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Russia using crypto in oil trade with China and India to skirt Western sanctions: Reuters

Russia using crypto in oil trade with China and India to skirt Western sanctions: Reuters

The BlockThe Block2025/03/13 16:00
By:By James Hunt

Quick Take Russia is using crypto in its oil trade with China and India to skirt Western sanctions, Reuters reported — citing sources with direct knowledge of the matter. Crypto represents a small but growing part of Russia’s $192 billion annual oil trade, with companies using bitcoin, ether and USDT, the sources said.

Russia using crypto in oil trade with China and India to skirt Western sanctions: Reuters image 0

Russia is using cryptocurrencies to facilitate a small but growing part of its oil trade with China and India to skirt Western sanctions, Reuters reported on Friday — citing four sources with direct knowledge who declined to be identified due to the sensitivity of the matter.

Russian oil companies are using bitcoin and ether via intermediaries to smooth the conversion of yuan and rupees to rubles in its oil trade with the countries, the sources said. The companies are also reportedly leveraging stablecoins like USDT — though, as a centralized entity, issuer Tether can freeze funds to comply with regulatory actions, including sanctions evasion.

One of the sources familiar with a Russian oil trader's operations said its crypto sales to China are worth tens of millions of dollars per month.

Russian companies began using bitcoin and other cryptocurrencies in December following legislative changes allowing their use for international payments to counter Western sanctions, the country's Finance Minister Anton Siluanov said at the time. Sanctions following the invasion of Ukraine have disrupted Russia's trade with key partners like China and India, as local banks exercise extreme caution with Russia-linked transactions to avoid Western regulatory scrutiny.

In September, blockchain analytics provider Chainalysis also reported Russia's central bank was spearheading crypto infrastructure efforts to evade Western sanctions. However, it's the first time the use of cryptocurrencies in Russia's $192 billion annual oil trade industry has been reported.

Earlier this month, senior Russian official Anton Gorelkin stated that sanctions won't fully prevent Russians from using the cryptocurrency market, noting that cryptocurrencies will continue to be one of the most effective tools for circumventing them. Gorelkin's comments came following fresh EU sanctions on the Russian crypto exchange Garantex, which has already been under U.S. sanctions since 2022.

Meanwhile, U.S. President Donald Trump has signaled interest in improving relations with Russia while pushing for an end to the war in Ukraine, but whether or not sanctions will be lifted remains uncertain. Regardless, crypto is likely to continue being used in Russia's oil trade, the sources said, as it is more convenient and helps operations run faster.

However, one of the sources, a Kremlin adviser, said cryptocurrencies are just one of several ways to bypass payment issues.

Russia is not the only country turning to cryptocurrencies, which have helped other sanctioned nations like Iran sustain their economies while bypassing the U.S. dollar. Russia's move also follows Venezuela's increasing use of digital currency for oil exports after the U.S. reimposed sanctions on the country last year.

Russia's growing use of crypto

While individuals in Russia are permitted to own cryptocurrencies, using them as a means of payment for goods and services within the country is prohibited, and trading is significantly restricted.

However, a three-year experimental initiative announced by Russia's central bank earlier this week could allow qualified investors to trade cryptocurrencies more easily. The central bank designated qualified investors as those who hold over 100 million rubles ($11.5 million) in stock investments and deposits or earned over 50 million rubles in income last year. Companies that are qualified under applicable law are also eligible to participate.

The new initiative may suggest the country's move towards a wider adoption of cryptocurrencies, years after President Vladimir Putin signed a law banning crypto asset payments in 2022. 

However, the central bank clarified that it still does not recognize cryptocurrency as a means of payment. Consequently, it plans to prohibit settlements outside of authorized participants in the program and impose penalties for violations.

In November, Russia's upper house of parliament, the Federation Council, approved a bill on taxing cryptocurrency transactions and mining, essentially exempting crypto transactions from value-added tax and recognizing digital currencies as property for tax purposes. The law also established income tax rates for cryptocurrency investments, setting them at 13% for earnings up to 2.4 million rubles and 15% for amounts exceeding that threshold, and was subsequently signed into law by President Vladimir Putin.

Putin also signed a law last year that formally legalized cryptocurrency mining within the country. The legislation established a regulatory framework for mining activities, permitting Russian legal entities and individual entrepreneurs to engage in cryptocurrency mining operations. However, the law requires miners to register with the government, and certain regions have still imposed restrictions or bans on mining due to energy consumption concerns.

Russia's central bank has also been testing its central bank digital currency ( CBDC ), the digital ruble, which is expected to begin rolling out in phases this year.


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