Billions in Dollar and Euro Notes Reach Russia despite Sanctions

Euro and Dollar banknotes and words "Sanctions" are placed on Russian flag in this illustration taken, May 16, 2024. REUTERS/Dado Ruvic/Illustration/File Photo Purchase Licensing Rights
Euro and Dollar banknotes and words "Sanctions" are placed on Russian flag in this illustration taken, May 16, 2024. REUTERS/Dado Ruvic/Illustration/File Photo Purchase Licensing Rights
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Billions in Dollar and Euro Notes Reach Russia despite Sanctions

Euro and Dollar banknotes and words "Sanctions" are placed on Russian flag in this illustration taken, May 16, 2024. REUTERS/Dado Ruvic/Illustration/File Photo Purchase Licensing Rights
Euro and Dollar banknotes and words "Sanctions" are placed on Russian flag in this illustration taken, May 16, 2024. REUTERS/Dado Ruvic/Illustration/File Photo Purchase Licensing Rights

Around $2.3 billion in dollar and euro bills have been shipped to Russia since the United States and EU banned the export of their banknotes there in March 2022 following the invasion of Ukraine, according to customs data seen by Reuters.
The previously unreported figures show Russia has managed to circumvent sanctions blocking cash imports, and suggest that dollars and euros remain useful tools for trade and travel even as Moscow strives to reduce its exposure to hard currencies.
The customs data, obtained from a commercial supplier that records and compiles the information, shows cash was transported to Russia from countries which have not imposed restrictions on trade with Russia. The country of origin for more than half the total was not stated in the records.
The US government in December threatened penalties for financial institutions that help Russia circumvent sanctions and has imposed sanctions on companies from third countries throughout 2023 and 2024.
China's yuan has overtaken the greenback to become the most traded foreign currency in Moscow, although significant payment problems persist.
Dmitry Polevoy, head of investment at Astra Asset Management in Russia, said many Russians still wanted foreign currency in cash for trips abroad, as well as small imports and domestic savings.
"For individuals, the dollar is still a reliable currency," he told Reuters.
Wall Street's main indexes closed mixed on Monday as investors braced for more key economic data in the hope of gauging the Federal Reserve's next policy moves.

Russia started labelling the dollar and euro as "toxic" in 2022 as sweeping sanctions cut its access to the global financial system, hampering payments and trade. Around $300 billion of the Bank of Russia's foreign reserves in Europe have been frozen.

A European Commission spokesperson said it could not comment on individual cases of sanctions application. The spokesperson said the European Union engages with third countries when it suspects that sanctions are being circumvented.
The customs records cover March 2022 to December 2023 and Reuters could not access more recent data.
The documents showed a surge in cash imports just prior to the invasion. Between November 2021 and February 2022, $18.9 billion in dollar and euro banknotes entered Russia, compared with just $17 million in the previous four months.
Daniel Pickard, International Trade & National Security Practice Group Leader at US law firm Buchanan Ingersoll & Rooney, said the pre-invasion spike in shipments suggested some Russians wanted to insulate themselves against possible sanctions.
"While the US and its allies have learned the importance of collective action in maximizing economic consequences, Russia has been learning how to avoid and mitigate those same consequences," Pickard said. He added that the data almost certainly understated actual currency flows.
Russia's central bank quickly curtailed individuals' foreign currency cash withdrawals following the invasion of Ukraine, in a bid to support the weakening rouble.
According to the data, just $98 million in dollar and euro banknotes left Russia between February 2022 and end-2023.
Foreign currency inflows, by contrast, were far higher. The largest single declarant of foreign currency was a little-known company, Aero-Trade, that offers duty-free shopping services in airports and aboard flights. It declared around $1.5 billion in bills during that period.



OPEC Cuts Oil Demand Growth Forecast, Highlighting Dilemma over Oct Hike

A view shows the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside its headquarters in Vienna, Austria, May 28 , 2024. REUTERS/Leonhard Foeger/ File Photo Purchase Licensing Rights
A view shows the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside its headquarters in Vienna, Austria, May 28 , 2024. REUTERS/Leonhard Foeger/ File Photo Purchase Licensing Rights
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OPEC Cuts Oil Demand Growth Forecast, Highlighting Dilemma over Oct Hike

A view shows the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside its headquarters in Vienna, Austria, May 28 , 2024. REUTERS/Leonhard Foeger/ File Photo Purchase Licensing Rights
A view shows the logo of the Organization of the Petroleum Exporting Countries (OPEC) outside its headquarters in Vienna, Austria, May 28 , 2024. REUTERS/Leonhard Foeger/ File Photo Purchase Licensing Rights

OPEC on Monday cut its forecast for global oil demand growth in 2024 citing softer expectations for China, a reduction that highlights the dilemma faced by the wider OPEC+ group in raising production from October.

This is the first cut in OPEC's 2024 forecast since it was made in July 2023, and comes after mounting signs that demand in China has lagged expectations due to slumping diesel consumption and as a crisis in the property sector hampers the economy.

In a monthly report on Monday, the Organization of the Petroleum Exporting Countries said world oil demand will rise by 2.11 million barrels per day in 2024, down from growth of 2.25 million bpd expected last month.

According to Reuters, there is a wide split in 2024 demand growth forecasts due to differences over China and the pace of the world's transition to cleaner fuels. OPEC is still at the top of industry estimates and has a long way to go to match the International Energy Agency's far lower view.

"This slight revision reflects actual data received for the first quarter of 2024 and in some cases for the second quarter, as well as softening expectations for China's oil demand growth in 2024," OPEC said in the report.

OPEC said this year's demand growth was still above the historical average of 1.4 million bpd seen prior to the COVID-19 pandemic in 2019, which caused a plunge in oil use, and that summer travel demand would remain robust.

"Despite the slow start to the summer driving season compared to the previous year, transport fuel demand is expected to remain solid due to healthy road and air mobility."

In the report, OPEC also cut next year's demand growth estimate to 1.78 million bpd from 1.85 million bpd previously, also at the top end of what the industry expects.

Oil last week touched the lowest price this year near $75 a barrel on concerns about Chinese demand and a possible US recession. Prices were steady after the report was released, trading above $80.

OPEC+, which groups OPEC and allies such as Russia, has implemented a series of output cuts since late 2022 to support the market, most of which are in place until the end of 2025.

On Aug. 1, OPEC+ confirmed a plan to start unwinding the most recent layer of cuts of 2.2 million bpd from October, with the caveat that it could be paused or reversed if needed.

The group still has a month to decide whether to start releasing the oil from October, and will study oil market data in the coming weeks, a source close to OPEC+ said last week.