Trading giants keep Russian oil flowing as majors feel the heat

12 March 2022

Trading giants keep Russian oil flowing as majors feel the heat

Trafigura, Vitol and Glencore loading Black Sea cargoes as war intensifies

As oil majors face scrutiny over their ties to Russia, the world’s largest commodities traders are quietly continuing to do business there, data seen by SourceMaterial shows.

Earlier this week Shell apologised and promised to stop buying Russian oil after heavy criticism of its purchase of cut-priced crude in the days following the invasion of Ukraine. Meanwhile, Trafigura, Vitol and Glencore all loaded oil products in Russian ports this week.

On Wednesday an Indian-registered tanker, the JAG Laxmi, was docked at Taman on the Black Sea to take on a cargo of vacuum gas oil, a petroleum byproduct that can be processed to make other fuels, according to Marine Traffic, a ship-tracking service.

SourceMaterial understands that the vessel was chartered by Trafigura, and that the supplier of the cargo was Rosneft, the Russian state-owned oil company.

At another Russian Black Sea port, Tuapse, Glencore was this week due to load a charter vessel, Gulf Coral, with 60,000 tonnes of naphtha, the raw material for solvents, also from Rosneft. A similar Glencore cargo left Tuapse earlier in the week.

SourceMaterial’s data also shows that since the 24 February invasion, Vitol loaded or was due to load seven cargoes of oil products including diesel, naphtha and liquid petroleum gas, some of them from Rosneft.

Vitol’s cargoes alone are worth nearly $100 million, according to estimates based on current prices.

While there is no suggestion that the three traders have broken sanctions, the invasion of Ukraine has seen international companies come under increasing pressure to break ties with Russia. Coca Cola and McDonald’s pulled out this week.

Trade with Rosneft is particularly controversial. BP, the British oil giant, said on 28 February it would abandon its 20 per cent stake in the company after SourceMaterial revealed Rosneft’s role in supplying fuel to Russia’s armed forces—though it said it would continue to continue to buy Russian oil products to meet its obligations under pre-existing contracts.

Following BP’s decision, its competitors Exxon, Equinor and Eni also announced exits from Russia, which would leave TotalEnergies the only major with significant interests there.

Geneva-based Trafigura said on 2 March that it had put on hold its interests in Russia, which include 10 per cent of Rosneft’s Vostock Oil project, without commenting on whether it would continue to buy oil there.

Contacted by SourceMaterial, a spokesperson for Trafigura said: “We are taking every precaution to ensure we comply with all applicable regulations and sanctions and we are in contact with the relevant governments either directly or through our customers.”

Glencore declined to comment.

A source with knowledge of Glencore’s trading operations said that SourceMaterial’s data reflects fulfilment of pre-invasion contracts—although none of the three traders has so far publicly committed to stop buying oil from Russia.

A spokeswoman for Vitol said: “At present Vitol is fulfilling contractual obligations to export energy products, in full compliance with all applicable sanctions.”

On Tuesday US President Joe Biden announced an immediate ban on new contracts for Russian oil, with a 45-day grace period for buyers to see out existing deals. The UK also announced it would phase out Russian oil imports by the year’s end.

It is unclear how these measures will affect commodities traders, however. The data seen by SourceMaterial includes deliveries by a range of traders for destinations including Malta, Italy, Turkey, Lebanon, Romania, South Korea and Greece.

Unlike the oil majors, the traders—with the exception of Glencore—are not listed on stock exchanges where companies face stricter transparency rules and added scrutiny, so it remains to be seen if they will encounter the moral pressure faced by BP and its peers.

“Russian resources are no longer a mere business opportunity but a weapon for a dictator with blood on his hands,” said Oliver Classen, a spokesman for Public Eye, which campaigns for greater accountability for traders in Switzerland, where Glencore is headquartered and Vitol and Trafigura have trading hubs. “The commodity traders need to stop reviewing and start acting responsibly.”