“New Geneva”. Dubai traders now export a third of Russia’s oil

Before the war, a significant part of the export of Russian oil and petroleum products was carried out through Switzerland. It is there that many leading commodity traders, such as Trafigura, Gunvor, Vitol, are registered, whose ships supplied oil from Russia. Lukoil’s trading arm, Litasco, also operated through Switzerland.

But the sanctions imposed by Western countries led to a change not only in the routes of Russian oil supplies. Dubai, or rather the Dubai Multi-Commodity Center (DMCC) free economic zone, has become the new center of its trade. Of the 104 buyers of Russian oil listed in Russian customs declarations for January-April 2023, at least 25 are registered with the DMCC, the Financial Times writes.

“Your Place Is Here”

Only a small part of the products went to the United Arab Emirates, while 90% went to recipients mainly in Asia (Russia’s main recipients were India and China), as well as in Africa and Latin America.

Out of the top 20 oil traders in the first four months of 2023, eight are registered in the UAE, and in the petroleum products sector, the share of such companies is even higher at 10 out of 20. “If you trade oil, you belong here,” said Matt Stanley, who has been in the business for 20 years and is currently responsible for customer relations at Kpler. “Dubai is the new Geneva.”

Litasco Lukoila previously had only a representative office in Dubai. But after sanctions were imposed on Russia, the company moved part of its commercial activities from Geneva to the emirate. According to a former Litasco salesman, she rented an entire floor in a skyscraper in the DMCC.

The second and third places are taken by the unknown companies Demex Trading and Qamah Logistics. Both have been registered within the last three years; FT journalists have not been able to contact them.

Dubai daughters

The Geneva merchant Gunvor in 2000 supplied 30% of Russian oil exports by sea. Subsequently, the company significantly diversified its activities, but did not completely break ties with Russia. Last October, he opened a second firm in Dubai to separate “running and financing any potential Russia-related deals” from other operations. Gunvor stopped trading oil but bought $330 million worth of petroleum products between January and April 2023, the FT reports. It is true that the customs documents obtained by the newspaper indicate such transactions worth more than $500 million, but Gunvor disputes this figure.

Switzerland joined the EU sanctions, but they do not apply to foreign “daughters” of local companies: if they are “legally independent”, their activities are not regulated by Swiss law. True, at least in one case the regulator questioned such independence. He began analyzing the performance of Geneva-based Paramount Energy & Commodities, whose Dubai branch trades the Far Eastern ESPO grade, which has consistently traded above the $60 per barrel mark set by Western countries.

In general, for countries that have imposed sanctions, it doesn’t matter where the Russian oil trade is organized as long as they are transparent, says former CIA analyst Helima Croft, who now heads RBC Capital Markets’ global commodity analysis division:

At the beginning of the year, representatives of the US Treasury Department even met with the managers of Trafigura and Gunvor; Washington wanted to prevent a reduction in the flow of Russian oil to the world market, which would increase prices. The most important was the reduction of Russia’s foreign currency influence. “The Americans are actively urging us to resume oil supplies” after capping oil since December and petroleum products since February, a trader who attended a meeting in March told the FT.

Oil from Rosneft

Another big Dubai trader is not the ex-Swiss but Tejarinaft FZCO, registered two months after the start of the war in another free economic zone, the Dubai Silicon Oasis. Hisham Fizazi, Moroccan, is listed as the sole director and shareholder. He also owns and manages two companies, Amur Trading FZCO and Amur Investments, which were registered in August and September 2022.

Other traders say they never heard of these companies until last year and believe they were opened by or for Rosneft. According to customs declarations, they buy oil and petroleum products only from the largest Russian oil company or projects in which it operates. From September 2022 to April 2023, the volume of such transactions amounted to almost USD 8 billion.