Saint Petersburg-based Gazprom, the state-owned multinational energy company, has likely proposed to the Indian public sector company that it purchase the fuel from Gazprom Singapore and settle payments in euros in future trades.
New Delhi: State-owned GAIL India and Russia‘s Gazprom are negotiating over the import of gas to India as the evolving payment mechanism between the two countries facilitate easier trade, said people familiar with the matter. While talks are in the early stages, the cost of these imports could be lower than international prices since Russia has surpluses as its exports to Europe have dwindled.
Saint Petersburg-based Gazprom, the state-owned multinational energy company, has likely proposed to the Indian public sector company that it purchase the fuel from Gazprom Singapore and settle payments in euros in future trades. The Singapore unit is a subsidiary of Gazprom Germania, where the Russian company still has a ‘quota’ despite abandoning ownership in April, sources said.
It is said to have agreed to pay demurrage charges after failing to deliver shipments to India as part of a long-term gas supply deal. Demurrage refers to the charge that the merchant pays for the use of containers in a terminal beyond the free time period. Traditional Russian banks that engage in oil and gas business globally are now under economic sanctions and barred from using SWIFT, interrupting payment settlements.
SWIFT is the internationally recognised messaging system used for cross-border banking transactions. The system can be skirted if transactions are settled in currencies other than US dollars.
Gazprom and GAIL did not comment on the matter.
“India should benefit from lower energy prices if we buy LNG (liquefied natural gas) from Russia,” said Asif Iqbal, president, Indian Economic Trade Organization (IETO). “Both Gazprom and GAIL are holding discussions on this to figure out broad contours like Singapore route payment settlements. This should also help control domestic price rises by curbing imported inflation.”
IETO is facilitating all such negotiations as it’s reaching out to all stakeholders in the process.
The US doesn’t appear to have too many reservations over India buying oil and gas from Russia as rising consumer prices change economic dynamics across the world.
“The US now wants us to buy fuels from Russia at a cost cheaper than China buys from them,” said an executive who met a visiting US diplomat. It’s up to India to decide what it wants to do, the person said.
Gazprom has defaulted on the supply of eight cargoes (shiploads) of LNG. Under the long-term deal, Gazprom Marketing and Trading Singapore (GMTS) was supposed to supply 2.5 million tonnes or a minimum of 36 cargoes of LNG to GAIL during calendar year 2022. Russia and India are working closely to develop bilateral transaction platforms. They may soon recognise each other’s payment systems-Mir and RuPay. The matter was reportedly discussed during the recent visit of Indian national security adviser Ajit Doval to Moscow.
Both countries are aiming to reach an annual trade volume of $30 billion by 2025 from $13.12 billion in FY22. Lenders from both sides are going to play a crucial role in bilateral trades.
Currently, Russia and India are implementing joint projects in various sectors including energy, oil, defence, pharmaceuticals, food, chemicals, interbank and insurance.
More than 15 Russian banks are in advanced talks with Indian lenders to facilitate bilateral business in their respective local currencies, ET reported on August 22.
The Reserve Bank of India (RBI) had on July 11 allowed invoicing and payments for international trade in rupees, potentially facilitating greater bilateral business with Russia.