Russia markets discounted but sanctioned LNG to South Asia

Russia is again seeking to capitalise on the tightening global gas market by offering LNG from US-sanctioned facilities to energy-constrained buyers in South Asia at steep discounts.

Bloomberg has reported that shipments from Russian projects subject to US sanctions were offered to nations thought to include India, Bangladesh and Sri Lanka in the last week at discounts of up to 40% to prevailing spot prices. The offers were, local reports suggest, channelled through lesser-known intermediary companies based in both China and Russia as part of efforts by Moscow to circumvent current restrictions while broadening the pool of potential buyers.

According to those involved in the discussions cited by the news agency, sellers indicated they could provide documentation designed to present the cargoes as originating from non-Russian producers such as Oman or Nigeria. The use of such arrangements, common in the transfer of sanctioned oil to nations wishing to avoid US repercussions, highlights the extent to which sanctioned supply is being repackaged in response to strong regional demand and elevated prices.

The push by Moscow comes at a moment of acute disruption in global gas markets as the world watches and waits to see what happens in US-Iran peace negotiations. The effective closure of the Strait of Hormuz prior to the start of talks, combined with attacks affecting Qatar’s LNG export infrastructure, has removed roughly 20% of global supply. As a result, the shortfall has driven prices sharply higher and forced a number of import-dependent economies across Asia to scramble for alternative sources.

Bangladesh and India have been among the most affected. Bangladesh, which sourced about 60% of its LNG from Qatar last year, has increasingly turned to the spot market in recent weeks, in the process paying nearly twice its contracted price levels at times. Both countries have also been compelled to scale back on gas allocations to the all-important fertiliser sector as supplies tighten. Of note is news from both nations that investments in renewables has risen dramatically in the past month.

Despite the apparent availability of discounted Russian cargoes, however, India has historically taken a typically cautious approach to imports linked to sanctioned projects for fear of upsetting the US.

The government has long maintained that it would not accept LNG originating from blacklisted Russian facilities although this followed a period of New Delhi insisting it would just do what was best for India in what many saw as a tacit admission that it has purchased at least some cargoes from Russia in the past year or so. However, recent developments indicate a more public degree of flexibility in energy procurement by India after New Delhi purchased its first shipment of Iranian oil since 2019 under a US Treasury licence that temporarily waived restrictions.

Russian efforts to extend sales into South Asia would in turn allow Moscow to diversify export destinations and increase utilisation rates at its sanctioned plants. Arctic LNG 2, launched in 2024 as Russia’s largest LNG facility, has yet to reach full production capacity, having been constrained by limited shipping availability and persistent buyer caution. With regular buyers in India and Bangladesh though, production numbers would soon increase.