Russia’s largest bank Sberbank and Trafigura Group Pte. Ltd of Singapore made a pilot blockchain transaction as part of a West Siberian oil sales deal during Russia’s Eastern Economic Forum on September 5, Sberbank said in a press release.
Sberbank purchased from Trafigura its accounts receivable of a major Turkish trader. Sberbank and Trafigura agreed on the financial terms of their deal and made a settlement that was tracked online step by step.
The experiment is an early foray into a technology that is popular with Russians. The idea is to put commodities onto a blockchain as due to their nature they are easily tradable and the price setting mechanisms are well established. However, the commodity markets that provide the platform for trading commodities are large and complex and the multiple layers and players incur costs. The idea of the blockchain is connect the purchaser of a unit of a commodity directly with the producer and so reduce costs and improve transparency and liquidity in the market.
This transaction was carried out on a platform created by the parties using the Hyperledger Fabric framework, with the transaction date, amount, timeframe, delivery scope and financial terms blockchain-encrypted.
The blockchain technology helped the parties cut their operating costs, documentation approval time and labour costs related to the transaction.
Alexander Vedyakhin, first deputy chairman of the executive board, Sberbank said: “We have carried out our first blockchain transaction with Trafigura, a leader in international commodities trading, and we plan to further develop this technology. This solution helps streamline business processes and dramatically improves the efficiency of document workflow. As of now, with all transactions the documents are being manually processed and then handled from Trafigura to the bank. Our blockchain pilot project records every step of the transaction: request for purchase of receivables, application processing and its approval with the bank, issuing the bank's offer, confirmation of terms by Trafigura, and settlement of the transaction. This cuts the procedure time from one day to one hour. I believe that these blockchain-based transactions are perfect for businesses involved in multi-party deals.”
Sberbank is now looking into expanding the list of blockchain project partners and is set to apply this technology in other trade financing operations in the future.
Jonathan Kollek, president, Trafigura Eurasia LLC said: “Today's announcement is a result of an intensive and successful cooperation between Sberbank and Trafigura."
Founded in 1993, Trafigura is one of the largest physical commodities trading groups in the world. Trafigura sources, stores, transports and delivers a range of raw materials (including oil and refined products and metals and minerals) to clients around the world. The trading business is supported by industrial and financial assets, including 49.3% owned global oil products storage and distribution company Puma Energy; global terminals, warehousing and logistics operator Impala Terminals; Trafigura's Mining Group; and Galena Asset Management.