Ecuador's state oil company has lifted a force majeure it declared over two Russia-origin cargoes of diesel after it could not obtain a letter of credit (L/C) from Banco Central del Ecuador (Central Bank of Ecuador - BCE).

The cargoes' supplier, BB Energy, has now made an open credit agreement with Petroecuador, thus enabling it to take delivery of the two cargoes.

The case highlights how suppliers, traders and buyers are managing to navigate sanctions as countries snub Russian energy products in response to Moscow's invasion of Ukraine.

Background

Petroecuador has announced that it is lifting a force majeure it declared over the cargoes of diesel after reaching an alternative financing agreement with Dubai-based BB Energy, which was founded in 1937 in Lebanon.

BB Energy won the rights to sell Petroecuador two diesel cargoes in a December tender where a total of 2.24 million barrels were awarded to different companies.

The cargoes were bought, loaded and shipped before Ecuador imposed sanctions on Russia over its invasion of Ukraine but were left stranded offshore Ecuador after BCE stopped providing L/Cs for Russian fuel.

L/C warning

Mid-sized trader BB Energy, the third largest supplier of fuels to Ecuador after Trafigura Group and Freepoint Commodities, has now agreed with Petroecuador an open credit arrangement with deferred payment in order to deliver the cargoes. Under this deal, payment can be made by Petroecuador 90 days after the tankers' arrival.

Petroecuador meanwhile has told suppliers it is no longer able to receive products of Russian origin because it is impossible for the state-owned oil company to obtain L/Cs for such products.

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