Russia struggles to collect money from oil sales

Russian companies have to wait several months to be paid for oil sales, because banks are wary of secondary US sanctions.

Reuters eight banking and trading sources said some banks in China, the UAE and Turkey have increased compliance requirements with US sanctions in recent weeks. This results in payments for crude oil to Russia being delayed or even denied.

Specifically, banks require Russian crude oil buyers to provide a written commitment that no individual or organization participating in or benefiting from this transaction is on the SDN (Special Designated Nationals) list. of America.

SDN is a list published by the US government, including individuals and organizations with which the country prohibits or restricts business transactions. Financial institutions are often required to comply with SDN to avoid violating US regulatory and sanctions regulations.

The crude oil tanker NS Captain owned by the Sovcomflot oil tanker group (Russia) passed through the Bosphorus Strait in Istanbul, Türkiye on February 22. Photo: Reuters

In the UAE, First Abu Dhabi Bank (FAB) and Dubai Islamic Bank (DIB) have suspended a number of accounts involved in trading Russian goods. Meanwhile, Mashreq Bank (UAE), Ziraat and Vakifbank (Turkey), ICBC and Bank of China (China) still process transactions but it takes weeks or months.

Sources say payments are delayed by 2-3 weeks, even up to 2 months. "Things have become difficult, not even with USD transactions. Sometimes it takes weeks for a direct yuan-ruble transaction to be carried out," said one trader.

Kremlin spokesman Dmitry Peskov confirmed that delays in payments by banks in China still exist. According to him, the US and the European Union still maintain unprecedented pressure on China. "Of course, this creates certain problems, but is not an obstacle to the further development of our economic and trade relations," Peskov said.

The West imposed a series of sanctions on Russia after the Ukraine conflict in February 2022. Trading with Russian oil remains legal as long as it falls under the $60 per barrel ceiling it imposes.

Russia's oil exports were interrupted in the first months after the conflict but returned to normal when Moscow switched to selling to Asian and African customers. However, by December 2023, collecting oil sales began to become more difficult as banks and businesses realized the threat of US secondary sanctions was real.

This stems from the US Treasury Department's move on December 22, warning that it may impose sanctions on foreign banks' evasion of Russian oil price ceilings and calling for an increase in oil prices. Strong compliance.

At the behest of the US, Chinese, UAE and Turkish banks that work with Russia have increased inspections, begun requiring more documents and training more staff to secure oil transactions. guarding the price ceiling.

They also require both parties to the transaction to provide additional documents, including details of the ownership of all companies involved in the transaction, data on individuals controlling the parties to the transaction for banking purposes. Customers can check if they are on the SDN list or not.