Some Banks In India Halt Credit To India Refiner Nayara, Owned By Rosneft, For Importing Russian Oil: Reports
HDFC Bank of India and some other foreign banks have halted offering trade credit to Nayara Energy, a Russian-backed refinery to import oil, according to reports citing source information. The reports also claimed that some suppliers are asking for payment in advance to avoid possible issues arising because of the Western sanctions against Russia.
Although Nayara was not sanctioned as part of the international response to Russia’s invasion of Ukraine, Rosneft, which controls 49 percent of the Indian refinery.
According to reports, the Mumbai-based corporation Nayara is selling more refined fuels in India to eliminate the need for borrowing to support international sales.
Because they are not authorized to speak to the media, all sources declined to be identified.
There was no comment on the issue from Nayara in the reports.
According to the reports, Nayara imports crude oil worth roughly $1 billion each month for its 400,000 barrels per day Vadinar refinery in India’s Gujarat state.
According to sources, India’s HDFC Bank, as well as major institutions including Citibank, JP Morgan, Deutsche Bank, and Japan’s Mitsubishi UFJ Financial Group, have stopped opening and confirming Letters of Credit (LCs), which are a traditional form of payment guarantee in the oil trade.
On Monday, Citigroup, JP Morgan, Deutsche Bank, and Mitsubishi UFJ declined to comment, while HDFC did not reply to inquiries.
With a 49.13% interest, Kesani Enterprises Co Ltd, a partnership chaired by Trafigura Group and Russia’s UCP Investment Group, is the other main shareholder in Nayara.
According to a fundraising document filed by Nayara in August last year, Kesani has pledged all of its Nayara shares to Russian bank VTB, from which it sought a loan to fund its acquisition of the Indian refiner in 2017.
VTB has been sanctioned as well.
According to the two sources, Nayara has increased local sales of its refined fuels this month, resulting in a revenue loss because pump prices in India are lower than those in other countries.
Nayara has already increased its fuel exports to benefit from higher overseas profits. To assist the government in combating inflation, state-owned refineries, which dominate Indian fuel retailing, have yet to pass on the increase in oil prices to customers.
According to the sources, Nayara must keep its fuel sale prices near those of state refineries to sell its products in local markets.
Financial sanctions have been imposed by the United States, Europe, and the United Kingdom in response to Russia’s invasion of Ukraine, which Moscow defines as a “special operation.”
While New Delhi has urged for an early cease-fire in Ukraine, it has declined to condemn Moscow’s actions publicly. India has also refused to vote on several UN resolutions related to the invasion.
“Since these LCs are routed via overseas banks in the countries that have placed the sanction, we don’t want to take the chance of spoiling our working relationships, so in some cases, we end up taking a more cautious approach,” according to an executive director at an Indian state-owned bank as stated in the reports.
According to reports, the bank has ceased granting letters of credit for transactions involving Russia.
Because of the sanctions against Moscow, India’s CARE Ratings has already placed Nayara’s long-term ratings on ‘credit watch with negative implications.’
“One may make an exception for state-run companies where there is complete government backing, but in the case of private companies, it is not worth taking the risk,” a senior executive at another private lender was quoted as saying.