India pays for Russian LNG imports in US dollar

India’s largest gas utility GAIL (India) Ltd continues to pay for the LNG it imports from Russia’s Gazprom in US dollars and will seek exchange rate neutrality in case payments are sought in any other currency such as Euro.

GAIL has a deal to receive 2.5 million tonnes of liquefied natural gas (LNG) annually on a delivered basis from Russia’s Gazprom. This translates into 3 to 4 cargoes or ship loads of super-cooled natural gas every month.

The contract with Gazprom provides for making payments in US dollars. Payments become due 5-7 days after the delivery of the LNG cargo. The last payment was made on March 23, which was in US dollars.

An LNG shipload was received on March 25 and its payment will be due in early April. There is no indication that the payment for this cargo will be in a currency other than US dollar. The last payment was settled through State Bank of India (SBI), the bank that has been used to pay for imports from Gazprom since the start of supplies in June 2018. GAIL has not received any written communication from Gazprom for change in the currency for settling the payments.

Gazprom reportedly is looking to wean away from the US currency after the Russian invasion of Ukraine. The US and European nations have imposed sanctions on Russia for the military action but have so far excluded energy trade from the sanctions. Russian banks continue to be on the main financial messaging SWIFT system, enabling payments for commodities bought or sold.

GAIL had in January 2018 taken advantage of Russian energy giant’s inability to deliver LNG from the previously agreed Schtokman project in the Barents Sea, to renegotiate price agreed in 2012. The price indexation was changed from the Japan Customs-cleared Crude to Brent, and the oil-linked slope of the contract formula lowered, and therefore the final price. India, which traditionally has had close ties with Moscow, has refrained from outright condemnation of Russian action but has called for an end to violence in Ukraine. It has not banned Russian oil and gas imports, unlike several Western countries, and on the contrary has snapped up distressed Russian oil at deep discounts.

Leave a Reply

Your email address will not be published.