Russia is currently using crypto in its oil trade with China and India to bypass Western sanctions. The move comes as traditional banking channels remain restricted due to sanctions imposed by the United States and its allies in response to the country’s actions in Ukraine.
Crypto Facilitates Oil Trade
According to sources cited by Reuters, some Russian oil companies are utilizing Bitcoin (BTC), Ether (ETH), and stablecoins such as Tether (USDT) to facilitate oil transactions. These digital assets help convert Chinese yuan and Indian rupees into Russian roubles, enabling smoother trade operations despite financial restrictions.
The process of using crypto for oil trade involves multiple steps and intermediaries. A foreign buyer transfers payment for the country’s oil in local currency to an offshore account managed by a trading company acting as a middleman.
The middleman then converts the funds into crypto and transfers them to another account, which is eventually sent to a third account in Russia. The funds are then converted into roubles for use in the country’s economy.
According to the Reuters report, a Russian oil trader dealing with China processes crypto transactions worth tens of millions of dollars per month, indicating the growing presence of digital assets in the oil sector.
Why Russia Is Turning to Crypto Despite Volatility
Western sanctions have cut off Russia’s access to global financial networks, including SWIFT, making it difficult for companies to conduct international transactions in U.S. dollars or euros. By turning to crypto, the country can conduct cross-border trade without relying on Western financial institutions.
Despite its advantages, using crypto for oil trade is not without risks. Crypto-assets are highly volatile, and regulatory scrutiny from Western authorities is increasing. The U.S. and its allies have been actively monitoring digital asset transactions linked to Russia and imposing restrictions on crypto exchanges suspected of facilitating sanctioned transactions.
The country’s use of crypto in energy transactions is part of the de-dollarization trend and a move towards alternative financial systems. Brazil, Russia, India, China, and South Africa are exploring ways to reduce their dependence on Western-dominated financial structures, including the increased use of local currencies and digital assets in international trade.
