Russia dodges Sanctions by Bitcoin Mining through Natural Gas

Russia sits on the world’s top natural gas reserves, with more than 24% of total world reserves. Combine it with the sanctions imposed by the US to prohibit any financial or crypto company from dealing with Russia. There is a huge unsold reserve of gas and high demand for cryptocurrencies.

Russia used this excess gas to mine bitcoins as per US Treasury. Unable to find a bigger source to obtain cryptocurrencies, Russian companies have started mining them.

This does not come as a surprise considering the tough sanctions that depleted Russian foreign exchange reserves.

From US Treasury Point-of-View

The US Treasury’s Office of Foreign Assets Control(OFAC) discovered that Russia was diverting its natural gas supplies to Bitcoin mining. Upon discovery, it sanctioned companies that were mining with offices in Russia. One such company was Bitriver AG, a holding company headquartered in Switzerland. It reportedly had 3 mining offices in Russia. Further, ten subsidiaries of the company were also sanctioned.

The Backdrop

Russia invaded Ukraine on 24 Feb 2022. As a result, the US and several other countries like the UK, Japan, Australia, etc., have put numerous sanctions on the country as well as companies and banks that were integral to its financial system.

Later, as it became obvious that Russia might switch to cryptocurrencies for foreign exchange needs, there were additional sanctions on cryptocurrency exchanges and companies.