Igor Sechin, the boss of Russia’s state oil company and longtime associate of Vladimir Putin, celebrated New Year’s Eve on a yacht anchored off Palm Jumeirah, the man-made Dubai island dotted with oligarch-friendly beachfront villas.
(Bloomberg) — Igor Sechin, the boss of Russia’s state oil company and longtime associate of Vladimir Putin, celebrated New Year’s Eve on a yacht anchored off Palm Jumeirah, the man-made Dubai island dotted with oligarch-friendly beachfront villas.
Sechin spent most of 2022 grappling with the impact of the invasion of Ukraine on Russia’s oil exports and finding new customers in the wake of sanctions. His most important guest that night was one of the men who helped him do it: oil trader Murtaza Lakhani, according to four people with direct knowledge of the matter.
A veteran of crude oil deals from Baghdad to Caracas, the Karachi native made a name for himself navigating some of the most challenging jurisdictions. Now, in alliance with Sechin, he’d helped set up a web of oil traders and shipping firms to steer Russian barrels around the globe amid a nuanced response from the West — sanctions and a price cap intended to restrict revenues alongside prodding from Washington to keep the flow going.
This story is based on interviews with several dozen people familiar with Lakhani’s business empire and the Russian oil trade, including people who’ve recently worked for his companies. They didn’t want to be identified discussing confidential business dealings.
Most of Lakhani’s Russia-related operations take place in countries not implementing the G-7’s price cap on exports, designed to block oil sold above $60 from critical Western-provided services such as shipping insurance. Having worked with Rosneft PJSC for nearly a decade before the invasion, he was also in a good position to help the state oil giant navigate an increasingly complex sanctions regime.
Although Lakhani’s main trading firm, Mercantile & Maritime Group, has done deals with Rosneft in the past, the network formed in the wake of the war in Ukraine relies on recently created companies, many of them in the United Arab Emirates, according to six people with direct knowledge of the matter and the internal assessment of a leading Western intelligence agency seen by Bloomberg News.
The people said that even if he doesn’t own them on paper, Lakhani was involved in setting up the firms and plays a role directing their activities. Prominent among them are Tejarinaft FZCO, Fossil Trading FZCO and Amur II – FZCO, according to the people.
The law firm Schillings, which represents Lakhani, said he has no involvement in any of those companies.
Those firms, which appear in invoice data over the past year as some of the biggest traders of Russian oil, have bought tens of millions of barrels of the country’s crude, loaded them onto ships and sold them to customers in India and China. It’s helped Moscow minimize the impact of sanctions and earned a big windfall for both Rosneft, which pays billions in dividends to the Kremlin, and Lakhani, four of the people said.
Until now, the White House has prioritized preventing a surge in crude prices rather than penalizing every actor involved in sidestepping the Russian oil restrictions, according to five US officials, who spoke on the condition of anonymity. More recently, that thinking has shifted, though, as data suggests much more of the trade happening above the cap, the people said.
Through his lawyers, Lakhani said neither he nor any business in which he has an interest is trading Russian oil or oil products. His companies stopped trading or shipping Russian oil in accordance with all applicable sanctions, his lawyers wrote in a letter.
Rosneft and Sechin didn’t respond to written requests for comment.
“Before the war, Rosneft had links with a number of traders in Europe,” said Agathe Duparc, a Geneva-based researcher at Swiss non-governmental organization Public Eye, who closely follows the commodities industry and spoke in general terms. “These days, it’s mostly smaller firms controlled by a few individual traders working with the Kremlin. They change their names and set up in Dubai, making their deals more opaque than ever before.”
Born in Karachi in 1962 but raised in England and Canada, Lakhani catapulted himself into the upper echelon of the commodities trading world with a risky bet several decades ago.
After the first Gulf War he called himself Glencore’s “man in Baghdad.” At the time, Iraq could only sell its crude via a system known as the oil-for-food program, administered by the United Nations. Saddam Hussein found a workaround — later revealed in a UN probe. Lakhani’s role was to move bags of cash for the trading firm, dropping them off at the Iraqi diplomatic mission in Geneva, according to the UN report.
READ: Billion Dollar Broker: How One Man Managed a Nation’s Oil Wealth
That investigation, which never alleged any wrongdoing on Lakhani’s part, acquainted him with a slew of officials in Washington. He’d later build that network out — bringing on grandees to the boards of his firms, including Simon Murray, the former Glencore chairman, and Charles Guthrie, who’d been the most senior general in the British army. Lakhani also became a major donor to the UK’s Conservative Party, records from the Electoral Commission show.
