Trafigura sells Russian fuel to Ecuador as EU ban approaches

Deal shows how Russian fuel is circulating despite calls for a boycott

Employees pass through the Vadinar refinery complex, jointly owned by Rosneft Oil Co. and Trafigura Group Pte., near Vadinar, India.

Trafigura Group is helping Russian diesel to break into Latin America as a ban on the sale of such barrels in Europe looms on the horizon. 

According to people familiar with the situation, the commodity trader chartered the Marlin Aventurine vessel to deliver 262,000 barrels of diesel to Ecuador's state oil company Petroecuador.

The cargo demonstrates how Russian oil continues to circulate in world markets despite calls to boycott Vladimir Putin's state. 

In an attempt to deprive Putin's government of cash, the U.S. has banned imports of Russian oil and products, while the European Union ban comes into effect gradually with deadlines starting later this year. Trafigura was among the companies that said they would turn their backs on Russia. In April, the trader announced that it would stop signing crude oil contracts with Russian state-owned producer Pjsc Rosneft before the EU deadline of May 15 to complete new deals, and significantly reduce purchases of petroleum products. Other commodity traders who have said they will stop doing new business with Russia include Gunvor Group Ltd and Glencore PLC. Fuel markets have since been plunged into turmoil as countries struggle to replace Russian products ahead of the ban. 

When asked about the deal, a Trafigura spokesperson said in an email that the company was not commenting on individual shipments and that it continued to fully comply with EU sanctions. Traders are reducing their exposure to Russia in line with sanctions decisions. However, the business remains very profitable, and buyers can provide steep discounts on Russian barrels of crude oil, diesel and fuel oil. Other countries, such as India and China, have already become key destinations for Russian products, which Europe avoids.

Petroecuador, which typically buys fuel from U.S. refineries, says its top priority is to stifle growing supply cuts. "Ecuador has a shortage in the supply of petroleum products, and our number one priority is to fill this deficit," Quito-based Petroecuador said in a statement. The company noted that Ecuador does not limit the purchase of hydrocarbons of Russian origin.

Trafigura is the largest supplier of petroleum products to Ecuador

However, this does not mean that the sale of Russian oil to Ecuador is risk-free. Petroecuador warned traders that it is unable to provide a letter of credit for oil of Russian origin and "the trader must take on this risk," the statement said. That is, even the central bank of Ecuador will not provide a guarantee of payment in the event that Petroecuador financially abandons the transaction.

Marlin Aventurine is loaded into the Russian port of Taman and arrived in Ecuador last week. Marlin Aventurine transports a cargo of diesel fuel that can be used to produce electricity, to fuel ships or as a diluent for the production of fuel oil, one of the country's best exported products.