Are US Sanctions Finally Crippling Russia’s Oil Payments?

Russia may now be facing a payment crisis regarding the delivery of its crude oil according to a Reuters report. The report states that US sanctions on Moscow are now making banks in China, Turkey, and the UAE more cautious resulting in pending payments for Moscow.

The US, EU, and the UK, have issued new sanctions against Moscow in February this year. The US issued 500 new sanctions along with export restrictions on 100 individuals. The UK has targeted 200 organisations, which it says are helping Russia acquire weapons. These sanctions also include those shipping armaments from North Korea. The UK has focused on those it says are responsible for the death of Russian dissident Alexei Navalny.

The cautiousness cannot come at a worse time for Russia. The rouble fell to a one-week low against the dollar to 93 after the terror attack in Moscow. What is of more long-term concern is that India, a long-term recipient of Russian oil, may reportedly be getting more cautious. A Bloomberg report suggests that Indian oil refiners will no longer accept tankers owned by state-run Sovcomflot PJSC. This, however, has yet to be confirmed by both Indian and Russian authorities.

Russia will also be concerned about the fact that banks in the UAE may now become more cautious about accepting payments on behalf of Moscow. Russia has so far relied on dirhams to receive payment.

A US Treasury spokesperson stated that Washington “expected and welcomed the fact that global oil buyers will be much less willing to deal with Sovcomflot than in the past.”

The problem for the US and the West is how much can they put the squeeze on Russian oil. Global oil prices are already at $90 a barrel and taking Russian oil off the market will only push up oil prices further. This is something President Biden will have to think about as this is an election year.