HDFC Bank and a few international banks have halted offering trade credit for oil imports to Nayara Energy, a Russian-backed refiner, and some suppliers are expecting upfront payment to prevent potential complications caused by Western sanctions against Moscow, reported Reuters citing sources.

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Although Nayara was not sanctioned as part of the international retaliation to Russia’s invasion of Ukraine, Rosneft, which controls 49% of the Indian refinery, has been. The Mumbai-based company is selling more refined fuels in India to minimise the requirement for credit to facilitate foreign trade, according to Reuters.

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On average, Nayara imports crude oil worth $1 billion each month for its 400,000 barrels per day Vadinar refinery in Gujarat, India.

HDFC Bank as well as foreign institutions, including Citibank, JP Morgan, Deutsche Bank and Mitsubishi UFJ Financial Group, have halted opening and confirming letters of credit for Nayara.

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The other significant shareholder in Nayara is Kesani Enterprises Co Ltd, a partnership led by Trafigura Group and Russia’s UCP Investment Group with a 49.13% shareholding.

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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. Nayara has increased its fuel exports to take advantage of higher international margins. To assist the government in combating inflation, state refiners, which dominate Indian fuel retailing, have yet to pass on the increase in oil prices to customers.

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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.”

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Because of the sanctions on Moscow, India’s CARE Ratings has already placed Nayara’s long-term ratings on ‘credit watch with negative implications.’