Exclusive – Some banks stop credit for oil imports by Rosneft-owned India refiner Nayara – sources

div classBodysc17zpet90 cdBBJodivpBy Nidhi Verma, Nupur Anand and Chris Thomasp

pNEW DELHIMUMBAIBANGALORE Reuters – Indias HDFC Bank and some foreign banks have stopped offering trade credit for oil imports to Nayara Energy, a Russianbacked refiner, and some suppliers are seeking payment upfront to avoid potential problems resulting from western sanctions against Moscow, four banking and industry sources said.pdivdivdiv classBodysc17zpet90 cdBBJodiv

pNayara has not been sanctioned as part of the international response to Russias invasion of Ukraine, but Russian energy giant Rosneft, which owns 49 of the Indian refiner, has been.p

pTo avoid the need for credit to fund overseas trade, the Mumbaiheadquartered company is selling more of its refined fuels in India, two of the sources said. p

pAll of the sources declined to be named because they are not authorised to speak to the media.p

pNayara did not respond to a request for comment. Rosneft did not immediately respond to a request for comment.p

pNayara imports crude oil worth about 1 billion every month on average for its 400,000 barrels per day Vadinar refinery in Indias Gujarat state, the two sources told Reuters.p

pIndia‘s HDFC Bank and international banks such as Citibank, JP Morgan, Deutsche Bank and Japan’s Mitsubishi UFJ Financial Group have stopped opening and confirming Letters of Credit LCs, which are a standard form of payment guarantee in the oil trade, for Nayara, four sources said.p

pCitigroup, JP Morgan, Deutsche Bank and Mitsubishi UFJ declined to comment on Monday, while HDFC did not respond to requests for comment.p

pKesani Enterprises Co Ltd, a consortium led by Trafigura Group and Russias UCP Investment Group, is the other major stakeholder in Nayara, also with a 49.13 stake.p

pKesani has pledged all of its shares in Nayara to Russian bank VTB, from which it took a loan to fund its acquisition of the Indian refiner in 2017, a fundraising document Nayara issued in August last year showed. p

pVTB has also been sanctioned.p

pThe two sources said Nayara has this month boosted local sales of its refined fuels, taking a hit on its revenue as pump prices in India are below overseas rates.p

pPreviously Nayara had raised its fuel exports to earn more from robust overseas margins. Staterefiners that dominate Indian fuel retailing have not yet passed on the spike in oil prices to customers to help the government tackle inflation. p

pNayara has to keep its fuel sale price close to the staterefiners rates just to be able to sell its products in local markets, the sources added.p

pRussias invasion of Ukraine, which Moscow describes as a “special operation”, has prompted financial sanctions from the United States, Europe and Britain.p

pWhile New Delhi has called for an immediate ceasefire in Ukraine, it has refused to explicitly condemn Moscows actions. India has also abstained from voting on multiple United Nations resolutions on the invasion.p

p“Since these LCs are routed via overseas banks in the countries that have placed the sanction, we dont want to take the chance of spoiling our working relationships, so in some cases we end up taking a more cautious approach,” an executive director at an Indian stateowned bank said. p

pThis source said his bank has stopped issuing LCs for transactions that have links to Russia.p

pIndia‘s CARE Ratings has already placed the longterm ratings of Nayara on ’credit watch with negative implications due to sanctions against Moscow.p

p“One may make an exception for staterun 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 said. p

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pp Reporting by Nidhi Verma Editing by Alexander Smithp

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