Pop-Up Russian oil traders emerge as US tightens sanctions grip

By Serene Cheong and Rakesh Sharma

As the US intensifies sanctions pressure on Moscow, Russia’s crude trade with India has begun to resemble a game of oil whack-a-mole. Just as one trader begins to gain prominence, another pops up.

New firms, going by names unfamiliar to even the most experienced merchants across Asia, have been constantly emerging to handle shipments between the the OPEC+ producer and the world’s third-largest importer and consumer, according to traders and Indian refinery executives. Highlighting the difficulties of global sanctions enforcement, they are often connected to the same individuals.

Many of the new names have become marketers of Russian grades only in the past few months, after the US slapped sanctions on Bellatrix Energy Ltd. and Zeenit Supply and Trading DMCC, the people said.

These companies form an ever-evolving network of transporters, creating a growing challenge for the Biden administration as it seeks to punish those helping to fund the Kremlin’s war machine. The question of unintended sanctions consequences and of the industry’s ability to adapt, including with a churn of little-known entities— has long worried even sanctions advocates. That is now playing out.

Between January and February this year, three previously unknown entities— Blackford, Black Pearl and Vertex, have together played a significant role in supplying India’s private and state processors with Russian crude, said the traders and refinery executives, who asked not to be named as they’re not authorized to speak publicly. They are likely to last months, but not years.

Traders said the ease of incorporating new businesses in locations such as Dubai and Hong Kong has been pivotal to the creation of pop-up firms. Most of these names had not been seen or heard, even by those close to the trade, just months earlier. With the support of these merchants, as well as the ones that came before, India’s imports from Russia surged from almost zero pre-Ukraine war to a peak of over two million barrels a day last year, before slipping a little from that level.

The advantage of smaller trading companies is that they’re easily replaceable, with many firms existing for less than a year, said Viktor Katona, lead crude analyst at commodity intelligence firm Kpler.

The turnover rate, however, is a headache for enforcers even as the US sanctions numerous traders, ships and shippers for their role in the Russian oil trade— in particular, for transactions done above the $60-a-barrel price limit.

Risk / Reward

Indian refining executives told Bloomberg that their firms have been inundated by requests from new entities looking to register themselves as approved suppliers. The companies conduct due-diligence checks with the help of third-party firms, who help to confirm that the pop-up traders are genuine.

The executives said that, while the entities may appear new, checks show the people behind them have typically sold Russian oil to India before.

In recent months, several cargoes of Russian oil bound for India got stuck as the US ramped up sanctions targeting traders and shipowners such as Sovcomflot PJSC. Some deliveries have been diverted to China as a result of these complications, while others attempted to transfer their cargoes onto other vessels at locations such as Oman.

Russian flows to China, meanwhile, have been less impacted by sanctions, traders said. That’s because of the presence of more middlemen in the chain of supply from producer to end-user, including some Chinese state and regional companies, they said.

“Everybody is trying to play hide and seek game as no one wants to be caught violating sanctions,” said Jayendu Krishna, director-deputy head at shipping consultancy firm Drewry Maritime Advisors. India needs cheap crude oil to dampen inflationary pressures, and these intermediaries are crucial to help keep oil flowing, he added.