Turkish-Russian trade hit by fresh US sanctions threat

A U.S. threat to hit financial firms doing business with Russia with sanctions has chilled Turkish-Russian trade، disrupting or slowing some payments for both imported oil and Turkish exports، according to seven sources familiar with the matter.

The U.S. executive order in December did not explicitly target energy but it has complicated some Turkish payments for Russian crude as well as Russian payments for a broader range of Turkish exports، the sources said.

U.S. sanctions aim to reduce the Kremlin's revenue and disrupt its war in Ukraine without choking Russian oil flows to global markets، to avoid a politically sensitive jump in U.S. gasoline prices with President Joe Biden، opens new tab seeking re-election in November.

However، similar payment problems to those now faced by Turkey have already disrupted Russian oil supplies to India and complicated those to the United Arab Emirates and China، according to oil traders.

Top crude and diesel exporter

Russia is the top crude and diesel exporter to energy-poor NATO member Turkey، supplying 8.9 million metric tons of crude and 9.4 million tons of diesel to its Black Sea neighbour in the 11 months to November.

The emerging payment issues are due to Turkish banks reviewing business and tightening compliance with Russian clients، four of the sources said. They have not disrupted Turkey's crude supplies، delaying only a small number of cargoes، two oil industry sources said.

A source with a Russian oil major said Russian oil exporters have not received payments from Turkey for two to three weeks.

"It has become difficult to make some energy payments to Russia، especially after the new sanctions (threat) at the end of December. Some payments were disrupted،" a Turkish source familiar with the payments issue said.

"The originally agreed upon method had to be changed or the payment had to be postponed، but the shipment continued. There may be problems on a cargo-by-cargo basis،" the source said.

The industrial and financial sector sources discussed the payment and trade disruption under condition of anonymity given they are not authorised to speak about the sensitive matter.

"Payment issues began after December. The focus is not on oil imports، but it is unsettling. It has not impacted day-to-day functioning but reminds us that a problem could arise any time،" a Turkish oil industry source said.

Maintaining close ties

The Turkish Treasury declined to comment when asked about the issue. Turkey's banking watchdog BDDK did not immediately respond to a request for comment.

Ankara opposes Western sanctions on Moscow even as it has criticised Russia's invasion of Ukraine two years ago. It has managed to maintain close ties with both Moscow and Kyiv throughout the conflict.

Though Ankara has said the sanctions will not be circumvented on Turkish soil، Washington ramped up pressure last year to halt the transit of dual-use goods that Russia could use on the battlefield، and has warned that Turkish banks and companies could be hit by secondary U.S. sanctions.