Russian Oil Firms Use Cryptocurrencies to Evade Sanctions

Russian oil firms have been utilizing cryptocurrencies such as USDT, Bitcoin, and Ethereum to circumvent Western sanctions and facilitate international trade. According to anonymous sources, these firms have been converting Chinese yuan and Indian rupees into rubles using these digital currencies. This strategy allows them to bypass the traditional financial system, which has been heavily restricted due to extensive sanctions imposed on Russia.

The use of cryptocurrencies in Russia's oil and gas trade has become a growing, albeit still minor, part of the country's international transactions. The revenues from this trade saw a significant increase in 2024, with one Russian oil trader's sales to China reportedly worth tens of millions of dollars per month. The process typically involves a buyer sending yuan or rupees to an intermediary, who then converts the payments into crypto and sends it to Russia, where it is sold for rubles.

Despite the increasing use of cryptocurrencies, most of Russia's international oil trade still relies on fiat currencies. The use of the United Arab Emirates' dirham has become more frequent in the wake of sanctions. However, the convenience and speed offered by cryptocurrencies may lead Russian oil firms to continue using them even after sanctions are lifted.

The drive towards using crypto for international trade has been supported by Russia's political system. The State Duma introduced legislation late last year permitting cross-border payments settled using cryptocurrencies. This move was preceded by advice from the Central Bank of Russia in July 2024, encouraging businesses to use digital assets and other alternative payments for international trade. The Central Bank's governor, Elvira Nabiullina, explained that new financial technology creates opportunities for schemes that did not exist before, justifying the softened stance on cryptocurrencies.

However, the use of cryptocurrencies for sanctions evasion is not without its challenges. Russian entities face the risk of law enforcement disruption, as seen with the seizure of Garantex’s domains and servers, and the freezing of funds. Additionally, the traceability of cryptocurrency usage and strengthening anti-money laundering regulations make it more challenging to execute sanctions evasion at scale. Mainstream cryptocurrency exchanges are increasingly protecting against potential sanctions evasion through their platforms, further complicating the process for Russian firms.