Billionaire’s companies helped Rosneft trade with sanction-hit Venezuela and have continued to ship Russian oil since Ukraine invasion
On a balmy afternoon late in 2019, the Liberian-flagged Delta Glory slipped through tropical waters towards Puerto José on the Venezuelan coast, anchored ten miles off the country’s biggest oil terminal, and vanished.
When, four days later in the Caribbean night, the 333 metre-long tanker switched its satellite transponder back on and became visible to tracking systems, it was fully laden and heading for mid-Atlantic, its cargo nearly 2 million barrels of Venezuelan crude targeted by US sanctions.
A few days earlier in London, on 5 November, Conservative officials had celebrated one of the party’s largest single donations, a £500,000 cash injection that within weeks would help propel Boris Johnson to a second term as prime minister with his party’s largest majority since the glory years of Margaret Thatcher.
The donor was Mercantile & Maritime Energy UK Ltd, owned by Murtaza Lakhani, a Pakistani-Canadian billionaire who became rich trading Kurdish oil in the aftermath of the 2003 Iraq war. It was Lakhani’s Mercantile & Maritime group which owned the Delta Glory’s cargo and dozens of other consignments from sanctioned Venezuela in 2019.
Lakhani’s company shipped the oil in a joint venture with Rosneft Trading, a Geneva subsidiary of the Russian state oil giant led by Igor Sechin, a close ally of Vladimir Putin. An investigation by SourceMaterial and The Times reveals an agreement between Rosneft Trading and Mercantile which sources and compliance experts say appears to have had little purpose beyond helping the Russian company to profit by circumventing US sanctions.
“The arrangement with Mercantile & Maritime inserted an unnecessary counterparty into a transaction for an unnecessary cost,” said a former Rosneft Trading executive familiar with the transactions, who spoke to SourceMaterial on condition of anonymity.
The transactions “present fairly stark and unexplained red flags that appear to have no legitimate business purpose,” said Ryan Fayhee, a former sanctions prosecutor at the US Department of Justice, adding that they are “consistent with my own experience in detecting and uncovering sanctions evasions schemes”.
Our investigation, based on leaked documents, insider interviews and industry data, also found that through another of his companies, Lakhani has continued to help Rosneft export oil from Russia since the invasion of Ukraine in February 2022. While there is no suggestion that the trade with Russia breaches any current sanctions, other oil companies such as Shell and BP wound down trade in Russian oil shortly after the war began.
Lawyers for Lakhani and the Mercantile group said that any ongoing trade with Russia was fully compliant with existing sanctions regimes and that the group’s relationship with Rosneft Trading in Venezuela was lawful.
“The suggestion that Mercantile & Maritime Group was involved in arrangements designed to conceal Rosneft’s trade in Venezuela to circumvent US sanctions is therefore baseless,” they said, adding that the arrangement was wound down when Rosneft Trading was itself sanctioned by the US authorities in early 2020.
A Rosneft spokesman said that its Swiss subsidiary never violated the restrictions imposed by the US, which were themselves unlawful, and that “according to the established practice of the Western media”, SourceMaterial and The Times were “trying to find imaginary violations where there are none”.
Lakhani’s ties to the Russian state oil company raise questions about the Conservative Party’s procedures for reviewing donors, said Daniel Bruce, head of Transparency International.
“Any political party ought to have a clear understanding of the nature of their benefactors—and whether they present a risk of potential embarrassment,” he said. “Political parties should carefully consider whether their donors adhere to the same values their party claims to hold.”
The Conservative Party did not respond to requests for comment.
Oil for food
Lakhani, 60, was born in Karachi and raised in England and Canada, beginning his career in a family business trading rice, cotton and wheat before moving his focus to oil, according to a 2020 Bloomberg profile.
In 2005 he was named by an independent inquiry into manipulation of the United Nations Oil-for-Food Programme in Iraq. Lakhani described himself as Glencore’s “man in Iraq”, receiving a $5,000 monthly retainer and hundreds of thousands of dollars in bonuses in return for securing oil shipments for the Swiss-based trading house, according to the inquiry’s report.
