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According to reporting by Reuters, Russian oil producers are seeking alternatives to the US Dollar in order to skirt fallout from tough US sanctions against Russia, leading to Russian crude producers to accepting payments for barrels in Euros instead of the standard Greenback.

Key highlights

Russia, under pressure from US sanctions since 2014 springing from the Crimea annexation, sees a rising threat of increased sanctions from the US, citing Russia’s “maligned” activities abroad.

Alarm bells in Russia are ringing over a potential move by the US Treasury Department to blacklist Russia from completing transactions in US Dollar, a move that would essentially cut Russia off from global markets and cripple their domestic crude industry.

Russia’s oil markets have been able to weather US sanctions in recent years, but the new possible measure sees Russian firms taking preemptive measures, borrowing from Russian banking firms instead of US banks and settling transactions in Euros instead of USD.

Technically, the US cannot forbid any entity from using US Dollars, but they can prevent US banks from doing business with firms in sanctioned countries  such as Russia.

As Reuters noted regarding Russia’s oil firms, especially Surgutneftegaz, the fourth-largest crude producer in Russia:  

Most Russian oil majors, including Rosneft and Lukoil, also sell the lion’s share of output via long-term contracts with clients, giving them more time to work out alternative forms of payment when the contracts expire.  But most of Surgutneftegaz’s exports “” around 2 million tonnes per month “” is sold through monthly tenders on the spot market, the largest volumes by far among its Russian peers. So it would have only around 30 days to find alternative payment methods.

 – Reuters