Then, not long after Sechin’s appointment as Rosneft CEO in 2012, the Russian oil boss got in touch with Lakhani, according to four people familiar with the matter.
A former Soviet interpreter and intelligence operative, Sechin served as Putin’s chief of staff at the Saint Petersburg mayor’s office in the 1990s and later rose to deputy prime minister. The Russian official forged a close bond with Lakhani after the trader helped Rosneft expand into Iraq, four of the people said, and he was soon advising the firm on a range of issues.
Lakhani’s word began to carry such weight that Rosneft employees were regularly told to turn to him for guidance rather than handle a transaction in house, according to two of the people and emails seen by Bloomberg.
The trader then appointed Daniel Richard, a lawyer who served on Rosneft Trading’s board, to the board of his flagship firm Mercantile & Maritime, which he founded in 2014. (He’ s since stepped down.)
A Glencore spokesperson declined to comment. Murray, Guthrie and the UK Conservative Party didn’t respond to requests for comment. Richard confirmed his former board role but declined to comment further.
Lakhani’s Russia relationship only deepened with time, according to M&M’s financial filings and its own public statements.
A 2021 advertisement that he bought in The Energy Year noted how M&M’s “extensive and high-end trading network is key to its success – boosted by collaborative relations with key players such as Rosneft, ExxonMobil, TotalEnergies, Shell, Repsol, BP and MOL.”
The firm said in the advert it was the biggest shipper of the Russian state oil giant’s seaborne oil-product exports in 2020.
Spokespeople for Exxon, Total, Repsol and MOL didn’t respond to requests for comment. A representative at Shell said it doesn’t have a relationship with M&M. A BP spokesperson said it’s never traded with Lakhani or his companies.
After Bloomberg’s requests for comment, the old advert removed references to every company except Rosneft, the archival Wayback Machine website shows.
Big Russia Presence in India Energy Summit Signals Stronger Ties
While his Russia business flourished in the years before the Ukraine invasion, Lakhani also burnished his contacts in Washington and London.
After jetting into countries navigating sanctions, such as Venezuela, he made a habit of updating US and UK officials on his discussions, six people familiar with the matter said. As a result, colleagues and confidants said Lakhani remained confident that he could earn significant profits from his businesses in these jurisdictions while avoiding the blow-back of sanctions.
Lakhani’s role behind the scenes became even more relevant this year as White House and US Treasury officials urged trading heavyweights in private meetings to keep Russian oil flows going in an effort to avert a supply shock that could prompt a surge in prices at the pump, people with direct knowledge of the matter said.
Lakhani and Sechin have grown even closer in the past year, following an exodus of senior Rosneft staff, including Didier Casimiro, Eric Liron and Zeljko Runje, four of the people said.
Lakhani’s network also includes Emirati bankers as well as Indian refiners, Lebanese traders and Russian lawyers, who’ve helped Rosneft forge an alternative payment method that largely bypasses the US dollar, some of the people said. Meantime, Azeri, Greek and UAE shipping interests have been tapped to move Rosneft’s crude, they said.
The state oil giant accounts for nearly half of the output in the world’s No. 2 crude exporting nation, giving the company a particularly significant role in global flows.
READ: Dubai Becomes New Switzerland for Traders of Russian Commodities
Lakhani’s network of firms trading Russian oil is centered on the UAE, according to people familiar with the matter. One of them, Fossil Trading, has a direct link to Rosneft: It also owns Energopole SA, according to Energopole’s website. The Swiss trading unit had been set up by Rosneft following the imposition of US sanctions in 2020 on Rosneft Trading SA. It became part of Fossil in 2022.
Other firms in the network trade large volumes of the state oil giant’s cargoes, according to detailed trade and shipping data compiled by KSE Institute, a part of the Kyiv School of Economics.
Amur handled 120,000 barrels per day of Russian crude in the first half of 2023 while Tejarinaft took 55,000 barrels per day in that period, ranking fifth and eighth overall, excluding the trading units of Russian producers, the trade and shipping data show.
Key Lakhani associates have been involved.
One is Edward Ghazal, a Lebanese oil trader who worked for two years at Lakhani’s M&M in Singapore before becoming a founding director at Tejarinaft in April 2022, according to documents seen by Bloomberg.
A second is Hicham Fizazi, a Moroccan national, who helped Lakhani incorporate multiple firms, some of the people said. He appears in UAE corporate records as a director at both Tejarinaft as well as multiple Amur entities in Dubai and Abu Dhabi.
