Russia leans on cryptocurrencies for oil trade

Russia is using cryptocurrencies in its oil trade with China and India to skirt Western sanctions, according to four sources with direct knowledge of the matter.

While Russia has publicly encouraged the use of cryptocurrency and last summer passed a law to allow digital currency payments in international trade, its use in the country’s oil trade has not previously been reported.

Some Russian oil companies are using bitcoin, ether and stablecoins such as Tether to smooth the conversion of Chinese yuan and Indian rupees to Russian roubles, the sources said, adding that it is a small but growing part of Russia’s overall oil trade, which according to the International Energy Agency was worth $192 billion last year.

All the sources declined to be identified due to the sensitivity of the matter.

Cryptocurrencies have already helped enable countries under U.S. sanctions such as Iran and Venezuela to keep their economies running while avoiding use of the dollar, the preferred currency for transactions in the global oil market.

Russia’s move comes after Venezuela accelerated its use of digital currency in crude and fuel exports after Washington reimposed sanctions.

Russia has set up a variety of systems and USDT (Tether) is just one of them, said a fifth source, a researcher at an investigations firm which tracks the use of cryptocurrencies for sanctions circumvention, who asked not to be named because of a non-disclosure agreement.

The Russian central bank did not respond to a request for comment. It said last year that delays in payments due to sanctions had become a major challenge for the Russian economy.

U.S. President Donald Trump is seeking to improve relations with Russia as he pushes for an end to the war in Ukraine, but whether sanctions will be lifted remains unclear. Reuters reported that the White House was drafting options for sanctions relief, but Trump posted on March 7 that he is strongly considering more sanctions on Russia.

Crypto would likely continue to be used in Russian oil trading, one of the four sources said, even if sanctions are lifted and the dollar can be used again. It is a convenient tool and helps run operations faster, they added.

In an example of how the trade works, a Chinese buyer of Russian oil pays a trading company acting as a middleman in yuan into an offshore account, two of the sources with knowledge of the transactions said.

The middleman converts this into crypto and transfers it to another account and from there, it is sent to a third account in Russia and converted to roubles, they said.

For one Russian oil trader’s sales to China, crypto transactions are in the tens of millions of dollars per month, according to one of the sources who is familiar with the trader’s operations.

Traditional currencies still account for the bulk of Russia’s oil transactions, analysts said, with other workarounds including the use of the UAE dirham, for example.

One Russian crypto exchange, Garantex, was placed under U.S. sanctions in 2022 and by the European Union last month. The platform suspended services last week after Tether blocked digital wallets on its platform.

Cryptocurrencies are one of multiple ways of getting around payment issues, according to one of the sources, who advises the Kremlin. Analysis by the UK’s Royal United Services Institute and the Centre for Information Resilience and also supports that view.