In June 2022, the Geneva-based company Paramount Energy & Commodities SA stopped its activities, and opened an identical company in Dubai under the name of Paramount Energy & Commodities DMCC. Until the relocation, Paramount SA was a small business specialising in trading Russian crude. In the two months following the beginning of the Ukraine War in February 2023, the Swiss company purchased 11.7 million barrels of oil, making it the fourth global largest buyer of Russian crude following only the industry giants Litasco, Trafigura, and Vitol. Its founder, Niels Troost, a Dutch citizen, used to be a tennis partner of Gennady Timoshenko, founder of the multinational commodity trading company Gunvor and close associate of Vladimir Putin. Following the price cap of $60 a barrel introduced in December 2022 by the G7 on Russian crude oil, the newly established Paramount Energy & Commodities DMCC kept trading the same oil it used to trade when it was based in Geneva, at a price above $70 a barrel, thus higher than the price cap. However, nowadays it is using United Arab Emirates lenders and ships registered to companies based in China, India and the Marshall Islands, countries that have not imposed sanctions on Russia. This allows it to bypass the current G7+ sanctions, which prohibit companies or individuals from the US, EU, UK and Switzerland from trading, shipping and insuring Russian oil sold at a price above the price cap. The Russian producers that sell oil to Paramount DMCC are Rosneft, Gazpromneft and Surgutneftegas, all sanctioned by G7 and EU countries. The main buyers are located in China, which after the beginning of the war has boosted its imports of Russian oil, counting on its increased bargaining position vis-à-vis Moscow to obtain lower-than-market prices. For this reason, officials from the EU, US and UK have visited the UAE to press Emirati authorities to curb sanctions’ circumvention.

This is not just related to oil. Another cause of concern for the G7 is the so-called “re-export” of high-tech goods, where electronic items are first exported from Western countries to the UAE or Central Asian states, and then, as a second step, from those countries to Russia. This is why last year there was a more than seven-fold increase in the UAE’s export of electronic parts such as microchips and drones from the UAE to Russia, while exports from the EU and the US to Armenia and Kyrgyzstan surged by 80% from May to June 2022.

The activity of companies such as Paramount DMCC risks jeopardising the objective of G7’s price cap of slashing the Kremlin’s oil revenue and reducing global energy prices, but without completely blocking Russian oil flows to Europe. These companies contribute to selling Russian crude at prices well above the price cap and they are also diverting oil flows away from European markets. The CEO of the maritime data company Windward, Ami Daniel, reported witnessing numerous cases in which individuals from countries including the United Arab Emirates, India, China, Pakistan, Indonesia, and Malaysia purchased ships to establish a non-Western trade structure with Russia. At the same time, Russia is using Iran’s “ghost fleet” to bypass G7’s price cap. This consists of vessels that disguise their ownership and their movements by turning off satellite trackers or transmitting fake coordinates. These vessels also  transfer Russian oil between ships in international waters, all with the aim of concealing the origin of the crude and selling Russian crude at a higher price than the price cap.

As a result, the IMF forecasted Russian oil exports to remain robust, shifting towards nations that have not enforced the price cap. Overall, despite the sanctions, the Russian economy is expected to grow by 0.3% in 2023. Implementing sanctions effectively is a cat-and-mouse game. G7 and EU countries will need to shift their focus on enforcement to ensure that sanctions achieve their goal of denying the Kremlin’s ability to finance the war.