The secret oil-trading ring that funds Russia’s war

Russia sought new foreign markets for its oil after the Ukraine invasion. An oil tanker at anchor off a terminal near the port city of Nakhodka, Russia. (Photo: Reuters)
Russia sought new foreign markets for its oil after the Ukraine invasion. An oil tanker at anchor off a terminal near the port city of Nakhodka, Russia. (Photo: Reuters)

Summary

A little-known trader from Azerbaijan assembled a clandestine network that moves vast quantities of petroleum to China, India and other new markets

In the early days of the Ukraine war, data trickled out showing that a mysterious firm called Nord Axis had become one of the biggest global traders of Russian oil.

The company seemed to have sprung from nowhere. It had been incorporated in Hong Kong nine days before Russia’s invasion. A man from Belize who was a nominee director said later that year that he didn’t know why Nord Axis had been founded or who its owners were.

With Western buyers of Russian oil beating a retreat, Nord Axis and several other obscure firms were keeping the nation’s most important industry afloat by finding new places to sell the oil, generating billions of dollars in revenue for President Vladimir Putin’s war effort.

The U.S. and other Western countries wanted to choke off Russia’s oil money. But who was masterminding the deals?

The answer: a little-known trader from Azerbaijan named Etibar Eyyub, who swiftly assembled a clandestine trading and shipping empire that now moves vast quantities of oil to buyers in China, India and other new markets, according to people who have worked with or done deals with him. He cobbled together a fleet of aging tankers and disguised the trading by using a maze of companies registered in Dubai and Hong Kong, those people said.

Nord Axis and four other companies those people say are operated by Eyyub exported at least $33 billion in Russian crude and fuel in 2023, according to trade data from the Kyiv School of Economics, which represented one-fifth of the Russian exports captured by the data. Those people said Eyyub also operated other firms involved in the Russian market.

Russia’s giant state producer, Rosneft Oil, came to depend on trading and shipping firms with opaque ownership and management to get its crude to market after the invasion.

The use of shell companies and obscure management structures is a common tactic that regimes employ to get around U.S. sanctions, said senior Justice Department officials. Such practices make it difficult to trace who is arranging shipments of oil from sanctioned countries such as Russia.

This account of how the secret trading operation helped Russia outflank Western efforts to squeeze its oil profits is based on interviews with people familiar with Eyyub’s activities, including current and former work colleagues and energy and shipping executives who have done business with or competed against him and the firms they said he operates. The Wall Street Journal also reviewed documents detailing transactions and shipments by firms that those people said are part of the trading network, and analyzed Russian export data, shipping data and corporate and legal records in 12 countries.

Subterfuge appears to be integral to the operation. Working out of offices in Moscow and Dubai, traders routed transactions through Nord Axis and the other companies, making it difficult to determine who is profiting. Eyyub flies to and from Moscow by private jet, according to senior oil officials in the Middle East.

One of the questions U.S. officials monitoring the trading have examined is whether it involves employees of Coral Energy, a commodities trader based in the United Arab Emirates for which Eyyub once worked. Coral continues to do business in Western nations where many companies have pledged not to buy or finance Russian oil.

A Coral spokeswoman said that the company had stopped doing business with Eyyub in early 2022 when it decided to exit from the Russian market, and that it had no relation to Nord Axis or the other firms affiliated with Eyyub.

In interviews, though, people who work or used to work for Coral described those firms as “satellites" of Coral because some people worked both for Coral and on the trading of Russian oil. Rosneft officials use the name Coral as a shorthand for the network of firms run by Eyyub.

The Justice Department has homed in on Eyyub, Coral and Coral’s founder, Tahir Garayev, in a broad investigation into suspected violations of sanctions on Russian oil, said people familiar with the matter.

Garayev, also a native of Azerbaijan, founded Coral Energy in Singapore in 2010. At the time, Azerbaijan’s national oil company was looking for traders to find global buyers for its oil, according to a current Coral executive.

Garayev hired Eyyub in 2014. Eyyub knew little about oil markets but learned fast. Eyyub, whom former colleagues described as a hard-charging dealmaker and Garayev’s second-in-command, established Coral’s business in Russia.

