Russian oil payments delayed amid sanctions scrutiny

Russian oil companies are facing significant delays in receiving payments for crude and fuel as banks in China, Turkey, and the United Arab Emirates (UAE) exercise increased caution over potential U.S. secondary sanctions, according to eight sources familiar with the matter.

The payment delays, which could stretch to several months, are impacting revenue to the Kremlin and causing disruptions in the flow of funds, aiding Washington's efforts to impose sanctions on Russia in response to its actions in Ukraine while maintaining global energy stability.

In recent weeks, several banks in China, the UAE, and Turkey have heightened their sanctions compliance requirements, resulting in delays or rejections of money transfers to Moscow, as reported by the sources.

To comply with U.S. secondary sanctions, banks have begun requesting written assurances from clients that no individual or entity on the U.S. Special Designated Nationals (SDN) list is involved in transactions or benefits from payments.

Banks such as First Abu Dhabi Bank (FAB) and Dubai Islamic Bank (DIB) in the UAE have reportedly suspended multiple accounts linked to the trading of Russian goods. Meanwhile, institutions like Mashreq Bank in the UAE, Ziraat and Vakifbank in Turkey, and ICBC and Bank of China in China are processing payments but are experiencing significant delays.

Kremlin spokesperson Dmitry Peskov acknowledged the payment challenges, attributing them to the pressure from the United States and the European Union on China. Peskov expressed confidence that these obstacles would not impede the development of trade and economic relations between Russia and China.

The escalation in payment disruptions follows a U.S. Treasury executive order issued on December 22, 2023, warning of potential sanctions for violating the Russian price cap on foreign banks. This directive prompted banks that were collaborating with Russia to enhance compliance measures, leading to increased scrutiny, additional documentation requirements, and extended processing times for transactions.

Specifically, UAE banks faced heightened scrutiny at the end of February when they were required to provide transaction data to U.S. correspondent banks and the U.S. Treasury for deals involving Russian entities and transactions destined for China.

As a result, payment delays have ranged from several weeks to a few months, impacting transactions denominated in various currencies, including the dollar and yuan. These delays signify the challenges faced by Russian oil firms in navigating the evolving landscape of international sanctions and compliance requirements.

Source: Reuters