A group of under-the-radar commodity traders are cashing in on Russian oil, stepping in to buy and transport crude to customers as their bigger rivals retreat from the market.
Little-known merchants including Paramount Energy & Commodities SA and Coral Energy Pte. Ltd. are buying unwanted Russian oil at deep discounts. For taking on the risk, the companies can make $20 million or more on one cargo depending on the size of the tanker, according to traders. That is up from $600,000 before the war.
The traders aren’t violating sanctions imposed by the West on Russia. The European Union has blocked its companies from doing most business with state-aligned producer
Oil Co. Switzerland has also enacted some restrictions. That pushed big traders such as Trafigura Group, Vitol,
PLC and Gunvor Group to head for the exit.
That opened up a lucrative opportunity for smaller traders. But the trade could be short-lived if the West imposes tougher sanctions on Russia’s oil industry or financiers and shipowners pull the plug on companies dealing in Russian energy.
Russia needs traders to sell the roughly 3.6 million barrels of oil it is exporting by sea each day, a volume that has fallen from 3.8 million in April, according to Kpler.
Paramount is a little-known Geneva-based trader. Working out of a brown, eight-story office building a few roads back from Lake Geneva, it has traded an average of 163,000 barrels a day since the invasion, according to Petro-Logistics data.
Paramount is owned by its Dutch founder, Niels Troost. The company is bolstering its presence in Dubai to avoid European sanctions, according to a person familiar with the company. Mr. Troost and a team of traders are working out of the Emirati city, the person said.
Mr. Troost said in an email that Paramount bought oil from independent companies under long-term contracts entered into before the Ukraine invasion and that the company has been established in Dubai since 2020.
One supplier to Paramount is Concept Oil Services Ltd., a Hong Kong-domiciled firm founded by Monaco resident Michael Zeligman, according to a person familiar with the company’s operations and a lawyer representing Concept. Concept buys oil from Russian producers including a subsidiary of state-owned Gazprom PJSC and sells to Paramount.
“Concept Oil Services complies fully with all international sanctions,” the company’s lawyer said by email.
SHARE YOUR THOUGHTS
Will sanctions on Russia’s oil industry be effective? Join the conversation below.
Paramount’s building in Geneva is also home to Tenergy Trading SA, a firm Mr. Troost co-founded with Swiss energy trader Michel Tuor. Tenergy has traded oil products with International Petroleum Products, a firm owned by Russian oligarch
a longtime ally of President
according to a person familiar with Mr. Troost’s business interests. Mr. Tuor and Mr. Timchenko also used to play tennis together, the person said. Mr. Timchenko was hit with sanctions by the U.S. in 2014 after Moscow annexed Crimea.
Mr. Troost said his firm traded indirectly with IPP in the open market and no longer works with it. “All of those transactions occurred before sanctions were imposed and were halted immediately when sanctions were put in place,” Mr. Troost said. He declined to comment about how Paramount operates, including where it sources oil from.
The ability of firms such as Paramount to ship oil is crucial for Mr. Putin. Oil-and-gas sales accounted for 45% of Russia’s federal budget last year, according to the International Energy Agency. High prices for energy, driven in part by the war, are plumping up the Kremlin’s coffers for now.
“Putin could carry on for a very long time because of this flow of cash and he will,” said
chief executive of Hermitage Capital Management, a longtime opponent of Mr. Putin and previously a big investor in Russia.
Dubai-based Coral Energy increased its volume of Russian oil by a quarter in April compared with the previous month, trading around 260,400 barrels a day of crude and refined products, according to Petro-Logistics data. In May so far, the firm has averaged 213,600 barrels a day. The drop reflects a shift in business to subsidiaries, according to people familiar with the matter.
Coral was founded by Azeri businessman Tahir Garayev in 2010. Russian oil accounted for about a fifth of the business before the war, said Coral Chief Financial Officer Ahmed Karimov. Most of the fuel is bought from private refiners and a quarter from Rosneft, he said, adding that Coral has no subsidiaries.
Mr. Karimov said Coral is winding down its Russian business, in large part because many banks are unwilling to finance Russian trades. Shortly after the EU laid out its sanctions on Rosneft in March, Coral told the state company it was exiting a long-term deal to buy virgin gas oil, according to Mr. Karimov and email correspondence seen by The Wall Street Journal.
“We have to follow the path of the other traders because we are kind of in a regulated market,” Mr. Karimov said. “We are regulated by the financing banks.”
To get around the banks’ restrictions, Rosneft is offering better terms for customers such as Coral, highlighting the Russian oil giant’s desperation to shift its fuel. Coral no longer has to get a bank to guarantee its payment, according to Mr. Karimov and two people familiar with the deals. Rosneft didn’t respond to a request for comment.
Coral is moving Geneva staff to Singapore to be able to continue this business, according to a person familiar with the firm. In the Asian trading hub, companies aren’t subject to EU and Swiss sanctions on doing business with state Russian producers.
Mr. Karimov said Coral was building a Singaporean office but that it was hiring locally and didn’t plan to use the team to trade with Russia.
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8