Commodity trade finance gets tough in a destabilized world
While the impact on energy is centre stage, the war in Ukraine is also wreaking havoc on soft commodity prices and trade routes. Trade in agricultural commodities is taking a hit. The pool of banks financing these commodities is already dwindling, while the risks for those that remain are growing.
When BNP Paribas explained its decision to sell its commodities finance business in the US earlier this year, the bank didn’t mention the war in Ukraine. The decision followed a similar retreat from commodities finance in Europe, the Middle East and Africa (Emea) in 2020 after large losses, which themselves had followed a $8.9 billion fine in 2014 related to trades with Iran, Cuba and Sudan.
“The decision taken to exit this business was consistent with our approach in Emea,” the bank insisted. “The impact is limited and BNP Paribas remains deeply committed to the US/Americas, its energy and renewables clients, and the continued growth of our CIB [corporate and institutional banking] business.”