Russia-backed Nayara Energy, an Indian refinery, was sanctioned by the European Union for purchasing Russian crude and sought to contain the effect. The company shipped a cargo to China, the first such one from India since 2021.

A Bloomberg report indicated that an Indian diesel shipment was headed to China, the first delivery in over four years. This followed as Nayara Energy, which has Russian connections, faced uncertainty on its oil product exports under the new European Union sanctions.

The ship EM Zenith sailed from Nayara's Vadinar terminal with approximately 496,000 barrels of ultra-low sulfur diesel on July 18, as reported by Kpler, a port agent report, and vessel tracking data gathered by Bloomberg.

The vessel sailed just ahead of the EU imposing sanctions on the Rosneft-backed refinery as part of its tougher stance against Russian oil commerce. The vessel, initially bound for Malaysia, altered course in the Strait of Malacca and remained anchored for about 12 days as some Nayara shipments fell victim to the sanctions. The ship later fixed a new destination for Zhoushan, China, according to Bloomberg.

The sanctions caused payment issues for Nayara, and it began to request advance payments or letters of credit prior to loading cargoes. The firm also reduced production at its Vadinar refinery due to delays in crude imports.

Kpler records indicated that it was the first shipment of diesel from India to China since April 202, coinciding with improving relations between the two nations.

State Bank of India ceased international trade and foreign exchange business with Nayara Energy following recent US tariff increases. A source explained that this was to prevent potential US and EU sanctions. The US raised an additional 25 per cent tariff on India for its Russian crude trade.

Since July, Nayara Energy has experienced issues after the EU implemented its 18th sanctions package, which placed restrictions on Russian fuel imports and imposed a price ceiling of 47.6 dollars a barrel on Russian oil.

"These European sanctions of July 18 were the final drop that made the cup overflow. All banks with international offices and operations must comply with the government legislation in order to avoid regulatory suspicion," the individual stated. "The latest European sanctions and US tariffs implemented thereafter have complicated the processing of transactions for Nayara."

"This decision has been made by the bank very recently, following the US sanctions to keep in line with international regulations," the source said to ET. "There has been no direction from the government, but every bank needs to take a call on how to handle these situations and SBI has done that."