Ecuador's state oil company has told commodity trader Trafigura Group to avoid importing Russian fuels into the country amid concerns it may become further entangled in sanctions difficulties according to the Bloomberg news agency.

Petroecuador already became embroiled in potentially sanctions-busting letter of credit (L/C) deals earlier this year, forcing it to declare force majeure over two Russia-origin cargoes of diesel after the state oil company failed to obtain an L/C from Banco Central del Ecuador.

Uncertain compliance

Petroecuador warned Trafigura to stop supplying Russian oil and diesel shortly after the commodity trader finished unloading a cargo of mostly Russian diesel at the Ecuadorian port of Esmeraldas on Sunday.

Bloomberg says it is not clear if Trafigura, Ecuador's top supplier of fuels, will comply with the request.

Deal background

In June, Trafigura signed a contract to supply diesel oil to Petroecuador according Bloomberg, which says the contract does not impose any restrictions by origin.

It does however does state that Petroecuador would not be able to obtain an L/C in case the cargo is of Russian origin or sold by a Russian company.

Without the L/C, the deal gets riskier as the trader could incur losses if the state oil company backs out financially from the deal.

Open credit alternative

Ecuador's state oil company eventually lifted the force majeure it declared over two Russia-origin cargoes of diesel earlier this year.

The cargoes' supplier, Dubai-based BB Energy, in the end made an open credit agreement with Petroecuador, thus enabling it to take delivery of the two cargoes (DC World News, 28 March 2022).

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