The planned sale of 49 percent in India’s Essar Oil to Russian giant Rosneft may have run afoul of the U.S., which has Rosneft on the list of sanctions it had imposed over Russia’s annexation of Crimea, The Times of India reported on Friday.

According to the Indian daily, many Indian banks, which are heavily exposed to Essar Oil with extended loans, may be reluctant to back the sale, which is estimated to be worth some US$3 billion, for fear of facing scrutiny and reaction by the U.S.

“We may have to review our exposure to Essar Oil if Rosneft comes on board,” a top banker with a state-run lender told The Times of India.

In March of this year, Rosneft confirmed its interest to buy into the share capital of the Indian company. The two parties had also agreed that Rosneft would deliver crude to Essar Oil’s Vadinar refinery. The deal, however, has not been yet officially sealed.

Essar Oil’s owners, the Ruias family, had initially sought to sell 74 percent to Rosneft, but reduced the share to 49 percent to avoid the company being categorized as a subsidiary of a group that has U.S. sanctions imposed.

Regarding the sale of the other 25 percent in the 74-percent stake that is up for sale, Essar Oil has been in talks with oil trader Trafigura Group. However, Trafigura has close relations with Rosneft since it handles much of Russia’s crude exports, and this 25-percent sale hinges on the Rosneft deal being completed, The Times of India said, citing banking and energy sources.

Earlier this month, Essar Oil’s chief executive said that Essar Oil would see the Indian company reduce its purchases of Iranian crude oil once the deal with Rosneft is complete. Currently Essar Oil is the biggest single importer of Iranian crude into India, and this may be about to change, as Rosneft will want to take the lion’s share of supplies to Essar’s facilities.

Essar Oil, in turn, has said it would spend the equivalent of US$179 million on raising the profit margin of Vadinar by US$1.50 a barrel. The money will be spent on upgrades over the next two to three years.

By Tsvetana Paraskova for Oilprice.com

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