Ghazal declined to comment, while Fossil Trading, Energopole, Amur, Tejarinaft, and Fizazi didn’t respond to emails and LinkedIn messages seeking comment. Officials at Dubai Silicon Oasis, the free-trade zone where Fossil Trading, Amur and Tejarinaft are registered, also didn’t return calls and emails seeking comment.
Formed in September 2022, Amur Investments Limited sits on the 12th floor of Al Sila Tower in Abu Dhabi Global Market, the emirate’s international financial center. Its listed shareholder is Dubai-based Amur II FZCO, an offshore crude oil trading firm, which opened a month earlier, according to Emirati corporate records.
On a recent Friday afternoon, Amur’s ADGM office was humming. Just around the corner, an office assistant pointed out an empty desk for a firm that she said was run by the same man. The recently formed special purpose vehicle, called Invest Co Holdings Limited, appears in ADGM records with just one shareholder, director and secretary: Lakhani.
On Oct. 3, Lakhani also set up a new firm in the same tower called Mercantile & Maritime Terminals Ltd., ADGM records show.
Hamad Al Mazrouei, CEO of the ADGM Registration Authority, said the financial center requires its firms to comply fully with all applicable rules and that it keeps close watch of global regulatory developments, including applicable sanctions.
In response to questions posed to the Ministry of Foreign Affairs, a UAE official said the Gulf state is fully aware of its responsibilities in protecting the integrity of the global financial system.
M&M said it stopped trading Russian-origin oil products in February, according to company filings, and that chief financial officer Sergey Geller, who was previously its head of Russia, resigned as director at the end of July. That coincides with a big increase in trade by the newer Middle Eastern and Asian entities that people familiar with the matter say are linked to Lakhani.
Geller didn’t respond to requests for comment.
People familiar with the trader’s travel say he’s constantly on the go. His luxury real estate portfolio spans Europe, the Middle East and North America. In the UK, he prefers to fly private through airports northwest of London. Until last year, he held a controlling interest in his own yacht broker firm Yachting Partners International Limited, UK corporate records show.
In a given week, Lakhani will meet the leadership in Somalia to ensure the safe passage of crude through the Gulf of Aden, dine at some of London’s most exclusive social clubs and then huddle with Sechin in Moscow to discuss business, three of the people said.
While part of the billionaire’s support staff still works from London, he’s spending more time in the Persian Gulf these days to build out operations from Dubai to Manama, the people said.
READ: Oil Trader Lakhani Buys Fuel Storage Terminal at UAE’s Fujairah
European sanctions have made it riskier for firms involved in the Russia trade to operate from the UK and Rosneft has also demanded greater discretion for intermediaries involved with shipments.
He recently moved some operations away from his long-time office around the corner from the Saatchi Gallery in London’s upmarket Chelsea neighborhood, according to UK corporate records. Lakhani had told people involved in the deal that the country was no longer a suitable jurisdiction for his trading operations.
Back in Washington, Biden officials say they’re confident the price cap has mostly been successful — maintaining market stability while reducing oil revenues that trickle back to Moscow — but now is a chance to tighten the screws on some traders skirting the rules.
“Coalition compliance and enforcement authorities take allegations of intentional price cap violations extremely seriously and will exercise appropriate authorities to take action where appropriate,” Eric Van Nostrand, US Treasury’s acting Assistant Secretary for Economic Policy, wrote in response to questions.
Four US officials, who spoke on the condition of anonymity, said that Washington has benefited from market intelligence provided by commodity traders active in Russia, with some of the information proving more accurate than the government’s own internal forecasts.
But Lakhani’s ongoing relationship with Sechin, who has been under sanctions since 2014, has prompted concerns from some officials pushing for a maximum pressure strategy by Washington, London and Brussels, according to three of the people.
Meantime, the recent oil rally has presented a conundrum for both policy makers and the intermediaries involved in the Russian trade. With most barrels of the nation’s flagship Urals selling above the $60 cap, the question is how aggressively might Washington crack down on non-compliance, just as tensions in the Middle East also risk sending crude prices higher, four of the people said.
In recent weeks, Lakhani has privately voiced his desire to forge ahead with the Russian oil trade, three of the people said. He’s told some colleagues that the recent market disruptions mark an opportunity to turn his organization into an industry leader, the people said.
–With assistance from Chanyaporn Chanjaroen, Stephanie Baker, Anthony Di Paola, Hemal Savai, Laura Hurst, Francois de Beaupuy, Thomas Gualtieri and Veronika Gulyas.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.