Officially the UN programme allowed Iraq to export oil despite international sanctions by bartering it for essential supplies. But Saddam Hussein’s regime exploited loopholes to extract surcharges from traders, and Lakhani made $2.8 million in such payments on Glencore’s behalf in 2002 and 2003, the report said.
No charges were brought against Lakhani or Glencore. Lawyers for Lakhani said that he cooperated with the UN investigation, which was “politically motivated”, and that at all times he “was acting as an agent of Glencore, and not in an independent capacity”.
After US-led invasion forces toppled Saddam, Lakhani became an intermediary for the regional government of Kurdistan. His business boomed in 2014 when Kurdish forces wrested the oil-rich city of Kirkuk from Islamic State fighters and began looking for buyers.
Lakhani brokered Kurdish export deals for a string of international companies, which by 2017 included Rosneft. His partnership with the Russian state-owned oil company also extended to Venezuela.
Coded emails
In 2019, the US imposed sanctions on Venezuela when President Nicolás Maduro clung to power after disputed elections. In the months that followed, Lakhani’s Singapore-based Mercantile & Maritime PTE Ltd apparently acted as an intermediary, or “sleeve” in industry jargon used by Rosneft traders in the leaked emails.
Mercantile bought oil from the Russian company in Venezuela and resold it on the international market—often back to Rosneft, documents and other evidence suggest. The partners would then split the profits 50-50, with financing provided by a Rosneft-owned bank, VBRR.
Emails seen by SourceMaterial appear to show Rosneft Trading employees discussing the trades in code.
“The payment for the Voronezh crude cannot be made in cash, we cannot use any banking channel,” one email from a Rosneft official read. Voronezh, a city in southwestern Russia, was used as a codeword for Venezuela after the introduction of sanctions, the former Rosneft executive said.
A leaked Rosneft Trading document about a meeting “in Voronezh” in fact contains details of talks with Venezuela’s state oil company, while another mentions “Voronezh” on a list of “sanctioned countries”.
Using Mercantile as an intermediary could help Rosneft avoid being blacklisted by US authorities, experts consulted by SourceMaterial said. Maduro’s Russian arms purchases and backing for Putin’s Ukraine invasion meant Washington would be monitoring the company’s Venezuelan deals closely.
Venezuela was important for Rosneft and its ultimate owner, the Kremlin. The country was a top “focus area” for the company, based on criteria that included “friendliness” to Russia as defined by “Soviet ties, Crimea voting, military trade, total trade, recommendations of Russian Ministry of Foreign Affairs”, according to an October 2019 document.
The “sleeve” concealed Rosneft Trading’s activities in Venezuela from the US Treasury and safeguarded the company’s investments, according to the former Rosneft Trading executive. It was “a screen, intended to protect Rosneft Trading from US sanctions,” he said.
The relationship, apparently cemented by the appointment of a Rosneft Trading director to Mercantile’s board, was lucrative for both parties. Rosneft Trading continued to secure Venezuelan oil at a steep discount—up to $27 a barrel below the market rate—with each supertanker cargo earning the partners around $5 million apiece, the leaked documents suggest. SourceMaterial has seen evidence of at least 62 shipments in 2019.
Venezuela, meanwhile, was able to keep oil flowing and avoid the cost of shutdowns. The arrangement would “avoid negative impacts and shutdown of your crude production,” a Rosneft trader wrote to his Venezuelan counterpart.
Mercantile’s lawyers said in a statement that the transactions “were not, and cannot credibly be characterised, as assisting Rosneft with concealing trade in Venezuela to circumvent US sanctions”.
The company had a “legitimate role in the transactions as in the normal course of industry trade”, they said, adding that the partners had “similar arrangements” in relation to crude from other countries.
Loan repayments
In its response to SourceMaterial, Mercantile argued that the shipments were legitimate because they were part of repayments of loans from Rosneft Trading to Venezuela’s state oil company agreed before sanctions came into force.
