Where is Russia Today?

For decades, Russia's oil industry has been led by powerhouse commodity traders such as Trafigura. These giants have long been the face of Russia's energy sector, with their operations and dealings largely transparent and subject to international scrutiny. However, in response to Western sanctions, new and mysterious players have emerged on the scene. Comprising a complex network of opaque shell companies operating aging tankers, dubbed the Shadow Fleet, these shady companies have dramatically altered the landscape of Russia's oil exports, allowing the country to circumvent international sanctions and maintain its grip on the global energy market. With the traditional big traders no longer the sole players, the rise of the Shadow Fleet and the companies operating the ships has introduced a new era of complexity and secrecy to Russia's oil industry, making it increasingly difficult to track the flow of oil and the parties involved. As the Shadow Fleet continues to grow in influence, it raises important questions about the true extent of Russia's oil exports, the identities of the companies and individuals behind the Shadow Fleet, and the implications for global energy security and sanctions enforcement. In this article, we will delve into the world of Russia's Shadow Fleet, exploring its origins, operations, and impact on the global energy landscape.

Nord Axis

Nord Axis was incorporated in Hong Kong just nine days before Russia's invasion of Ukraine and benefits from being owned by a UAE holding company, ensuring that no stakeholder records are publicly available. Emerging from obscurity, the company seamlessly filled the gap created by Trafigura's exit from the Russian oil market. By acquiring a 10% share in Russian oil company Rosneft's Vostok oil project, Nord Axis commenced exporting large amounts of Rosneft petroleum to international markets. By 2023, using an aging fleet of tankers, the company was exporting billions of dollars worth of Russian crude oil and fuel to Indian and Chinese markets.

Coral Energy

Sanctioned oil trading company 2Rivers, formerly known as Coral Energy, is based in Dubai and engages in the sale and export of Russian crude oil and petroleum products. The company was founded in 2010 by Tahir Garayev, a seasoned entrepreneur with dual citizenship in Malta and Russia, as well as Azerbaijani roots, and a close friend of Igor Sechin and Rosneft.

Initially, the company focused on trading crude oil from Azerbaijan's state-owned oil company. A pivotal moment came in 2014 when Garayev brought Etibar Eyyub on board to expand Coral's operations in Russia. That same year, the company set up a formal presence in Dubai. As Coral Energy continued to grow, it attracted two additional Azerbaijani nationals, Talat Safarov and Ahmed Karimov, who joined the team over the next few years. Despite closing its Azerbaijan office in 2017, Coral's business was thriving, with revenues soaring to over $3.5 billion by 2018.

According to available information, 2Rivers has become the largest trader evading Western oil sanctions. Eyyub and Garayev operate using a network of obscure companies controlled by the 2Rivers executive team, including ship management and operations companies, and dozens of trading companies registered in the UAE DMCC free zone and Hong Kong. Coral Energy was one of the major traders that emerged following Russia's invasion of Ukraine, along with Everest Energy, which has since claimed to have exited the business. Both companies denied that they left the trade due to sanctions risks. Everest stated, "it was a strategic business decision based on various factors specific to our company." Coral Energy stated, "we made a decision to source outside of Russia thanks to our diversified footprint in the MENA region."

The traders behind Coral Energy live a life of opulence, with many of them being associates. They frequently travel by private jet and divide their time between the affluent suburbs of Geneva and the luxurious skyscrapers of Dubai.

Sanctions

Coral Energy has come under the scrutiny of international authorities, including the US Office of Foreign Assets Control. Coral Energy and five of its affiliated companies are being investigated by the authority for allegedly selling Russian oil in violation of sanctions. The company's recent rebranding from Coral Energy to 2Rivers has not gone unnoticed. On December 17, the UK announced sanctions against 2Rivers, stating that the move aims to "further drain Putin's war chest" by limiting the oil revenues that fund Russia's ongoing conflict. In response to the sanctions, a spokesperson for 2Rivers told The Wall Street Journal that the company's name was being used without permission by former employees in Russia. The spokesperson also stated that 2Rivers would challenge the sanctions.

An Aging Fleet

Coral Energy's rapid expansion of its clandestine fleet was fueled by a series of strategic acquisitions, as the company purchased allegedly 125 aging tankers from China, Turkey, and Greece, many of which were built in the early 2000s. Although these vessels may be nearing the end of their lifespan, they come with a hefty price tag, typically ranging from $30 million to $40 million per ship. The use of outdated vessels poses a significant safety risk, as many of these ships are no longer eligible for insurance coverage, leaving them more prone to accidents. According to reports, Coral's purchasing spree was largely facilitated by loans from Russian financial institutions. In an apparent bid to maintain a low profile, the company registered its new acquisitions under the flags of countries with notoriously lax maritime regulations, such as Gabon, Panama, Palau, and the Cook Islands, making it increasingly difficult to track their movements. Reportedly, 47 Coral Energy vessels are currently flying the Gabonese flag.

