There appear to have been significant shifts in the dynamics of letter of credit (L/C) business with and within Russia since its 2014 annexation of Crimea and the subsequent imposition of EU and US sanctions.

The impact has been noticeable across the region with a reduction in L/C business reported by an operator in the wider Central and Eastern Europe (CEE) area, while an increase in the use of internal L/Cs is reported by one Russian bank.

Regional impact

According to Raiffeisen Bank International, global exports to Russia secured by L/Cs have nearly halved since the imposition of the sanctions, from around US$11.8 billion in 2014 to around US$6.3 billion in 2015, and have not yet recovered.

The bank, which considers Austria and Central and Eastern Europe (CEE) its home market and has a substantial network of subsidiaries in Russia, says it has however seen moderate growth in guarantees and a steep rise in supply chain finance products.

Internal impact

Meanwhile, Russia's Sberbank Group maintains that L/Cs remain a mainstay in its trade finance suite of products.

In 2016, around US$35 million worth of payments were made using the bank's new unsecured L/C with advance payment offering.

In total, the equivalent of around US$1.8 billion worth of unsecured L/Cs were issued in 2016 according to Sberbank.

More increases

Sberbank is seeing the largest growth in settlements using internal Russian L/Cs denominated in rubles, up to the equivalent of around US$7.5 billion in 2016, a 45 per cent increase on the previous year.

The bank's volume and quantity of import and export transactions is on the increase too, with the volume of issued L/Cs with post-import financing more than doubling in 2016 over the previous year.

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