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News Digest / World News / Russia Faces Payment Delays for Oil as Banks Heighten Scrutiny

Russia Faces Payment Delays for Oil as Banks Heighten Scrutiny

Lukas Schmidt
04:22am, Wednesday, Mar 27, 2024

FILE PHOTO: Liberia-flagged crude oil tanker NS Captain, owned by Russia's leading tanker group Sovcomflot, transits the Bosphorus

In a development that underscores the complexities of international sanctions, Russian oil companies are experiencing considerable delays in receiving payments for crude oil and fuel exports. This issue arises as banks in China, Turkey, and the United Arab Emirates (UAE) intensify their scrutiny over transactions to avoid falling foul of U.S. secondary sanctions. According to sources familiar with the situation, these delays have stretched to several months, posing a challenge to the Kremlin's revenue stream and creating unpredictable financial inflows.

The increased compliance measures adopted by banks in these countries have led to more rigorous verification processes, with some financial institutions even rejecting money transfers to Moscow. Banks now require clients to provide explicit guarantees that no individuals or entities from the U.S. Special Designated Nationals (SDN) list are involved in or benefiting from the transactions. This heightened diligence reflects a growing caution among global banks about the potential repercussions of facilitating deals that may contravene U.S. sanctions.

In response to the escalated U.S. and EU pressure on China, Kremlin spokesperson Dmitry Peskov acknowledged the existence of payment problems but expressed confidence that these challenges would not impede the ongoing trade and economic relations between Russia and China. The situation is further complicated by the actions of UAE banks, such as the First Abu Dhabi Bank (FAB) and Dubai Islamic Bank (DIB), which have reportedly suspended accounts related to trading Russian goods.

The backdrop to these developments is a series of Western sanctions imposed on Russia following its invasion of Ukraine in February 2022. Although trading Russian oil is not prohibited under these sanctions, provided it is sold below the price cap of $60 per barrel, the recent U.S. Treasury executive order has heightened fears of secondary sanctions, prompting a reevaluation of compliance strategies by banks engaged in these transactions.

This situation represents a significant challenge for Russia as it seeks to navigate the evolving landscape of international sanctions and maintain its oil exports. The delays in payments impact Russia's immediate financial stability and reflect the broader geopolitical tensions influencing global trade and economic relations. As the international community continues to respond to the ongoing conflict in Ukraine, the ramifications for global energy markets and the intricate web of international finance remain to be seen.

About The Author

Lukas Schmidt