In a notable transaction, Coral spent €100 million on fuel oil from Petrokim Trading Middle East and Asia DMCC, a Dubai-based entity with ties to Rosneft that has since rebranded as Voliton, between October and November 2022. Interestingly, Petrokim has also been linked to Nayara, an Indian petroleum company in which the Russian energy giant Rosneft holds a nearly 50% stake, highlighting the complex web of connections within the industry.

Price Cap

The stakes escalated dramatically in December 2022, when a price cap on Russian crude oil imposed by the G7 nations and their allies took effect. The move was designed to limit Moscow's ability to profit from its oil exports, but it appears to have had little deterrent effect on some players in the industry. Documents reveal that Petrokim inked a deal with Nayara, to purchase crude oil at a price of over $67 a barrel - a clear breach of the $60 per barrel cap.

Further investigation suggests that Coral Energy has been finding ways to circumvent the price cap by partnering with ship management companies and vessel owners in countries that have not signed on to the G7 agreement. India and Turkey have emerged as key hubs for these activities, with the Marshall Islands also playing a role. Shipping data shows Coral Energy chartered vessels exporting oil to ports in China, India, and West Africa with impunity.

Shadowy Transactions

Financial records uncovered a complex web of transactions between Coral Energy and its affiliated companies. In January 2023, Coral Energy requested a refund of €313 million from Petrokim, also known as Voliton, which is linked to Coral Energy. Just a few months later, another Coral Energy affiliate, Pontus Trading, paid $300 million to Voliton. Both companies are registered at the same address in Dubai's Jumeirah Lakes Tower.

Further investigations revealed the creation of a new shell company, Pura Vida Holding Limited, which was incorporated in the United Arab Emirates in May 2023. Pura Vida is listed as the ultimate parent company of Coral and its affiliates. The company's shareholders include two existing Coral Energy affiliates, Talat Safarov and Ahmad Karimov, as well as Anar Madatli, the son of Azerbaijan's former ambassador to Ukraine and the brother-in-law of Coral Energy's founder, Tahir Garayev.

Further Sanctions

The US Treasury Department imposed sanctions on two entities linked to Coral Energy, Voliton DMCC and Bellatrix Energy Limited, in December. According to the Treasury, Bellatrix "sharply increased its share of the trade of Russian oil since the price cap policy was implemented." Shipping data shows that Bellatrix chartered 13 journeys in 2023, carrying over 3.7 million tons of crude oil or gas oil diesel. The journeys originated from Russian ports, including Primorsk, Tuapse, and Ust Luga, and were destined for ports in India, Greece, Ghana, China, Saudi Arabia, and Benin. The vessels flew the flags of Gabon or Panama.

Trafigura Group

An investigation by Le Monde found that between February 2023 and February 2024, at least 41 cargoes of petroleum were sold by Coral to Trafigura Group. Coral and Trafigura have a close relationship and have shared employees. Otabek Karimov, a former executive at Rosneft, left the company in May 2022 and is believed to have played a key role in the development and management of Coral's trading operations. He was hired by Trafigura in Dubai in June. A Trafigura spokesperson stated the company "has complied and continues to comply with the Price Cap Framework, as well as all sanctions laws applicable to it."

Coral Energy Today

2Rivers now reportedly employs 110 people, and sales were expected to total $11 billion in 2024. In the press release, Karimov insisted that 2Rivers was a new venture. However, the company's roots remain associated with Coral Energy: according to available information, just two weeks before the rebranding, Pura Vida, Coral's parent company, became the 85% shareholder of Novus Middle East, another company affiliated with Coral and said to be Garayev's holding company.

In July 2024, Nord Axis' Russian activity came to an abrupt halt. This is most likely a temporary inconvenience, as reports indicate that further companies linked to Eyyub, namely Voliton, Guron Trading, and Pontus Trading continue to keep the oil flowing out of Russia.

The Bottom Line

The emergence of new players in Russia's oil industry, such as Nord Axis and Coral Energy, has significantly altered the landscape of the country's energy sector. These companies, operating in the shadows and utilizing complex networks of shell companies and aging ships, have enabled Russia to maintain its grip on the global energy market despite Western sanctions. The rise of these opaque entities has introduced a new era of complexity and secrecy to Russia's oil industry, making it increasingly challenging to track the flow of oil and the parties involved. As international authorities continue to scrutinize these companies, it remains to be seen whether they will be able to evade sanctions and maintain their influence in the industry. The case of Etibar Eyyub, the architect behind Nord Axis, serves as a prime example of the adaptability of these new players, who are willing to go to great lengths to achieve their goals and avoid detection. As the global energy landscape continues to evolve, it is essential to shed light on the activities of these shadowy companies and to hold them accountable for their actions, to ensure the integrity of the global energy market and the effectiveness of sanctions enforcement. Ultimately, the true extent of Russia's oil exports and the identities of the companies and individuals behind the Shadow Fleet remain shrouded in mystery, highlighting the need for continued investigation and vigilance against sanctions evasion.