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Ecuadorian state-owned oil company Petroecuador has urged commodity trader Trafigura to stop importing Russian fuel, amid fears the South American nation could fall foul of western sanctions targeting Moscow.

The company issued the warning in a public statement on August 28, following the trader’s delivery of 275,000 barrels of diesel.

Petroecuador says 95% of the shipment was of Russian origin, with the remaining 5% from Panama, a mix which could put the country and state officials at risk of breaching sanctions.

The latest delivery was the fourth under a six-shipment contract, which Trafigura won following a tender process in June.

A Trafigura spokesperson tells GTR that the company does not comment on individual shipments, but says the trader “continues to comply in full with EU sanctions”. They did not comment when asked what the Petroecuador statement means for the remaining two shipments in the diesel contract.

Since late February, Washington and Brussels have announced a range of sanctions on Russian banks, companies and oligarchs, in an attempt to squeeze the Kremlin’s energy revenues and wider war efforts in Ukraine.

Nevertheless, some countries have proven willing to buy large amounts of Russian oil, with Moscow having offered sizeable discounts to lure in nations, particularly major Asian economies such as India and China.

 

Traders in a bind?

Major trading houses, including Vitol and Trafigura have moved to slash their exposure to Russian oil in the wake of both sanctions and sizeable reputational risk.

In April, Trafigura announced it would stop all purchases of crude from Russia’s largest oil producer, Rosneft, by mid-May. As reported by Reuters, the firm also said it would substantially reduce the volume of refined products it buys from Rosneft.

Later, in July, Trafigura completed the exit of its 10% investment in Russia’s Vostok oil project in Siberia, having bought the non-operational stake in late 2020 in a deal that secured millions of barrels of oil.

But with the EU having made adjustments to some of its sanctions to stave off a global fuel crisis in recent weeks, in some instances traders are now being actively encouraged to lift Russian oil.

GTR understands from sources familiar with discussions that western governments are continuing to engage with commodity traders about how to maintain a global supply of petroleum products, including to Latin America.

In July, policymakers in Brussels exempted transactions with certain listed entities, including financial institutions and state-linked companies – such as Rosneft and Gazprom – that are deemed essential to supplying food, agricultural goods and oil to countries outside of the European bloc.

The EU said the move was taken “with a view to avoid any potential negative consequences for food and energy security around the world”.

Nevertheless, a sixth wave of EU sanctions, announced in June and set to be enforced at the end of the year, may hamper the ability of companies to transport Russian oil globally.

The latest measures ban domestic EU companies from “insuring and financing the transport, in particular through maritime routes”, of Russian oil to third countries.

The restrictions are expected to have a significant impact on Russia’s ability to export oil globally, given the vital role of European banks and insurance companies in financing and insuring these trade flows.