Singapore's biggest banks are apparently responding to pressure from Washington not to participate in trade financing that could be seen to be linked to transactions that evade the G7-led price cap on Russian oil or other sanctions imposed on Moscow in response to its military action in Ukraine.

Some banks are reportedly restricting letters of credit (L/Cs) amidst warnings from Singapore-based insurance and maritime service providers that it is difficult to confirm that paperwork promising oil is bought at or below the US$60 cap is accurate.

L/Cs on stop

DBS Group, Oversea-Chinese Banking Corporation (OCBC) and United Overseas Bank have stopped issuing L/Cs for Russian energy deals because of uncertainty over the course of sanctions, according to Bloomberg.

The news agency says it obtained this information from people, who asked not to be identified as the information is not public. Bloomberg also report's that OCBC's restrictions cover all commodities.

Pivotal trading hub

Singapore is a key trading hub for Russian oil, and traders operating in the Singapore Strait are reporting a rise in fuel suppliers blending and re-exporting Russian fuel.

Apart from banks, other participants in the region's oil trading sector are being targeted by sanctions imposed by Washington. It has designated Red Box Energy Services, a vessel operator based in Singapore and another company in Hong Kong for working with a Russian liquified natural gas project.

Under the price cap, the G7 countries, the European Union and Australia bans the use of Western maritime services such as insurance, flagging and transportation when tankers carry Russian oil priced at or above US$60 a barrel

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