‘Latvian blend’: How Russia bends the rules to keep its oil flowing

Shell provoked upset less than two weeks into Putin’s invasion of Ukraine as it snapped up a cargo of steeply discounted Russian oil, putting it on course for hefty profits in markets roiled by the disruption.  

Dmytro Kuleba, Ukraine’s foreign minister, criticised the company on Twitter, demanding that multinational companies “cut all business ties with Russia.” 

The FTSE 100 oil and gas giant was quick to apologise, saying the “difficult decision” was necessary to avoid supply disruptions, and promising to put any profits from trading Russian oil into a fund to help Ukraine. 

It also pledged to stop buying Russian crude oil on the spot market and start withdrawing from its petroleum products as part of its wider pullback from the country, stressing this would be a “complex challenge”. 

More than a month later, the company has once again provoked Ukraine’s anger, however, as the limits and complexities of that strategy start to emerge. It points to how Russian crude oil has been kept flowing.

According to reports, Shell’s terms indicate it is accepting refined products such as diesel or naphtha with some Russian content, as long as this does not exceed 50pc. 

“The goods sold and delivered by Seller shall not be of Russian Federation (‘RF’) origin and shall not have been loaded in or transported from RF,” the terms state, according to Bloomberg. 

“Goods shall be deemed of ‘RF origin’ if produced in RF or if 50pc or more of their content (by volume) consists of material that was produced in RF.”

The approach was criticised in a letter from Ukrainian economic advisor Oleg Ustenko to Shell’s boss Ben van Beurden on April 13. 

“The notion that any company will continue to bankroll Putin’s war machine through an accounting trick is deplorable,” Ustenko wrote, according to the Wall Street Journal (WSJ). 

“It’s a national shame for many governments and institutions that are financing these aggressions towards us.”

It comes as experts point to a growing gap between rhetoric and reality on the vast trade of Russian oil to Europe and elsewhere. 

Energy imports have largely been exempted from EU sanctions due to the continent’s dependence, but many companies have publicly disavowed its products amid ethical concerns about funding Moscow’s war or for fear of getting caught in the limited sanctions. 

Some banks are also believed to be pulling back from financing such deals. A Goldman Sachs source says the bank had not struck any new deals to finance commodity trading houses’ purchases of Russian producers’ goods since the war began, and did not currently plan to. JP Morgan declined to comment, as did HSBC.  

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