Rosneft’s move is seen by traders and analysts as a future hedge against potential new U.S. sanctions on Russia and/or its oil industry.
Rosneft has been on a list of sanctioned entities of the U.S. Department of the Treasury since 2014, when the U.S. and the EU imposed sanctions on Russia and Russian companies over the Russian annexation of Crimea. Those sanctions, however, don’t prohibit Rosneft accepting U.S. dollars as payments for the oil and oil product it sells.
Rosneft exports around half of the oil products its refineries in Russia produce. Most of the exported oil products are being sold via tenders to major international commodity traders or the trading units of oil majors. Trafigura, Vitol, Glencore, BP, and Cetracore are some of the top buyers of Rosneft’s oil products in annual, spot, or short-term tenders.
According to traders who spoke to Reuters, the goal of replacing the U.S. dollar with Euros in future tenders - and this switch could be made as soon as this year - is to mitigate as much as possible future unpredictable U.S. sanctions on Rosneft.
At the end of last year, Russia’s oil firms were said to be demanding penalty clauses and payments in Euros instead of U.S. dollars in their annual renegotiation of oil supply contracts with Western crude buyers, as the Russian oil industry was seeking to protect itself from possible new U.S. sanctions on the sector.
According to an exclusive Reuters report in November 2018, buyers were unwilling at the time to yield to the Russian demands.
Last year, U.S. lawmakers discussed extending sanctions on Russia to energy and oil projects and sovereign debt markets in what Republican Senator Lindsey Graham called a “sanctions bill from hell.”