Sri Lanka buys coal from Singapore unit of Russia's SUEK at a discount: sources

[NEW DELHI] Sri Lanka has bought coal from the Singapore unit of Russian coal trader SUEK AG and will pay in US dollars, 2 senior officials said, as it looks to address a fuel shortage that has lead to hours-long power outages.

Sri Lanka has been struggling to pay for critical imports including fuel and food due to paltry forex reserves, while many Russian firms are struggling to complete transactions because foreign banks are wary of doing business with them after Western sanctions that followed Russia's invasion of Ukraine.

Some international traders have been avoiding Russian oil to avoid becoming entangled in sanctions, but Russia has been pushing its commodities to countries including Sri Lanka's northern neighbour India at steep discounts.

Sri Lanka's power secretary, Wasantha Perera, said that the island nation was expecting coal from Russia and would pay as per contract.

"The company is SUEK AG and the payment is about US$17 million," Perera told Reuters.

A top Sri Lankan government official told Reuters 2 cargoes of 60,000 tonnes of coal each sent by SUEK were on their way to Sri Lanka from Russia, adding that the shipments were expected to arrive in the second week of April.

The coal shipments will be the first from Russia to Sri Lanka after Russia invaded Ukraine on Feb 24. Details about the deal have not been previously reported.

"A letter of credit (LC) backed by the central bank has been opened. At the maturity, payment will be made by the treasury," the official said, adding that payments had not yet been made to SUEK.

There was no indication that Sri Lanka was breaking any law by trading with SUEK. Sri Lanka had abstained from voting on the UN General Assembly resolution on Mar 2 that demanded Russia withdraw its troops from Ukraine.

SUEK this month joined a long list of Russian firms that had defaulted on Eurobond coupons, as the bank that received the funds did not make the payment.

The majority of the payment for the coal will be made after a discharge certificate is issued at the Sri Lankan port, the official said, adding that the rest would be made in 90 days after discharge. REUTERS