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Sources say that Russia is increasingly relying on cryptocurrency for its oil trade.

Sources say that Russia is increasingly relying on cryptocurrency for its oil trade.

Four sources who have direct knowledge of this matter claim that Russia uses cryptocurrencies to avoid Western sanctions in its oil trading with China and India.

Although Russia has publicly endorsed the use of digital currencies and passed a bill last summer to allow them in international trade, the use of these currencies in the oil trade in the country has never been reported.

Sources said that some Russian oil companies use bitcoin, ether, and stablecoins like Tether to convert Chinese yuan, Indian rupees, and other currencies into Russian roubles. They added that this is only a small, but growing, part of Russia's total oil trade which, according to the International Energy Agency, was valued at $192 billion in 2017.

Due to the sensitive nature of the issue, all sources refused to be named.

Cryptocurrencies are already helping countries like Iran and Venezuela, which have been subject to U.S. sanctions, keep their economies going without having to use the dollar as the currency of choice for global oil transactions.

Russia's move follows Venezuela's use of digital currencies in crude and fuel imports after Washington reimposed its sanctions.

A fifth source said that Russia has set up several systems, and USDT (Tether), is only one of them. The researcher, who works for an investigation firm that tracks the use cryptocurrency to circumvent sanctions, asked not be identified because of non-disclosure agreements.

The Russian central banking did not reply to a comment request. Last year, it said that sanctions-related delays in payments had become a major problem for the Russian economy.

Donald Trump wants to improve the relationship with Russia while he pushes to end the war in Ukraine. However, it is unclear whether sanctions will be removed. Reports said that the White House had been drafting options to ease sanctions, but Trump stated on March 7 that more sanctions against Russia are being seriously considered.

One of the sources stated that crypto would continue to be used for Russian oil trading even if the sanctions were lifted and the dollar could be used again. They said that it is a useful tool and makes operations run faster.

Two sources familiar with the transactions described how a Chinese buyer who purchases Russian oil pays the trading company that acts as the middleman yuan to an offshore account.

They said that the middleman converts it into crypto, transfers it to another bank account, and then sends it to a third Russian account to be converted to roubles.

According to a source familiar with the operations of the Russian oil trader, the crypto transactions for his sales to China are in the tens or hundreds of millions of dollars each month.

Analysts said that traditional currencies still make up the majority of Russia's oil transaction, but they also suggested other alternatives, such as the UAE dirham.

Garantex, a Russian crypto exchange, has been sanctioned by the United States in 2022, and by the European Union just last month. Last week, the platform suspended its services after Tether banned digital wallets from its platform.

According to a source who advises the Kremlin, cryptocurrency is one way of avoiding payment problems. The Royal United Services Institute in the UK and the Centre for Information Resilience also support this view. Reporting by Anna Hirtenstein, Aizhu chen, editing by Alex Lawler and Dmitry Zhdannikov, Kirby Donovan.

(source: Reuters)