One year since Russia invaded Ukraine in February 2022, trading of the country’s oil has changed beyond recognition. The traditional players that used to dominate the trade have dropped out, possibly for good. They have been largely replaced by a new set of mostly obscure firms domiciled in Dubai and Hong Kong, some of which were set up only last year.
The first companies to withdraw from the Russian trading scene were majors such as BP, Shell and Equinor, that for several years had been buying barrels direct from big Russian producers such as Rosneft, Gazprom Neft and Surgutneftegas. Next were leading Western traders such as Vitol, Trafigura, Glencore and Gunvor that had been handling well over 1 million barrels per day of Russian oil between them — some under offtake deals with Rosneft — until they stopped buying crude last spring. The traders have also slashed their shipments of oil products.
Trafigura and Vitol sold their stakes in the huge Rosneft-led Vostok Oil development to two little-known, recently established trading firms: Hong Kong-based Nord Axis (Trafigura), and Dubai’s Fossil Trading FZCO (Vitol).
Second-tier players such as Singapore-domiciled Coral Energy and Mercantile and Maritime Energy (MME) also pulled the plug on Russia. Coral says it stopped buying Russian crude over six months ago and wound down its product business at the end of last year, while MME says it ceased trading Russian oil “in accordance with all applicable international sanctions.” Like Vitol, MME also sold its small stake in Vostok Oil to Fossil Trading.
Vienna-based trader Cetracore, which had been lifting regular volumes of Russian gasoil from the Black Sea port of Tuapse until the end of last year, has also withdrawn.
There are one or two exceptions to this trend, but not many. Litasco, the Swiss-based trading arm of Russian oil giant Lukoil, continues to lift Russian oil from all the major Russian ports and also has a sizable non-Russian business that includes parts of the Mideast and North Africa. It is the only company still making regular crude shipments to the EU as Bulgaria, where Lukoil owns a refinery, is exempt from the EU embargo until end-2024.
Another Geneva-based trader that still lifts Russian oil is Paramount Energy: The company continues to ship several cargoes a month of East Siberia-Pacific Ocean (Espo) crude from the eastern port of Kozmino, all for China, according to sources with access to port data.
Paramount, which is owned by Dutch trading veteran Niels Troost, did not respond for a request to comment.
New Players Emerge
However, the main gap in Russian oil, perhaps as much as 2 million b/d for crude and products combined, has been filled by a new group of trading firms domiciled outside Europe that had little or no involvement before the war and, in some cases, did not even exist.
Information on these is scarce, but Energy Intelligence estimates their number at well over 20. Their operations are opaque, although trading sources familiar with some of these entities say they conduct a large part of their business in Russian rubles, with the US dollar and euro phased out of transactions.
Trade finance is provided by United Arab Emirates and Turkish banks, according to a source who knows several of these companies. He says European lenders, which pre-invasion were handling a large chunk of the business, are now out of the picture.
None of these trading companies is violating any sanctions by lifting Russian oil. Restrictions imposed last year by the EU, Switzerland and UK — which include a ban on commercial dealings with state-backed companies such as Rosneft, Gazprom Neft, shipping company Sovcomflot and pipeline operator Transneft — apply only to entities and individuals domiciled in their territory.
Similarly, new G7 restrictions on providing shipping services for Russian oil only apply to companies from the G7.
Moscow on the Gulf
Most of the new entrants are based in Dubai, which has seen an influx of Russians since the war began, attracted by the emirate’s business-friendly environment.
Based on feedback from multiple trading and shipping sources and various port data, Energy Intelligence has identified at least a dozen firms in Dubai that are involved in the Russian oil trade, some of which are members of the Dubai Multi Commodities Centre (DMCC), a free zone that promotes itself as “the center of global commodities trading.”
A source familiar with the Dubai-based trade says many of the companies tend to be interconnected. “A lot of the business is going through a small circle of people, some of whom work in the same building,” he says.
