Indian lender UCO Bank has received government approval to facilitate trade payments for Nayara Energy Ltd., according to people familiar with the matter, nearly two months after the refiner was sanctioned by the EU and subsequently shunned by large financial institutions.
Senior executives from the mid-sized state-owned lender recently met with top finance ministry officials, the people said, asking not to be identified as the discussions are private. They were asked to take the lead in executing the payments for Nayara, which is part-owned by Russian oil major Rosneft PJSC.
Operational details, including the choice of currency, are still being worked out, the people said.
Nayara, UCO Bank and the finance ministry did not immediately reply to emails seeking comment.
Nayara had approached government officials last month for help brokering a relationship with a domestic lender with a limited offshore presence in order to support wire payments for crude oil imports and to help it receive payments for refined fuel product exports. UCO Bank, which has in the past facilitated oil trades with Iran, was mentioned then as a potential candidate.
Nayara has separately sought government help in securing vessels to transport products locally, after domestic shipowners stopped working with the company.
The refiner was sanctioned by the European Union in July. Since being blacklisted, Nayara has sought advance payment or letters of credit even before its fuel shipments are loaded, and has cut run rates at its operation. Ships have diverted away from its terminal.
Large institutions in India and elsewhere typically react to Western sanctions with extreme caution, fearing reprisals that could ultimately jeopardize access to the global financial system. State Bank of India, the country’s largest state-run lender, is among those that have stopped processing trade and foreign currency transactions for Nayara Energy, according to a report in the Economic Times last month.
Rosneft owns just over 49% of Nayara, which accounts for nearly 8% of India’s refining capacity and 7% of its retail-fuel network.
