Russian Oil Buyers Unable to Obtain LCs, Banks Back Off

According to multiple trading sources cited by Reuters, at least three major buyers of Russian oil have been unable to open letters of credit from unnamed “Western banks” to cover purchases on 24 February 2022. Some traders drew parallels to the “Iranian syndrome, when major western institutions exercised restraint and caution before sanctions have been even imposed for the fear of transactions potentially breaching future regulations.”

“The restrictions will be very deep. We’re expecting most European banks will pull out of financing any commodities from Russia. Letters of credit are being stopped, financing in general toward Russian commodities is being stopped,” said Igho Sanomi, founder of energy trading company Taleveras, as quoted in a Wall Street Journal article.

Additionally, Bloomberg News reported on 25 February that Chinese importers of Russian crude are “briefly pausing new seaborne purchases as they assess the potential implications of handling the shipments”. Bloomberg News also reported that “some European banks such as ING Groep NV and Rabobank have begun to impose restrictions on commodity-trade finance” linked to Russia and US.