more control over dollars transactions. The US has not supported EU’s move. In addition, Indian refiners do trade not directly from European buyers but through middlemen, which can make the ban and difficult to implement.