Russian Oil Firms Using Crypto to Evade Sanctions

According to four anonymous sources, Russian oil firms are employing USDT, Bitcoin, and Ethereum to bypass Western sanctions and engage in international trade.

Cryptocurrency Utilization

Speaking to Reuters, sources indicated that Russian oil companies convert Chinese yuan and Indian rupees into rubles using these cryptocurrencies.

Andrew Fierman, Head of National Security Intelligence at blockchain analytics firm Chainalysis, informed Decrypt that cryptocurrency has facilitated sanctions evasion, primarily due to limited access to traditional financial systems because of extensive sanctions.

Growth in Oil Revenue

Cryptocurrency has emerged as a growing, albeit minor, component of Russia’s international oil and gas trade, with revenues increasing by 26% in 2024 to $108 billion. One oil trader’s sales to China reportedly amount to “tens of millions of dollars per month.”

Russia’s crypto-enabled oil transactions typically involve a buyer sending yuan or rupees to an intermediary, who converts the payment into cryptocurrency for remittance to Russia, where it is exchanged for rubles.

Despite the use of crypto, much of Russia’s international oil trade continues to rely on fiat currencies, with the UAE dirham increasingly utilized due to sanctions.

Future of Crypto in Oil Trade

Reports suggest that Russian oil companies may persist in their use of cryptocurrencies even after sanctions are lifted, given their efficiency. Fierman explained that the shift towards crypto usage is driven by Russia’s political leadership, with recent legislation allowing cross-border payments using cryptocurrencies.

The Central Bank of Russia recommended businesses use digital assets for international trade, asserting that new financial technologies present previously unavailable opportunities. Following this advice, legislation was passed to legalize cross-border crypto payments and facilitate overseas transactions using private virtual currencies.

Upcoming Changes

In July, Nabiullina indicated that cross-border crypto payments would commence in the fall, suggesting preparations with government and business entities.

Challenges in Sanctions Evasion

However, the adoption of cryptocurrency isn’t without challenges. Fierman noted that efforts to evade sanctions risk exposure to law enforcement, pointing to recent seizures of Garantex’s domains and the freezing of over $26 million in funds. Earlier, the UK’s National Crime Agency disrupted a significant Russian money laundering operation, leading to numerous arrests and the seizure of millions in crypto.

Cryptocurrency transactions are often traceable, and as regulatory frameworks strengthen against money laundering, mainstream exchanges may limit usage that facilitates sanctions evasion. Notably, the EU has prohibited providing crypto services to Russia, while the US has imposed numerous designations against Russian entities exploiting cryptocurrency.