Chris Thomas, Nupur Aand and Nidhi verma

NEW DELHI/MUMBAI/BANGALORE (Reuters) – India’s HDFC Bank and some foreign banks have stopped offering trade credit for oil imports to Nayara Energy, a Russian-backed refiner, and some suppliers are seeking payment upfront to avoid potential problems resulting from western sanctions against Moscow, four banking and industry sources said.

Nayara is not being sanctioned by the international response to Russia’s invasion of Ukraine. But Rosneft Russian Energy giant has 49% ownership of Indian refiner.

Two sources say that the Mumbai-based company plans to sell more refined fuels in India so it does not have to borrow money for overseas trade.

Because they were not authorized to address the media, all sources have declined to identify themselves.

Nayara didn’t respond to my request for comment. Rosneft didn’t immediately reply to my request for comment.

Two sources tell Reuters that Nayara imports about $1 billion each month to pay for its 400,000 barrels of Vadinar refinery, which is located in India’s Gujarat state.

India’s HDFC Bank, and other international banks like Citibank, JP Morgan. Deutsche Bank According to four sources, the Japan’s Mitsubishi UFJ and (DE::) Financial Group stopped opening and confirming Letters of Credit, which were a form of payment assurance in oil trade.

Citigroup (NYSE:), JP Morgan and Deutsche Bank declined to comment Monday while Mitsubishi UFJ did not reply to request for comment.

Kesani Enterprises Co Ltd (a Russian consortium headed by Trafigura Group & Russia’s UCP Investment Group) is also a major stakeholder with a 49.13% interest.

Kesani has pledged all its shares in Nayara, a Russian bank VTB. VTB took out a loan from VTB to help it acquire the Indian refiner in 2017.

VTB was also approved.

According to the two sources, Nayara had this month increased local sales for its refined fuels. This has led to a decrease in its revenues as India’s pump prices are lower than overseas.

Nayara previously increased its exports of fuel to make more money from strong overseas margins. Indian state-refiners, which dominate Indian fuel retailing, have yet to pass on an increase in oil prices to their customers. This is to aid the government with inflation.

Sources said Nayara needs to maintain its fuel sales price within the range of state-refiners rates in order to market its products on the local markets.

Russia’s invading of Ukraine has been described by Moscow as “special operations” and has led to financial sanctions being imposed on the United States, Europe, and Britain.

New Delhi calls for an immediate ceasefire to be reached in Ukraine. However, the Indian government has not explicitly condemned Moscow’s actions. India also abstained in voting for multiple United Nations resolutions regarding 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,” an executive director at an Indian state-owned bank said.

According to this source, his bank stopped issuing LCs for Russian transactions.

India’s CARE Ratings placed Nayara’s long-term rating on ‘credit monitor with negative implications’ because of the sanctions against Moscow.

A senior executive from a private lender stated that while one may allow exceptions for government-owned companies, it’s not worth the risk in private businesses.