For the past six months or two, according to several trading sources, one of the largest lifters of Russian crude and fuel oil has been Tejarinaft FZCO, a Dubai-based company that was incorporated last year and is barely known in the wider trading world. Tejarinaft — Arabic for “oil trade” — has been selling Russian Urals and Espo grades, mostly from Rosneft, the sources say. It has sold Urals into India and Turkey, the sources say, and is also a regular seller of Espo barrels into China.
Tejarinaft keeps a low profile, but it does have a website that cites a presence “across multiple international markets” and says it has used this experience to “provide services and innovative approaches.” The website says the company was set up last year by its chief executive, Moroccan-born Hicham Fizazi, who started off in the wheat trading business. Its COO is Lebanese-born Edward Ghazal, who has a 15-year background in oil and gas and has worked for other trading companies. Attempts to contact the firm by phone were unsuccessful, and an email sent to the company’s official email address bounced back.
Other Dubai-based entities that have cropped up in recent months as lifters of Russian crude and products include:
Everest Energy, which has been around for several years as a products offtaker from the Black Sea and turned up last year as a supplier of Urals crude to Turkey;
Elbrus General Trading, whose principal business is petrochemicals;
Petroruss, which has made several oil shipments to India and China, and for years previously had been trading products in the Baltics; and
GMS Trading, which was established last year and makes regular product shipments out of the Black Sea, according to trading sources.
Attempts by Energy Intelligence to contact these companies were unsuccessful.
Eastern Promise
While Dubai is by far the most popular new base for Russian oil traders and shippers, Hong Kong also has its attractions.
One of the first of the new breed of trading firms to appear on the scene was Bellatrix Energy, a company that was incorporated in Hong Kong in 2020 with a national of Azerbaijan, Bilal Aliyev, listed as the sole director.
Bellatrix, which according to its website trades both oil and petrochemicals, has lifted multiple cargoes of Rosneft crude, according to trading and shipping sources, a large chunk of which have gone to India. The company did not respond to an emailed request for comment.
Even less is known about Sunrise X Trading, a company that emerged on the scene around the same time as Bellatrix and also lifts Rosneft barrels, according to the sources. A company of that name was established in Hong Kong in June last year, but it is unclear if this is the same entity.
A third Hong Kong-based company that has lifted Russian barrels in recent months is Covart Energy, which was established in 2019.
None of these three companies could be reached for comment.
Hong Kong is also the new domicile for the company that ultimately owns Russia’s fleet of tankers, which plays a key part in the oil trade and is used by all the major Russian exporters.
The fleet of more than 90 ships of various sizes is overseen and maintained by Sun Ship Management in Dubai, which is a fully owned subsidiary of state-backed Sovcomflot that was established over a decade ago.
According to the Dubai corporate registry, ownership of Sun Ship was transferred on Jan. 18 from SCF Overseas Holding in Cyprus to a company called Star Choice (Hong Kong) in Hong Kong. The Hong Kong registry shows that two of the Russian directors of Sun Ship Management are now directors of Star Choice.
Direct Sales?
Russia’s oil trade continues to evolve, and further changes seem likely in the coming year as exporters adapt to tougher sanctions.
Judging from the pattern of the past 12 months, more obscure trading entities are likely to crop up in Dubai, Hong Kong and other jurisdictions, industry sources say.
“You will see more of these companies, their names will keep on changing and it will become harder and harder to know who’s behind them,” says a veteran European trader who has been involved with Russia for almost 30 years. He draws a parallel to what happened with oil exports from Iran and Venezuela, where a series of “pop-up” offtakers emerged to lift their barrels after the US and EU tightened trade sanctions years ago.
While these intermediaries look set to continue playing a pivotal role, there is also room for direct sales between produces and end-users — similar to the system that existed in Soviet times.
Rosneft, for example, is now shipping barrels to Turkey without using go-betweens, and is also selling several cargoes a month of Urals to India’s state IOC, according to traders.
ENB Top NewsENBEnergy DashboardENB PodcastENB Substack
Energy News Beat