Turkish-Russian Trade Hit by U.S. Sanctions Threat, Payment Disruptions Reported

In the wake of a U.S. threat to impose sanctions on financial institutions engaging in business with Russia, Turkish-Russian trade has encountered disruptions, with payments for imported oil and Turkish exports being affected, according to multiple sources familiar with the situation, said a report by Reuters.

The U.S. executive order issued in December, while not explicitly targeting energy, has complicated payment processes for Turkish transactions involving Russian crude oil, as well as Russian payments for a wider array of Turkish exports, the sources revealed.

The objective of the U.S. sanctions is to curb Kremlin revenue and impede its activities in Ukraine, yet without significantly disrupting Russian oil flows to global markets. This delicate balance aims to prevent a surge in U.S. gasoline prices, particularly with President Joe Biden facing re-election in November.

Although the impact of the sanctions on Turkish oil supplies has been minimal, there have been delays in some shipments due to emerging payment challenges. Turkish banks are reportedly reassessing their business relationships and tightening compliance measures with Russian clients, leading to disruptions in payment flows between the two countries.

The disruption to Russian-Turkish payments intensified following the signing of the executive order by President Biden on December 22, which warned firms of potential consequences for aiding Russia in circumventing sanctions.

In response to the heightened pressure from the U.S., Turkish banks have been compelled to adopt stringent measures, closely scrutinizing all transactions to ensure compliance with sanctions regulations. This cautious approach underscores the significant implications for financial institutions involved in cross-border transactions with sanctioned entities.

While both the Turkish Treasury and banking regulators declined to comment on the matter, the U.S. State Department expressed encouragement over reports of Turkish banks enhancing their compliance programs in response to the sanctions threat.

However, the impact of the sanctions extends beyond the energy sector, affecting various segments of Turkish exports. Machinery exports, in particular, have been disrupted due to perceived similarities with military equipment, exacerbating trade tensions between the two countries.

The recent turmoil in Turkish-Russian trade underscores the intricate web of geopolitical dynamics and economic interests at play, as both nations navigate the challenges posed by international sanctions and regional conflicts.