Where is Russia Today?

In response to Russia's invasion of Ukraine in February 2022, the international community swiftly imposed a range of economic sanctions aimed at restricting the Russian economy and limiting the country's ability to fund its military aggression. Among the most significant of these measures were sanctions targeting Russia's oil sector, a crucial component of the country's economy and a major source of revenue for the Russian government. In particular, the G7 group of nations, along with other EU countries, agreed on a price cap on the sale or purchase of Russian oil and petroleum products.

In an effort to avoid the price cap, and other possible sanctions, Russia has encouraged the creation of its own Shadow Fleet of limited lifecycle companies operating aging tankers, to hide the real trade in Russian oil. While some may be under direct if covert Russian control, many are owned and operated by opportunistic third-party operators, who can make large profits in trading Russian oil. To support this, an array of companies has sprung up to facilitate the trade, while also making it difficult to track activity, and therefore aid in evading sanctions.

The number of little-known trading firms relied on by Moscow to export large volumes of crude exports to Asia has mushroomed in recent months. Sanctions against Russian oil sparked major oil firms and commodity houses to withdraw from business with producers in Russia. As Western companies pulled out of Russian oil markets in the wake of the Russian invasion of Ukraine, this shadowy network of shell companies immediately stepped in to fill the gap.

The Shadow Fleet network is a shift away from the small number of well-established major oil companies that have handled Russian oil products for decades. Shipping data indicates over 40 middlemen and companies with no prior involvement in the oil business, handled Russian oil trading between March and June 2024.

These new companies have quickly become some of the world's biggest oil traders, shipping at least half of Russia's crude oil and refined oil on average in 2024, up to 6-8 million barrels per day, appearing after Russia's illegal invasion of Ukraine in February 2022.

Bellatrix Energy

Bellatrix Energy is a prime example of a murky Shadow Fleet company. Sharing a name with an evil witch from the Harry Potter world, this company is practicing evil of a much more banal form.

Bellatrix Energy is controlled by Bilal Aliyev, an Azerbaijani who took control in the early weeks of the Russian invasion. According to the US Government, since the middle of June 2023, vessels chartered by Bellatrix have made more than 150 port calls in Russia. Since the invasion of Ukraine, Bellatrix has traded tens of millions of tons of crude oil and other products of Russian state-owned companies, and has received a loan worth hundreds of millions of dollars from a Russian state-owned bank. Bellatrix has also borrowed from the Russian Regional Development Bank, which OFAC (US Office of Foreign Assets Control) designated for sanctions on November 2 2023.

One particular example, shows the sort of methodology used to obscure the trade in Russian oil from detection by concerned authorities. In May 2023, a Liberian-flagged tanker (but actually part of the Shadow Fleet), the 'Leopard I' left Ust-Luga port in Russia, carrying 100,000 tonnes of Russian oil bound for India. The company who had ostensibly brokered the shipment was Bellatrix Energy, but not for long. Halfway on the journey, while still at sea, the oil changed hands. The new owner was now Guron Trading, another Hong Kong based company, and one which has also been identified and sanctioned for its part in obfuscating the trade in Russian oil. The exchange was clearly not a genuine business transaction, just a sleight-of-hand to confuse things. This web of transactions, with ownership changing hands in mid-voyage etc, is typical of the way Russian oil is currently being laundered through a series of shell companies and nominal owners, making it increasingly difficult to track the true origin and destination of the oil, thereby allowing Russia to continue evading sanctions while deceiving the international community about the extent of its oil exports. Bellatrix is just one such dirty company, serving the same dirty function as many others.

Guron Trading

Guron Trading, based in Hong Kong, now operates the Liberian-flagged 'Leopard I'. The company was founded 12/20/2021, the website was removed in 2024. It is now available and displays little information, just that the company deals in the international oil trade.

Are the Sanctions Working?

Russia's oil exports fell in 2024 but revenue rose by $3.8 billion hitting $192 billion. Thanks to the Shadow Fleet, Russian oil exports from all sea ports reached a multi-year high in April and May 2024 at nearly 4 million bpd.

In May 2024, Russian oil supplies to India, which was a rare buyer of Russian oil before the invasion of Ukraine, hit a record of 1.95 million bpd while China imported 2.29 million bpd. China and India have become Russia's biggest buyers of oil since sanctions were introduced by Europe and the United States.

Of the largest oil producers, only Lukoil continues to market oil through its trading division, which it relocated to Dubai. The other companies sell to the new trading firms, which are mostly registered in China, Singapore, Hong Kong or Dubai.

According to data, from March to June 2024 the top oil traders who purchased oil from Rosneft, Surgutneftegaz and Gazprom Neft were, Dubai-based Petroruss, Hong Kong-registered Guron Trading, Bellatrix Energy and Covart Energy, Dubai-registered Voliton, Demex Trading, Nestor Trading, Orion Energy and Singapore-headquartered Patera.

Some companies, such as Voliton, had no websites or contact numbers.

These emerging companies have been instrumental in maintaining, and increasing Russia's oil exports by facilitating the redirection of shipments from major crude producers like Rosneft, Lukoil, Surgutneftegaz, and Gazprom Neft to countries such as India and China.

The Bottom Line

The data reveals a disturbing methodology, where companies with limited lifecycles are deliberately established to circumvent sanctions and facilitate the trade of Russian oil. These opaque entities are strategically set up in jurisdictions with lenient regulatory environments, such as the UAE's DMCC free zone. By leveraging a complex web of intermediaries and proxy companies, the true ownership and beneficiaries of these organizations remain obscured, making it exceedingly difficult to track the origin and destination of oil products. This cleverly designed system enables sanctioned entities to covertly continue trading oil, reaping substantial profits in the process.

The transient nature of these companies, which can quickly be established and dissolved, adds an extra layer of complexity to the already murky landscape. This makes it challenging for authorities to monitor the transfer of oil products and assets, as exemplified by the transfer involving the 'Leopard I' vessel, between Bellatrix Energy and Guron Trading. The use of such shell companies, with their short lifecycles, has become a key tactic in evading sanctions, allowing Russia to maintain a steady flow of revenue from its oil exports.

Ultimately this methodology has significant implications for the ongoing conflict in Ukraine, as it enables Russia to continue funding its aggressive military campaign. The imposition of sanctions was intended to restrict Russia's ability to generate revenue from its oil sales, thereby limiting its capacity to finance its illegal war. However, by exploiting loopholes and using clandestine networks, Russia has been able to evade these sanctions, ensuring a continued influx of funds to support its illegal invasion of Ukraine. As a result, the international community must adapt its strategies to counter these evasion tactics, in order to effectively curb Russia's ability to profit from its oil exports and ultimately bring an end to the conflict in Ukraine.