Two companies, one trade: the switch that keeps Putin’s oil flowing

A month before G7 members imposed a cap on the price of Russian oil, veteran commodities trader Niels Troost spoke at a global food security conference and questioned whether the move made sense.

“There are all kinds of reasons why price caps may not necessarily be the solution,” he told the November gathering, arguing that Russian oil exports were necessary to stop food prices soaring. “How do we do that? By getting the shipowners, the banks, the insurance companies, to recognise that we have a bigger responsibility than our morals.”

Troost has a record of keeping Russian oil flowing: Switzerland-based Paramount Energy & Commodities SA, the company he founded, was a leading trader in oil from Russia’s far east before and after President Vladimir Putin launched his full invasion of Ukraine a year ago. But the tightening of EU sanctions on Russian energy exports in May threw up hurdles that made the trade more difficult.

What happened next highlights the complications and contradictions of a sanctions regime designed to starve Putin of funds for his war, while keeping Russian oil exports going to protect the global economy. It also illustrates how some oil traders have been willing to take on the reputational and legal risks of continuing the lucrative business with Russia when better-known companies have been deterred.

In order to maintain access to banking services and stay the right side of western restrictions, Paramount SA’s Russian trading activity stopped around June and was taken up by a near-identically named company in Dubai. That business, Paramount Energy and Commodities DMCC, uses United Arab Emirates lenders to help make the trades, and ships registered to companies in countries such as India and China to transport the crude.

Troost, a Dutch national, has distanced himself from recent Russian trades, which have involved a blend of crude that pricing agencies suggest has broadly kept trading well above the $60-a-barrel price cap imposed by the G7 in December.

Paramount SA and Paramount DMCC say the two entities are operated and managed “totally independently”, and that Troost has no “direct” holding in the Dubai-based Paramount.

Paramount SA founder Niels Troost: ‘There are all kinds of reasons why price caps may not necessarily be the solution’ © atlanticcouncil/twitter

Paramount DMCC’s Russian shipments have at times still used western insurance services — a potential breach of sanctions if any of the cargoes have been sold at market rates, which would place them above the G7 cap.

Paramount DMCC declined to comment on whether it sold Russian crude cargoes above or below the $60 cap, citing commercial confidentiality. It denied breaching any western sanctions, saying its operations complied with all applicable “laws and regulations”.

Troost is a 25-year veteran of Russian oil trading and Paramount SA had long enjoyed a foothold at the port of Kozmino, on Russia’s eastern edge. The crude arrives via the 4,857km Eastern Siberia-Pacific Ocean pipeline from which it derives its name, ESPO-blend. It is then loaded on to tankers and shipped, mainly to refineries in China.

Paramount SA regularly sold multiple ESPO crude cargoes per month from Kozmino from at least 2020 until the middle of last year, shipping data showed. Paramount DMCC has continued that business, acquiring crude from privately owned Russian producers and packaging it into single shipments. Paramount DMCC was responsible for as much as a quarter of all crude exports from the port last month, shipping experts estimated.

The only other companies selling ESPO crude cargoes from Kozmino are Russian producers Rosneft, Gazpromneft and Surgutneftegas, the shipping data showed.

Under the sanctions introduced on December 5, companies or individuals from countries including the US, UK, EU member states and Switzerland are prohibited from trading, broking, shipping or insuring Russian crude, unless it is sold below $60 a barrel.

Oil terminals at Kozmino
The port at Kozmino in eastern Russia from where Paramount SA shipped crude oil © Tatiana Meel/Reuters

ESPO-blend has traded above $70 a barrel since December, according to price reporting agency Argus, suggesting that any western company involved in its trade would violate the sanctions unless it was sold at below market prices. Russia’s main crude benchmark, Urals blend, in contrast, has traded at a much larger discount since the war broke out and averaged $49 a barrel in January.