A photo posted on Facebook shows Eyyub in a black turtleneck and rimless glasses. He told associates that his ambition was to make the Forbes billionaires list, said one of the people who have done business with him.

In 2018, he left Coral to become a trading consultant, but continued to work for the company on a commission basis. The Coral spokeswoman said that after Eyyub left, the company “engaged him on specific projects" until early 2022.

By the time Russia invaded Ukraine in February 2022, Coral was trading petroleum from Rosneft and smaller private companies, according to export data, the executive and U.K. court documents.

Coral was a smaller player than the Western traders that dominated the Russian market. Rosneft needed those traders to find buyers, finance deals and arrange shipping. Its most important outlet to the world was Switzerland’s Trafigura Group.

Russia’s invasion of Ukraine brought an avalanche of sanctions from Western nations. In March 2022, the U.S. banned imports of Russian oil and the European Union took steps to restrict dealings with Rosneft.

Suddenly, Western banks were afraid to touch anything Russian, and many oil middlemen abandoned Russia. Trafigura wound down its relationship with Rosneft. Continuing to do business with Russia’s state producer would have endangered its business with many other nations and its relationships with Western banks.

Russia’s oil and fuel exports—which accounted for almost one-tenth of the world’s petroleum—started to seize up. Without the middlemen and fearful of sanctions, refiners would buy Russian oil only at big discounts, threatening Moscow’s budget.

Rosneft asked Coral to take Trafigura’s place, people familiar with the request said. Trafigura had dealt with Coral before and Eyyub understood the Russian supply system, according to people familiar with those trading relationships.

“We consider it inappropriate and moreover useless to comment on the variety of rumors and speculations presented by you," a Rosneft spokesperson said in response to questions from the Journal.

The Coral spokeswoman said the company, “from the very first day of the war," clearly expressed its intention to withdraw from the Russian market.

Coral didn’t want to imperil its ability to borrow from Western banks. So, like its bigger rivals, it said it would stop trading with Rosneft, in May, and would wind down its entire Russian oil business. Regulatory and logistical uncertainties also played a part in the decision, the Coral spokesperson said.

In July 2022, Trafigura announced that Nord Axis had purchased its 10% stake in Russia’s flagship oil-exploration project in the Arctic, called Vostok Oil. Eyyub and Garayev put together the purchase with Igor Sechin, a Putin confidante who leads Rosneft, said people familiar with the arrangement. Shipping and export data show Nord Axis began exporting large amounts of Rosneft’s petroleum.

A Trafigura spokeswoman said Nord Axis was an independent company. She said Trafigura’s due diligence determined that neither Nord Axis nor its beneficial owners were the target of any sanctions restrictions in effect at the time of the purchase.

Nord Axis’s public filings in Hong Kong, where it is registered, don’t mention Eyyub or Garayev. They show the firm was owned by a holding company in the U.A.E. with unnamed shareholders. The filings indicate those shareholders had bought Nord Axis from another Azeri trader, a month before Nord Axis purchased the Vostok shares. At the time, that trader also served as a Coral representative in Turkey, according to messages, meeting minutes and internal company documents reviewed by the Journal. Coral said the trader had acted as the company’s agent on “a few transactions," but that he wasn’t an employee.

A Nord Axis spokesperson said the company worked directly with Trafigura on the Vostok purchase, and that Nord Axis isn’t related to either Eyyub or Garayev.

The Journal attempted for more than two weeks to send Garayev questions via Coral’s spokeswoman and a cellphone number confirmed by a Coral executive. Both Coral and the executive said they had informed Garayev that the Journal wished to contact him. Later, a person who purported to represent Garayev but didn’t provide a name or phone number emailed the Journal inviting questions. That person didn’t respond to the questions or a subsequent email.

The Coral spokesperson said Garayev had no involvement, direct or indirect, with the transaction, and that he has no relation to Nord Axis or any of the other entities trading Russian oil. Eyyub is no longer involved in Coral’s business, she said, so the company couldn’t comment on his activities.

She said Garayev hasn’t been involved in Coral management for more than a year. “Any efforts to directly or indirectly try to tie Mr. Garayev to Coral Energy is not reflective of the facts," said the spokeswoman, who described Garayev as a “passive minority investor."

Both Coral Energy and Garayev, she said, “unequivocally condemn the invasion of Ukraine and fully support and adhere to all applicable sanctions."

