Banks in the US and Middle East continue to do what self-sanctioning is stopping their European counterparts from doing: Financing the trade of crucial Russian crops and fertilizers.

Sanctions on Russia over its invasion of Ukraine haven’t targeted its farm sector because of the key role it plays in helping to feed the world. The US has reiterated that food and fertilizers aren’t part of any restrictions to ease buyers’ concerns, and Middle Eastern and Asian countries have mostly avoided penalties on Moscow altogether.

But in Europe, many banks are steering clear of financing Russian products. 

European Union sanctions targeting the beneficial owners of some bulk-commodity companies have created uncertainty over which deals are allowed and lenders are worried about dealing with Russian counterparts more broadly. The same thing is happening in Switzerland, which has mirrored EU rules and traditionally played a key part in funding trade in Russian commodities.

The split shows how the firms that trade and finance the flow of commodities around the world keep grappling with the question of Russian goods. Russia is a huge supplier of grains, particularly wheat, and governments are trying to ensure that sanctions designed to punish it don’t push near-record global food costs even higher.

There are recent signs that the EU is seeking to encourage Russian agricultural trade and reduce over-compliance as a result of its rules -- ambassadors signed off on new measures this week that allow exemptions to sanctions for agricultural transactions.

“It is not surprising that Swiss and EU banks are reluctant to finance trades where the ownership structure of the parties to the trade requires analysis,” said Sarah Hunt, a partner at law firm HFW.

Citigroup Inc. and JPMorgan Chase & Co. are among banks still financing purchases of Russian farm commodities, either directly or through subsidiaries, according to people familiar with the matter, who asked not to be identified because details are private. 

Two big US agricultural firms who asked not to be named said they’re continuing to do Russian business with no financial-related problems.

Citigroup and JPMorgan declined to comment. Citigroup last week said it’s considering possibilities to exit its Russian consumer and commercial banking businesses. JPMorgan in March said it was engaging in limited operations in Russia.

Global food prices were already rising before Russia’s invasion of Ukraine -- also a major grains supplier -- sent them spiking to a record, squeezing household budgets and threatening to worsen global hunger. While Russia kept exporting large amounts of wheat last season, sanctions worries and war-related risks raised shipping, financing and insurance costs. 

The US Treasury issued a fact sheet last week reiterating that fertilizers and agricultural products aren’t included in any sanctions. The EU in June said that its sanctions don’t prohibit European businesses to buy, import or pay for Russian farm products, provided that sanctioned persons aren’t involved.

Sanctioned beneficial owners of Russian agricultural commodities firms include Dmitry Mazepin, who offloaded a stake in fertilizer maker UralChem JSC to executives, and Vadim Moshkovich, who cut his stake in agricultural conglomerate Ros Agro Plc to below 50%. 

Billionaire Andrey Melnichenko withdrew as beneficiary of a trust that holds shares of fertilizer maker EuroChem through a holding company, leaving his family as the beneficiary of the trust, while his wife is also under EU sanctions. The EU hasn’t directly sanctioned Russian agriculture and fertilizer products.

As part of a proposed new sanctions package, EU ambassadors signed off on changes that allow exemptions for sanctioned entities, including banks, for agricultural transactions, according to a draft of the proposal obtained by Bloomberg.

Highlighting the challenges still faced in Europe, traders are rushing to set up businesses in Dubai as Switzerland makes it harder for them to deal with Moscow.

Russian grain shippers are still facing problems getting financing from European banks, while working with US lenders is easier, Eduard Zernin, the head of the Russian Union of Grain Exporters, said this month. The union has urged officials to make it clear that trade in Russian agricultural goods is allowed.

“We’ve all seen how difficult it is to disconnect the Russian economy from the West in a couple of key sectors,” Citigroup chief Jane Fraser said earlier this month, pointing to food and energy. “We’ve been in the middle of some of those flows that are essential for the West and the multinationals that are supporting it.”