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Commodity traders registered in the UAE and Hong Kong are now purchasing more than 80% of crude oil sold by Russia, following an exodus from the market by Swiss trading houses, researchers believe. 

Russian customs data analysed by Swiss non-profit Public Eye shows that 51% of Russian crude sold in July 2023 was bought by non-state traders registered in the UAE – largely in Dubai – and a further 30% by those in Hong Kong. 

By contrast, in April 2022 – just weeks after Russia’s invasion of Ukraine and the introduction of sanctions by western governments – the combined figure was just 3%. 

At the same time, the share of Russian crude purchased by Swiss traders has dropped from 47% to 5%, Public Eye finds. Before the war, that figure was typically between 50% and 60%, largely involving companies based in the country’s commodities hub, Geneva. 

“Dozens of companies which operated from Geneva before the war in Ukraine have beefed up their presence or set up new entities in Dubai,” the report says. 

“For the time being, the major Swiss traders hardly feature among the buyers of Russian oil. Their position has been taken over by small, little-known entities, some of which are close to the Kremlin.” 

The data illustrates the extent to which sanctions have shifted trade in Russian oil into new markets. 

The UAE and Hong Kong have not imposed sanctions on Russia, whereas in Switzerland, Russian crude and petroleum imports are prohibited and any oil traded with third countries must be below the US$60 per barrel price cap. 

Of the nine commodity traders identified by Public Eye as the largest buyers of Russian crude, six are Dubai-based and two are in Hong Kong. 

The only Swiss trader on that list is Geneva-headquartered Litasco SA, whose parent company is Russian energy giant Lukoil. The company was responsible for around 5% of seaborne crude oil exports from Russia’s four largest ports between January and July this year, Public Eye says. 

Litasco has also expanded its business in Dubai, however. In October last year, Reuters reported the company had relocated around 100 employees to Dubai-based Litasco Middle East DMCC. 

The company is not accused of any wrongdoing, and in a statement published by Public Eye, says it “is complying with all applicable laws and regulations, including the G7 price cap rules”. 

The statement adds that Dubai-based Litasco Middle East DMCC is not owned or controlled by the Geneva company, and the common name “is a legacy of the time when [it] was a subsidiary of Litasco SA”. Lukoil did not immediately respond when contacted. 

The vast majority of Russian oil purchased by Dubai traders is not imported to the UAE, but rather sold to buyers in Asia, Africa and Latin America, Public Eye adds. 

One concern around Dubai emerging as a centre for Russian oil trade is that some traders may still have ties to countries where sanctions do apply, including Switzerland. 

Public Eye warned in March that some Swiss traders were “retain[ing] a strong presence in Geneva to conserve their credit lines”, despite the introduction of sanctions.  

Global Witness said the same month it believed Swiss-linked Dubai traders were involved in sales of Russian crude oil “well above” the price cap. 

Following a parliamentary vote in September, Switzerland’s Federal Council is now required to investigate whether enforcement of Russian sanctions is proving effective in the raw materials trading sector. 

Meanwhile, the UK government announced earlier this month it was imposing sanctions on Paramount Energy & Commodities DMCC, a Dubai-based trader it said “is known to employ opaque ownership structures and has been used by Russia to soften the blow of oil-related sanctions”. 

The company took over Russian trading activities from Swiss entity Paramount Energy & Commodities SA in June last year, according to the Financial Times, although the companies said at the time they operated fully independently. 

Yet in the US, Public Eye reports that the government has been encouraging Geneva-based oil traders to “get back into the Russian oil trade”, under the conditions set out by the price cap. 

“Messages from Washington have also reportedly been sent to some of the major banks involved in trade finance to get back to dealing with the Russians,” it says. 

But with buyers in non-G7 markets willing to pay more than US$60 per barrel, there is little incentive for Russian sellers to trade within the cap. 

Citing an analyst at a Dubai-based trading house, Public Eye says an upward adjustment of the cap would be necessary before traders re-engage with Russian oil.