(Bloomberg) -- Six little-known companies emerged as new kings of Russian oil in December, collectively handling enough of the country’s exports to catapult them into the leagues of the world’s largest commodity traders.
The question of who has been managing the flow of Russian oil after big international traders cut ties with Moscow has been one of the oil market’s biggest mysteries. Now, Russian customs data seen by Bloomberg for the final four weeks of 2022 show that the six companies based in Hong Kong and Dubai in total handled about 1.4 million barrels a day of Russian crude oil.
That is enough oil to meet the entire needs of the UK or Italy, and it’s more Russian oil than trading giants like Trafigura Group or Vitol Group would generally have handled before the war in Ukraine. The biggest oil traders have stepped back from that business in the past year.
Buying Russian oil remains legal, but successive rounds of international sanctions have pushed the trade deeper into the shadows and made it all but impossible for analysts and government officials to get hard data on who is involved in it.
The question has become more pointed in recent months, as the US and European Union in December imposed a price cap on Russian oil, preventing companies using western insurance and services to transport the crude if it’s bought above $60 a barrel. Major buyers China and India didn’t sign up to the measure, and even the US acknowledged last week that most Russian oil is now trading outside the cap.
“Knowing who the big names are is an important step in understanding how oil markets are responding to the price cap and wider sanctions,” said Steve Cicala, co-director of the Project on the Economic Analysis of Regulation at the National Bureau of Economic Research.
The customs data seen by Bloomberg give invoice-by-invoice information on the buyers of Russian crude oil from Dec. 5 to Dec. 31. Many of the biggest buyers were large Chinese and Indian state companies, and units of Russian oil companies, but there were six traders in the top 15.
The largest among them was Nord Axis Ltd., which bought 521,000 barrels a day of Russian oil in December, all from Rosneft PJSC. Nord Axis, which was incorporated in February last year in Hong Kong, was unknown in the oil market until July when it was announced as the buyer of Trafigura’s stake in Rosneft’s flagship oil project, Vostok Oil. Bloomberg couldn’t find a website for Nord Axis and wasn’t able to make contact with the firm.
A request for comment from Rosneft was not answered.
The other buyers include Tejarinaft FZCO, a Dubai company which bought 244,000 barrels a day from Rosneft in December. A phone call to the company was answered by a receptionist in a temporary office space who declined to pass on the call. A message to an email address on the company’s website bounced back.
For years, the world’s largest commodity traders competed with one another to secure oil supplies from Russia. But sanctions since the nation’s invasion of Ukraine have prompted them to step back. Trafigura, one of the leading buyers for many years, was handling 850,000 barrels a day of Russian at its peak, Chief Executive Jeremy Weir said at a conference last year.
The customs data seen by Bloomberg don’t necessarily show which companies and individuals are organizing the shipping of the oil, or who is capturing the profits. Margins have surged as the trade becomes more complicated.
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It’s not clear how the six traders were able to finance the flow of Russian oil, which was worth more than $2 billion over the month of December.
Some of them were established traders before the war, like Concept Oil Services Ltd., a Hong Kong company which was started in 2003 by Latvian citizen Michael Zeligmans to trade oil in Europe, Russia and the countries of the former Soviet Union, according to a 2013 UK court case. It handled just over 152,000 barrels a day of Russian oil in the period covered. Bloomberg wasn’t able to find a website for Concept or reach Zeligmans.
Similarly, Coral Energy DMCC bought 121,000 barrels a day of Russian crude in the final four weeks of December from Surgutneftegas PJSC. Owned by Tahir Garayev, Coral started out a decade ago as a fuel oil trader, according to its website. Coral’s Chief Financial Officer Ahmed Karimov repeated previously provided comments that his company stopped dealing in Russian oil from Jan. 1.
Others have less track record. The third-largest trader is Dubai-based QR Trading DMCC, which bought 199,000 barrels a day from Surgutneftegas. An email to QR went unanswered, and no one was available when Bloomberg visited its Dubai office last week.
Surgutneftegas didn’t respond to a request for a comment.
The fifth-largest trader is Bellatrix Energy Ltd., a Hong Kong company that was unknown in the oil market before the war. Owned by an Azerbaijani citizen called Bilal Aliyev, according to corporate filings, it bought 151,000 barrels a day in December from several Russian oil companies, the customs data show.
Hong Kong filings show that in December 2022, it received loan facilities from Russian banks including Russian Agricultural Bank and Rosneft-owned Russian Regional Development Bank. An email seeking comment from Bellatrix went unanswered.
Requests for comment from the two banks were not answered.
The invoice data are presented in kilograms and were converted into barrels a day by Bloomberg.
The Group of Seven and the European Union designed the sanctions on Russian energy with the aim of keeping the oil flowing, even as the measures added complexity as they sought to curb Moscow’s revenues. US Assistant Treasury Secretary Ben Harris underscored last week just how opaque the trade has become.
“We’re coming to this with a lot of humility and we’re just asking that everyone else can adopt the same level of uncertainty. These are really opaque markets, the data’s not great on it. Let’s just acknowledge that from the outset when we’re making conclusions.”
--With assistance from Serene Cheong and Archie Hunter.
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