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Exclusive Russia is struggling to collect oil payments while China, the United Arab Emirates and Turkey are tightening banking controls

MOSCOW (Reuters) – Russian oil companies face payment delays of up to several months for crude oil and fuel as banks in China, Turkey and the United Arab Emirates (UAE) become more wary of U.S. secondary sanctions, according to eight sources familiar with the matter report said.

Delayed payments reduce the Kremlin’s revenue and create irregular revenues, allowing Washington to achieve its dual political sanctions goals – cutting off the flow of money to the Kremlin to punish it for the war in Ukraine, while at the same time not restricting global energy flows interrupt.

According to the eight banking and trade sources, several banks in China, the United Arab Emirates and Turkey have tightened their sanctions compliance requirements in recent weeks, leading to delays or even rejection of money transfers to Moscow.

Banks, wary of U.S. secondary sanctions, began requiring customers to provide written guarantees that no person or entity on the U.S. Special Designated Nationals (SDN) list would be involved in a transaction or be the beneficiary of a payment.

The sources asked not to be named because the issue is sensitive and they are not authorized to speak to the media.

In the United Arab Emirates, banks First Abu Dhabi Bank (FAB) and Dubai Islamic Bank (DIB) have blocked several accounts linked to trade in Russian goods, two sources said.

The United Arab Emirates’ Mashreq Bank, Turkey’s Ziraat and Vakifbank banks, and Chinese banks ICBC and Bank of China are still processing payments, but processing takes weeks or months, four sources said.

Mashreq Bank declined to comment. The UAE’s FAB and DIB banks, Turkey’s Ziraat and Vakifbank, China’s ICBC and Bank of China did not respond to requests for comment.

Kremlin spokesman Dmitry Peskov said there were payment problems when asked about reports that banks in China had slowed payments.

“Of course, the unprecedented pressure of the United States and the European Union on the People’s Republic of China remains,” Peskov said in a daily conference call with reporters.

“Of course, this creates certain problems, but it should not be an obstacle to the further development of our trade and economic relations (with China),” Peskov said.

US EXECUTIVE ORDER

The West imposed a variety of sanctions against Russia after the invasion of Ukraine in February 2022. Trading Russian oil is not illegal as long as it is sold below a Western-imposed price cap of $60 a barrel.

Russian oil exports and payments for them were disrupted in the early months of the war, but later normalized as Moscow redirected oil flows from Europe to Asia and Africa.

“From December, problems returned after banks and companies realized the threat of secondary US sanctions was real,” a trading source said.

The source referred to a US Treasury Department executive order published on December 22, 2023, in which it warned against imposing sanctions on foreign banks for circumventing Russia’s price cap and called on them to improve compliance.

It was the first direct warning of the possibility of secondary sanctions against Russia, putting the country on a par with Iran in some trade areas.

Following the US order, Chinese, UAE and Turkish banks working with Russia have strengthened their controls, required additional documentation and trained more staff to ensure deals comply with the price cap, trade sources said.

Additional documents may also contain ownership details of all companies involved in the transaction, as well as personal information of people who control the companies, allowing banks to verify any exposures to the SDN list.

In late February, banks in the United Arab Emirates were forced to tighten their payment scrutiny as they were required to provide data to U.S. correspondent banks and the U.S. Treasury Department when they conduct transactions going to China on behalf of a Russian company, one said banking source familiar with them The reason.

“This led to delays in processing payments to Russia,” one of the sources said.

One source said a payment was delayed by two months, while another said the delays amounted to two to three weeks.

“It has become difficult, not even for dollar transactions. “Sometimes it takes weeks for a direct yuan-ruble transaction to be completed,” said one of the traders.

(Reporting by Reuters reporters in MOSCOW, Aizhu Chen in SINGAPORE, Engen Tham in BEIJING, additional reporting by Ziyi Tang, Florence Tan, Can Sezer, Jonathan Spicer, Federico Maccioni, Nidhi Verma, Hadeel Al Sayegh and Kevin Huang; Editing by David Evan)

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