In May, an oil tanker flying the Liberian flag departed from Russia’s Ust-Luga port, carrying crude on behalf of a little-known trading company based in Hong Kong. Before reaching its destination in India, the cargo switched hands. The new owner of the 100,000 tonnes of Urals crude was a low-profile trading company based in Hong Kong, as confirmed by two trading sources.
In recent months, there has been a significant increase in the number of little-known trading firms involved in Moscow’s major crude exports to Asia. This uptick can be attributed to the withdrawal of major oil companies and commodity houses due to Ukraine war-related sanctions against Russian producers. According to trading sources and analysts, at least 40 intermediaries, including companies with no prior involvement in the oil trading arena, were involved in Russian oil trading between March and June.
These new players have collectively shipped at least half of Russia’s total crude and refined product exports, averaging 6-8 million barrels per day this year. Consequently, these once little-known companies have become the largest oil traders globally. This development departs from previous industry norms, where a handful of well-established oil majors and top trading houses handled Russian oil transactions over the past few decades.
Although these trades do not violate sanctions, they present challenges for sanctions enforcement agencies in Europe and the United States in tracking Russian oil transactions and prices. For instance, the rapidly changing trading network could complicate the identification of those involved in moving oil when prices breach the cap set by the Group of Seven Nations, Australia, and the European Union.
The emergence of new companies and practices has increased multiple trades while ships are at sea, a phenomenon that was once rare but has now become more common. These trades often occur with minimal public documentation, aiming to make Russia’s oil exports harder to trace. In some cases, a single cargo passes through at least three traders.
Previously, oil cargoes were usually handled by a single, well-known trader from the source to the destination. However, this network of pop-up traders has now introduced a different dynamic. Furthermore, these traders also utilize old oil tankers, which the Western shipping community tends to avoid, creating financial risks for Russian oil companies dealing with unknown entities and limited credit history.
Several companies that became major traders of Russian oil last year have since exited the business, and the ultimate ownership of these new trading companies remains unclear.
