(Bloomberg) — A Turkish gas trader is starting a currency exchange business to ease unsanctioned trade between Russia and Turkey, showing firms are finding creative ways around payment issues while creating lucrative opportunities for middlemen.
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Under the program, Bosphorus Gaz Corp AS, Turkey’s second-biggest private importer of Russian natural gas, will pay Turkish exporters euros for the equivalent amount in rubles owed to them by their Russian customers, General Manager Bilgehan Ustundag told Bloomberg in an interview.
The company can then use those rubles to help pay for gas it buys under a long-term contract with Russia’s state-run supplier Gazprom PJSC.
Istanbul-based Bosphorous Gaz started offering the FX swap last month to meet demand from exporters who face delays and high fees when using banks for Russia-related transactions, even for goods that aren’t blacklisted by the US and its allies, Ustundag said. The exchange is currently in a trial phase, he said.
It’s the latest example of how businesses are adapting to western sanctions over Moscow’s full-scale invasion of Ukraine that have made the banks that conventionally mediate cross-border trade increasingly wary of handling transactions with Russia. Other recent examples include barter deals for agricultural produce and settling payments in neighboring countries such as Kazakhstan.
Turkey has sought to maintain ties with both Russia and Ukraine during the war, and hasn’t implemented sanctions against Moscow. That sparked an export boom after the February 2022 invasion as western firms pulled back. Volumes have since fallen as US sanctions force Turkish banks to increase scrutiny of Russia-linked trade.
Turkey’s biggest exports to Russia include industrial machinery, fruit and vegetables and motor vehicles. Turkish President Recep Tayyip Erdogan has long championed trade in local currencies, but no concrete steps have been taken so far.
For now there is no Europe-wide ban on Russian gas, which continues to flow to parts of the continent, albeit in smaller volumes than before the war. Russia ships gas directly to Turkey through pipelines under the Black Sea.
Transactions in the new exchange program will be handled at Turkey’s Emlak Katilim Bankasi, a state-run Islamic bank, with Bosphorus Gaz charging a fee for facilitating the swap, Ustundag said. Trade involving sanctioned products won’t be eligible, he added.
