Ukraine urges commodity traders to stop trading Russian oil

The Ukrainian government has ordered some of the world’s largest energy traders to halt trading in Russian crude, of which the companies have offloaded more than 20 million barrels since the war broke out.

Vitol, Trafigura, Glencore and Gunvor have continued to lift large volumes of Russian crude and products, including diesel, according to ship tracking and port data.

Oleg Ustenko, economic advisor to Ukrainian President Volodymyr Zelenskyy, wrote to the four companies in late March, urging them to stop trading in Russian hydrocarbons immediately, as export earnings fund Moscow’s purchases of weapons and missiles.

“The fact is traders are acting and helping Russia get this blood money,” Ustenko told the Financial Times. “You are in this cycle of funding war crimes and genocide against Ukrainian citizens.”

Russia’s exports of crude oil, refined products and gas to Europe alone bring Moscow an estimated $850 million a day and have pushed Russia to a record current account surplus, according to data from the Bruegel think tank and the International Institute of Finance. Tank.

Images of civilian deaths have prompted Ukrainian leaders accused Russia of war crimesa claim Moscow denies.

While Russian oil and gas are not directly under EU sanctionsRefiners, insurers, banks and shipping companies “sanction themselves” for the risk of violations or damage to their reputation.

Oil traders have a lower profile than energy companies like BP and Shell, which have powerful marketing firms that also trade Russian oil. However, they form an essential part of the infrastructure that enables the worldwide flow of goods.

Between the start of the war in Ukraine and the end of March, Glencore, Vitol, Trafigura and Gunvor reviewed by the Financial Times, according to an analysis of Refinitiv data by Global Witness, a lobby group. The figures also include oil produced in Kazakhstan and Turkmenistan but shipped from Russian ports.

At last month’s FT Commodities Global Summit, chiefs of the world’s largest commodities traders said they had frozen investments and stopped doing new business in Russia, but planned to continue fulfilling their commitments to purchase oil under legally binding long-term contracts, which is not the case case has been sanctioned.

When asked to comment on Ustenko’s letter, all trading companies said they unequivocally condemned the war in Ukraine.

In a statement, Vitol said it would not enter into any new Russian oil transactions and “intends to cease trading in crude oil and products of Russian origin unless otherwise instructed.”

“Oil volumes will decline significantly in the second quarter as near-term contractual commitments decrease and we expect this to be completed by the end of 2022,” it said.

Vitol also said it was working with its consortium partner to find a “mutually acceptable solution” to its stake in Vostok, a huge Arctic oil project being developed by Rosneft, the state-backed Russian oil producer.

Trafigura said it is buying less Russian oil than before the invasion. “We are not developing a new oil and gas business in Russia,” she added.

Gunvor said it has a legal obligation to honor existing commercial contracts, which are not sanctioned. “No new business will be transacted,” it said. Glencore said it would not enter into any new trading deal related to Russian commodities.

According to research by JPMorgan, at least 2.5 million of Russia’s 4.6 million barrels per day of crude oil exports in 2021 were sold under long-term contracts, with 1.4 million barrels per day shipped to Europe. Russian crude exports fell to 3.1 million b/d in the second half of March, compared with 3.5 million b/d in the first half of the month, data from commodities analysis group Kpler shows.

However, the traders have not disclosed the amount of oil they are required to purchase under their contracts. Under some Russian contracts, traders are required by law to lift volumes nominated by the seller.

The Ukrainian government has set up a task force with Global Witness and data analysts to track oil exports from Russia.

If traders are unable under their contracts to stop extracting Russian hydrocarbons, Ustenko said they should make “considerable efforts” to lobby national governments to boycott his oil.

“Either they sanction themselves or push their national governments to implement this embargo,” he said. “There is no other way.”

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Adam Bradshaw

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