In an initial response to questions sent to Troost about certain ESPO shipments, Paramount SA’s lawyers, US firm BakerHostetler, dismissed points presented by the Financial Times as “incorrect in all material aspects”. The law firm warned the FT that it risked supporting a campaign by unnamed people to “extort” the company if it published them.

Following a response from the FT, a UK-based public affairs agency provided separate statements from Geneva-based Paramount SA and Dubai-based Paramount DMCC.

Paramount SA said it had previously sold ESPO crude from Kozmino but stopped around June 2022 due to western banks “limiting their exposure to Russia” and the willingness of UAE-based banks to keep “accommodating” such business. All of the company’s activities last year had complied with the restrictions in place at the time, it said. Paramount SA’s website was then taken down.

Paramount DMCC acknowledged its involvement in at least 12 shipments of ESPO crude from Kozmino since the price cap came in, each identified by the FT using shipping records. Each cargo was about 750,000 barrels, worth more than $50mn at market prices.

“Paramount Energy and Commodities DMCC, located in the UAE, is active in commodity trading, including from Russia,” it said in a statement. Its operations are “conducted at all times in compliance with applicable laws and regulations, including the latest G7 guidance on sanctions.”

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The seven vessels used in the 12 shipments identified by the FT are registered to companies in China, India or the Marshall Islands, according to information held by the International Maritime Office.

Five of those ships did not have an active insurance policy with a western provider at the time of the crossings, according to checks of online insurance records — a structure that shipping experts said may have been used so the vessels could transport crude sold at prices above the cap.

But two of the ships, the Nichole and the Yasa Golden Dardanelles, did have protection and indemnity insurance from western providers at the time of the voyages, respectively the American Club and Britannia P&I.

The American Club said all members had committed to comply with sanctions to qualify for cover, but confidentiality obligations meant it could not disclose whether it received — as required by the sanctions — specific attestations that the cargoes identified by the FT were sold under the price cap.

Britannia P&I said the owner of the Yasa Golden Dardanelles had confirmed the vessel was operating “in compliance with the price cap”, but did not respond to any follow-up questions. The owners of the vessels could not be reached for comment.

Advocacy groups such as Global Witness are concerned it may be too easy for companies to trade Russian crude above $60 a barrel and are calling on western authorities to step up the policing of the restrictions. “Our research makes it clear that no one is enforcing the price cap,” said Mai Rosner, a senior campaigner at Global Witness.

Paramount DMCC was registered in December 2020 at Dubai Multi Commodities Centre, a free-trade zone favoured by commodity traders.

An EU official involved in sanctions policy said that while no rules stopped Dubai-based companies from trading Russian oil above the price cap, as long as they did not use western services such as insurance, doing so could violate sanctions if the company was owned or controlled by a European entity or national.

Shipments of Russian ESPO crude to China made by Dubai-based Paramount DMCC since December 5

Paramount DMCC said Troost had “no role in establishing the company and he has no management or direct shareholding interest in the company in Dubai”. It added that Paramount DMCC was run by “non-US/G7 nationals” but declined to disclose further details.

Francois Edouard Mauron, who is named in Paramount DMCC’s Dubai corporate records, is a director of the company and a Swiss national, but “not an employee or management executive”, it said. Paramount DMCC said Mauron declined to comment. He could not be reached directly.

The Swiss government, which has implemented its own version of the EU’s sanctions, said any violations would be “prosecuted and punished”, adding that it does not comment on individual companies.

Western policymakers, notably in the US, want Russian oil to continue flowing as long as it is sold below the cap, and have privately urged some commodity traders to keep up the trade.

US government officials were not aware of any such conversations with representatives of Paramount SA or Paramount DMCC, a person familiar with the matter said. The US Treasury said that “any person who evades, avoids . . . or attempts to violate” the sanctions risks facing “civil or criminal enforcement action”.

At the November conference, Troost was insistent that the west had to compromise if it wanted to keep the wheels of the global economy turning.

 “The US government has been very clear that the oil and food needs to flow,” he said. “We need to make the difficult decision — even though maybe politically we don’t like it.”



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