Letter of credit (L/C) flows are facing increasing restrictions as a result of international sanctions imposed on Russia as well as self-imposed measures taken by banks for fear that future sanctions could be enacted without warning.

But banks in India, which has strong economic and defence links with Russia, appear ready to write L/C business according to a recent report.

Proof of origin

The impact of sanctions imposed on Moscow in response to its invasion of Ukraine is now going beyond L/Cs arranged with Russian counterparties.

Some banks are reportedly asking for proof of origin for physical oil products trades in the European market before signing off on credit lines according to Argus Media.

The global energy and commodities publication cites a trader saying that they were unable to secure an L/C on gasoline purchased last week from a European counterparty, without first providing proof of origin. The request is unusual for such products, and proof of origin is almost impossible to provide in some European trading hubs.

U-turn for India

India however has reportedly contracted to buy Russian sunflower oil at a record high price for shipments in April after supplies from Ukraine dried up.

Indian buyers were not making purchases of Russian sunflower oil for nearly a month, a New Delhi-based dealer with a global trading firm reportedly told Reuters. The dealer said they are now placing orders as banks are opening L/Cs for the purchases.

This article represents the views of the author and not necessarily those of the ICC or Coastline Solutions.