How Russia Is Using Bitcoin, Ethereum, and Stablecoins to Power Its Oil Trade with China and India

Russia has quietly turned to cryptocurrencies like Bitcoin, Ethereum, and Tether to facilitate its massive oil trade with China and India, a move aimed at navigating around Western sanctions, according to Reuters. This development marks a shift in how the country handles its $192 billion oil market, as reported by the International Energy Agency last year.

While the use of digital currencies remains a small portion of these transactions, its role is steadily expanding. Russian oil companies are leveraging these cryptocurrencies to streamline the conversion of Chinese yuan and Indian rupees into Russian roubles, offering a workaround to traditional financial hurdles imposed by sanctions.

The adoption of cryptocurrencies in Russia’s oil trade has not been widely publicized until now, though the country has taken steps to legitimize such practices. Last summer, Russia passed legislation permitting digital currency payments in international commerce, signaling an openness to alternative financial systems. This follows a pattern seen in other sanctioned nations like Iran and Venezuela, where cryptocurrencies have played a key role in sustaining economic activity without relying on the U.S. dollar, the dominant currency in global oil markets.

For Russia, the pivot comes as a practical response to payment delays, which the Russian central bank identified last year as a significant economic challenge. The central bank did not respond to requests for comment on this latest development.

A Closer Look at the Process and Its Scope

The mechanics of this trade reveal a sophisticated system designed for efficiency. A Chinese buyer, for instance, might pay a trading company acting as an intermediary in yuan through an offshore account. That payment is then converted into a cryptocurrency, transferred across multiple accounts, and eventually cashed out as roubles in Russia, according to two sources with direct knowledge of the process.

One source, familiar with a specific Russian oil trader’s operations in China, noted that these crypto transactions amount to tens of millions of dollars monthly. While traditional currencies still dominate Russia’s oil dealings, alternative methods like using the UAE dirham also persist. Cryptocurrencies, however, offer a speed and flexibility that other options lack, a point emphasized by one source who suggested their use could continue even if sanctions were lifted.

This trend builds on Russia’s broader efforts to adapt to a sanctions-hit economy. Another source from Reuters, a researcher at an investigations firm tracking cryptocurrency use in sanctions evasion, described Tether as just one tool in a larger toolkit Russia has developed. The researcher, bound by a non-disclosure agreement, declined to be named.

Meanwhile, the Kremlin has received advice that digital currencies are one of several viable solutions to payment woes, a view echoed by analysis from the UK’s Royal United Services Institute and the Centre for Information Resilience. Despite these innovations, challenges remain. Garantex, a Russian crypto exchange, faced U.S. sanctions in 2022 and European Union restrictions last month, leading to a suspension of services after Tether blocked its wallets.