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European oil traders are weighing when to re-enter Russia’s markets with some predicting Moscow will seek to maintain increased control of its oil exports even if western sanctions are lifted.
After Europe’s powerful commodity houses, including Vitol, Trafigura and Gunvor, ceased trading most Russian oil after the invasion of Ukraine, Moscow was forced to rely on new intermediaries to move crude and petroleum to buyers in Asia, Africa and the Middle East.
Russia’s oil producers would probably want to maintain that network even if western sanctions were eased allowing European traders to return, said Torbjörn Törnqvist, chief executive and founder of Geneva-based Gunvor.
“They obviously have their own ways now and use their own controlled system to bring oil to the markets,” Törnqvist told the FT Commodities Global Summit in Lausanne, Switzerland. “My suspicion is that they will not go back to what they used to do . . . and leave all the transport and all the marketing in the hands of the traders.”
Before the war, oil producers such as Rosneft sold oil to European traders on a free-on-board basis, meaning the traders would organise the shipping from Russian ports to foreign customers, capturing profits along the way.
In the future, Rosneft and other Russian producers might seek to sell more oil on a delivered basis, using the trading networks they had built over the past three years to ship directly to customers and keep a greater portion of the profits, Törnqvist said.
The prediction from Gunvor, one of the biggest shipping companies of Russian oil before the war, raises the possibility of a renewed battle for Moscow’s markets between Europe’s trading giants and the groups, mainly in Dubai and Hong Kong, that have served the country since the full-scale invasion in 2022.
After the US and Europe responded to Russia’s aggression with the most expansive sanctions regime in history, most western companies appeared to have written off Moscow’s market for years.
But US President Donald Trump’s controversial pursuit of a rapprochement with Russian President Vladimir Putin has raised the once-unthinkable possibility that restrictions could be relaxed in the event of a negotiated peace deal.
The chief executives of Vitol, Trafigura and Gunvor said they would probably return to trading Russian crude if sanctions were lifted,
but cautioned that this could be some time away.
“Most people [in Vitol] are based in Europe and sitting under European sanctions and beginning to think, OK, how could this break down?” Vitol chief executive Russell Hardy told the FT summit.
“In reality, we do think it’s going to be a year or two and so there isn’t any anxiety inside the organisation about being ready or preparing for it, but clearly I could be wrong and it could be a little bit quicker than anticipated.”
He added that while some US officials and energy executives appeared to favour easing sanctions, the situation in Europe was more “complex”, given “the number of European countries involved with different views”.
Ultimately, some parts of Europe might decide to restart Russian imports while others choose not to, he said. “It is probably going to be a very fragmented solution, and our activity is obviously going to depend on the laws, rules and regulations at the time.”
Trafigura’s new chief executive Richard Holtum said it was possible, given “the noise” from Washington, that the US would choose to ease its sanctions on Russia first.
However, due to the large numbers of European citizens working at Trafigura, both the UK and EU sanctions would also need to be lifted before the company changed its position. “You would need to see a wholesale winding back of all the sanctions before it’s something that could even be considered,” he said.
