By Marcelo Teixeira
NEW YORK (Reuters) – Coffee traders are seeking advance payment in any new deal to sell beans to Russia as Western sanctions hit the financial system of the world’s sixth largest importer.
Traders in Brazil, the world’s largest exporter and number 1 supplier to Russia, said they have added the country to a list of risky and sanctioned destinations that require pre-payment, including Syria, Lebanon and Iran.
“Too many uncertainties right now in terms of their ability to pay, so new deals only with 100% payment upfront,” said coffee broker Thomas Raad, who owns a trading company that ships regularly to risky destinations.
Jose Marcos Magalhaes, head of the Minasul coffee co-op, said advance payment would be required in any new deal for Russia, a regular client.
He added that the co-op would also need assurances regarding shipping as container lines are restricting trips to Russia since its invasion of neighboring Ukraine.
Raad said he is currently negotiating with a Russian buyer, having sent coffee samples for approval, but had yet to discuss payment.
SWIFT, the international banking messaging system used for money transfers, said on Tuesday it was waiting for instructions regarding which Russian banks should be disconnected from the system under the sanctions.
Brazil exporters association Cecafe said changes to SWIFT could certainly impact transactions but the situation was still unclear. It said Russia bought 1.2 million bags of Brazilian coffee in 2021 valued at $177 million.
Raad said crypto could be a payment option.
“I would take crypto because I am familiar with it, but many exporters wouldn’t”, he said.
For that to work, Raad said, the Russian importer would need access to a crypto broker that can complete both legs of the payment preferably using the USD Coin, a digital stablecoin pegged to the U.S. dollar.
(Reporting by Marcelo Teixeira; Editing by Kirsten Donovan)
