Little-Known Commodity Traders Help Russia Sell Oil

A group of covert commodity traders are cashing in on Russian oil, buying and shipping crude to customers as their larger rivals pull out of the market.

Lesser known traders include Paramount Energy & Commodities SA and Coral Energy Pte. Ltd. are buying unwanted Russian oil at a deep discount. According to traders, if companies take the risk, companies can make $20 million or more per shipment depending on the size of the tanker. This is up from $600,000 before the war.

Traders are not violating Western sanctions against Russia. The European Union has blocked its companies from doing most of their business with state-affiliated manufacturer Rosneft ROSN 2.86%

The Swiss Oil Company has also issued some restrictions. That has prompted major traders such as Trafigura Group, Vitol, Glencore PLC and Gunvor Group to find a way out.

That has opened up a lucrative opportunity for smaller traders. However, trade could be short-lived if the West imposes tougher sanctions on Russia’s oil industry or financiers and shipowners make it difficult for companies to do business. Russian energy.

Russia needs traders to sell about 3.6 million barrels of oil it exports by sea each day, a volume down from 3.8 million in April, according to Kpler.

Paramount is a little-known merchant in Geneva. Operating in a brown eight-story office building a few streets from Lake Geneva, it has traded an average of 163,000 barrels per day since the invasion, according to Petro-Logistics data.

Paramount is owned by Dutch founder, Niels Troost. The company is increasing its presence in Dubai to avoid European sanctions, according to a person familiar with the company. Mr. Troost and a group of traders were working outside the city of Emirati, the person said.

Mr. Troost said in an email that Paramount had purchased oil from independent companies under long-term contracts signed before the invasion of Ukraine and that the company had been established in Dubai since 2020.

One supplier to Paramount is Concept Oil Services Ltd., a Hong Kong-based company set up by Monaco resident Michael Zeligman, according to a person familiar with the company’s operations and the attorney representing it. Concept. Concept buys oil from Russian producers including a subsidiary of state-owned Gazprom PJSC and sells it to Paramount.

“The Concept Oil Service is fully compliant with all international sanctions,” the company’s attorney said by email.

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Paramount’s building in Geneva is also home to Tenergy Trading SA, a company Mr. Troost co-founded with Swiss energy trader Michel Tuor. Tenergy traded oil products with International Petroleum Products, a company owned by Russian magnate Gennady Timchenko, a longtime ally of President Vladimir Putin, according to a person familiar with his business interests. Troost. Mr. Tuor and Mr. Timchenko also played tennis together, the person said. Mr. Timchenko was subject to US sanctions in 2014 after Moscow annexed Crimea.

Mr. Troost said his company has transacted indirectly with IPP on the open market and no longer works with it. “All of those transactions happened before the sanctions were imposed and were stopped immediately once the sanctions were in place,” Mr. Troost said. He declined to comment on how Paramount operates, including where the oil comes from.

The ability of companies like Paramount to transport oil is crucial to Putin. According to the International Energy Agency, oil and gas sales accounted for 45% of Russia’s federal budget last year. High energy prices, partly due to the war, are increasing the Kremlin’s coffers.

The consequences of harsh economic sanctions against Russia have been recognized globally. WSJ’s Greg Ip joins other experts to explain the significance of what has happened so far and how conflict could transform the global economy. Photo illustrator: Alexander Hotz

“Putin can last for a very long time because of the cash flow,” said Bill Browder, chief executive officer of Hermitage Capital Management, a longtime rival of Putin and formerly a major investor in Russia. this and he will do it.

Dubai-based Coral Energy increased Russian oil volumes by a quarter in April from the previous month, trading around 260,400 bpd of crude and refined products, according to Petro-Logistics data. For the month of May so far, the company has averaged output of 213,600 bpd. The drop reflects a business shift to subsidiaries, according to people familiar with the matter.

Coral was founded by businessman Azeri Tahir Garayev in 2010. Russian oil accounted for about a fifth of its pre-war business, said Coral’s chief financial officer, Ahmed Karimov. Most fuel is purchased from private refineries and a quarter from Rosneft, he adds that Coral has no subsidiaries.

Mr. Karimov said Coral is denting its Russian business, in large part because many banks are unwilling to finance Russian businesses. Shortly after the EU introduced sanctions on Rosneft in March, Coral told the state-owned company it was exiting a long-term agreement to purchase virgin oil and gas, according to Karimov and email correspondence. of The Wall Street Journal.

“We have to follow the path of other traders because we are in a regulated market,” Mr. Karimov said. “We are regulated by the donor banks.”

To get around the banks’ restrictions, Rosneft is offering better terms to customers like Coral, highlighting the Russian oil giant’s desperation to switch fuels. According to Karimov and two people familiar with the transactions, Coral no longer had to ask the bank to guarantee her payment. Rosneft did not respond to a request for comment.

Coral is moving Geneva employees to Singapore so it can continue the business, according to a person familiar with the company. In the Asian trade hub, companies are exempt from EU and Swiss sanctions for doing business with Russian state-owned manufacturers.

Mr. Karimov said Coral is building an office in Singapore but it is renting locally and has no plans to use the team to deal with Russia.

Write to Anna Hirtenstein at anna.hirtenstein@wsj.com and Joe Wallace at joe.wallace@wsj.com

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https://www.wsj.com/articles/little-known-commodity-traders-help-russia-sell-oil-11653643583?mod=rss_markets_main Little-Known Commodity Traders Help Russia Sell Oil

Edmund DeMarche

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