“Mercantile & Maritime Group had a commercial relationship with Rosneft Trading providing logistics and marketing services when Rosneft Trading was lawfully lifting Venezuelan oil to repay debts owed to it,” the lawyers, Schillings, said.
But an industry compliance adviser who asked to remain anonymous because of commercial sensitivities told SourceMaterial that recovering debt was not a defence for dealing with Venezuela under US sanctions.
“If it was so legitimate, why wasn’t every other company doing the same thing?”
“If it was so legitimate, why wasn’t every other company who had debt or money tied up in Venezuela doing the same thing?” the adviser said, pointing out that other oil companies, including Equinor, Inpex, and TotalEnergies, wrote off hundreds of millions of dollars in debt to sever ties with the country.
The US Treasury appears to have agreed when it did eventually sanction Rosneft Trading in 2020 for impeding its efforts to “prevent the looting of Venezuela’s oil assets by the corrupt Maduro regime”.
Those sanctions resulted directly from trades involving Mercantile, according to the former Rosneft Trading executive. Rosneft Trading’s dealings with Venezuela in the year before the company was sanctioned were “all via this vehicle”, he said.
Mercantile’s lawyers said: “Rosneft Trading’s lifting of Venezuelan oil was public knowledge at the time. Mercantile & Maritime Group had similar arrangements with Rosneft Trading—and with other traders and international companies—in relation to crude of various origins.
Party ties
It was deals like the Rosneft arrangement that catapulted Lakhani into the big league of Conservative funders. Mercantile also began using a public relations firm linked to the party: Hawthorn Associates, is co-owned by a former Conservative chairman, Ben Elliot, and has represented other big donors to the party, as well Akshata Murty, wife of the prime minister, Rishi Sunak.
Lakhani’s lawyers said that the Conservative donation was “entirely legitimate”, adding that the party had approached him for the funding, which was “philanthropic” and motivated by his desire to spearhead a campaign against moped crime in Central London. Lakhani left London in February 2020 and no longer has an active interest in UK affairs, and never met or spoke to British MPs or ministers about his business interests, they said.
There is no evidence that Lakhani has purchased Venezuelan oil with Rosneft Trading since the US sanctioned the company. But following Vladimir Putin’s invasion of Ukraine, Mercantile has remained an investor in state-owned oil firm Rosneft’s vast Vostok project to develop new oil fields in northern Siberia. Another of Lakhani’s companies, Austrian-registered Cetracore, has continued to handle Rosneft oil.
Cetracore, in which Rosneft owns a minority stake, arranged the transfer of ten cargoes of Rosneft refined oil products from Russia to destinations including Greece and Turkey in August, according to industry data. Such trades allow Russia to benefit from continued trade in its oil products in a shrinking pool of buyers.
There is no suggestion that the current trading in Russian oil products, or Mercantile’s investments in Russia, put the company in breach of UK, EU or Singaporean sanctions regimes.
Lawyers for Lakhani said: “Mercantile & Maritime Group has always operated in full compliance with all applicable international trade laws and maritime regulations and will continue to do so.”
Mercantile and Cetracore would comply with an EU and UK ban on Russian oil imports expected to become effective on December 5, the statement said.
Picture: Maracaibo lake, where an enormous deposit of oil discovered in the 1910s made Venezuela one of the world’s major oil exporters, Brasil2
2 December 2022: This article is the subject of a legal complaint from Murtaza Lakhani and The Mercantile & Maritime Group
15 September 2023: Murtaza Lakhani and the Mercantile & Maritime Group have written to SourceMaterial to provide further statements on this article. They continue to state that the relationship between Rosneft Trading and Mercantile was a permissible and legitimate commercial relationship falling outside applicable sanctions, namely by Mercantile selling oil purchased from Rosneft to end buyers or ‘occasions’ where oil was sold back to Rosneft because it had the necessary relationship with the end buyer, as well through providing marketing and logistics. They state that there was no question of arrangements being made to evade sanctions regarding Venezuela or conceal the trade as a number of established international oil and gas companies were involved in oil-for debt swaps, similar arrangements were used for crude of other origins, and Rosneft was openly trading Venezuelan oil at the relevant time.