By the summer of 2022, new oil revenue was pouring into Russia from Asian buyers who hadn’t taken sides in the war. Chinese, Indian and Turkish refineries bought most of the barrels.

But a new danger loomed: The U.S., in concert with the rest of the G-7 nations, was preparing sanctions that would attempt to cap the price of Russian oil. The idea was to keep Russian oil flowing to world markets to keep energy prices low, while crimping how much Moscow could earn.

The planned sanctions would allow Russia to continue using Western oil tankers and insurance companies, but only if it sold oil at or below $60 a barrel, substantially below benchmark prices. To sell crude at prices above $60 a barrel, Russia would need to build its own fleet.

Companies operated by Eyyub snapped up tankers, said people familiar with the activities of those firms and executives who sold the boats. European and Asian shipowners said those companies offered them generous prices for 25-year-old tankers destined for scrap.

Using both purchases and charters, firms run by Eyyub assembled more than 80 ships, one of the world’s largest fleets, said some of the people familiar with the deals. Brokers said more than $1 billion was spent to put it together.

The vessels joined what the industry calls the shadow fleet—hundreds of tankers with unclear ownership that move petroleum from sanctioned producers, often traveling without tracking transponders.

The Western imposed price cap on Russian crude took effect on Dec. 5, 2022.

Companies said to be operated by Eyyub were busy trying to sidestep the measure. In late 2022, people executing trades for those firms in Moscow discussed ways to hide sales of oil above the cap, said someone who worked for Coral at the time and another person familiar with the matter. They worked from an office that was registered to a company whose director was a senior Coral executive at the time, corporate records show.

Managers told people working in that office to remove mention of Coral from LinkedIn, those people said. When people in the office used their Coral email accounts, they were not supposed to mention Rosneft. The Nord Axis and Bellatrix Energy email addresses they used to communicate with Rosneft didn’t include their full names, the person who worked for Coral said.

The Coral spokeswoman said it was “baseless and untrue" to say that anyone working for Coral had discussed ways to skirt sanctions. “Coral Energy was no longer engaged in trading Russian oil after the price cap was implemented," she said.

She said the company registered at the Moscow office had provided services to Coral. Coral wound that firm down when it left Russia, she said, and Moscow-based Coral employees were told to update their social-media profiles to reflect that withdrawal.

Garayev sold 60% of the Coral shares that he owned to company managers at the start of 2023 and hasn’t played any part in running the company since then, the spokeswoman said.

In a sign that the makeshift trading network was working, Russian petroleum sales exceeded $180 billion last year, according to the International Energy Agency. That was down from more than $230 billion in 2022, when the invasion led to high oil prices, but only $5 billion below revenues from 2021, before the war. Russian oil prices have risen relative to the global benchmark for crude.

Nord Axis’s contracts in Russia ended last July, said Murat Sayin, a lawyer in Turkey who was the director of Nord Axis at the time. But the oil kept flowing through different companies. Eyyub, through Voliton, Guron Trading, Pontus Trading and other vehicles, emerged as Rosneft’s premier middleman, said people familiar with the Russian company’s exports. A Pontus spokesperson said the firm had no affiliation to Eyyub.

One sign of Eyyub’s deepening relationship with Moscow: He has accompanied Sechin to meetings with foreign counterparts in Qatar, and the two men spent time together at a hunting lodge in Tula, south of the Russian capital, said people familiar with the men’s activities.

Garayev held meetings with Rosneft officials in Moscow in late 2023, said people familiar with the matter. The Coral spokeswoman said the company no longer had any knowledge of Garayev’s activities.

U.S. authorities investigating the trading network believe it is connected to Coral, said people familiar with the matter. Neither Eyyub nor Garayev has been sanctioned by the U.S. Coral’s spokeswoman said the company hasn’t received any queries from U.S. officials.

In December, the Treasury Department sanctioned Bellatrix and Voliton, two of the firms. Activity immediately began to shift to different firms that Eyyub operates, some of the people familiar with their activities said.

Write to Joe Wallace at joe.wallace@wsj.com, Anna Hirtenstein at anna.hirtenstein@wsj.com and Costas Paris at costas.paris@wsj.com

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