Russia Switches to Crypto in Oil Trade

Russia is increasingly using cryptocurrencies in its oil trade with top clients China and India amid U.S. sanctions, Reuters has reported, citing unnamed sources, who said Russian oil traders were using the cryptocurrencies to facilitate the conversion of yuans and rupees into rubles.

For now, the amount of oil traded with cryptocurrencies is a small portion of Russia’s total, the sources told Reuters, but it is growing. Russia’s total oil trade last year amounted to $912 billion, according to the International Energy Agency.

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Cryptocurrencies have become a favored way to circumvent sanctions, with Iran and Venezuela also tapping the international trade settlement potential of the digital currencies in the context of U.S. sanctions.

One of Reuters’ sources explained the mechanism of the trade as involving a buyer paying for a cargo to a middleman company in, say, yuan, which is deposited in an offshore account. The middleman converts the yuan into cryptocurrency and transfers that to another account. Then the sum gets transferred to a third account in Russia where it is converted into rubles. It is a complicated mechanism that proves demand for oil is healthy enough to go to the troubles of all these conversions to get a cargo.

According to one of the sources, just one Russian oil trading entity’s monthly volumes are in the tens of millions of dollars.

Meanwhile, it appears that the sanctions on Russia’s oil industry are starting to lose their effectiveness, as sanctioned tankers begin to load again, according to Bloomberg’s Julian Lee. The columnist reported this week that three sanctioned tankers loaded the country’s flagship East Siberia Pacific Ocean grade and set off from the Far Eastern port of Nakhodka. More tankers were also departing from the oil port, Lee added, citing satellite imaging data. Tankers were previously idled at the port due to the sanctions.

By Irina Slav for Oilprice.com

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