Before Russia-Ukraine war, Western oil firms ‘cut deals’ to favour Moscow’s allies | Express Investigations News

The CPC takes crude from large oil fields in western Kazakhstan and also from Russian producers to Russia’s Black Sea port of Novorossiysk, from where it is transported to buyers globally through tankers.

In 2023, CPC carried 63.5 million tons of oil to international markets — around 10 per cent of CPC crude is Russian, the rest is from Kazakhstan’s large oil fields Kashagan and Karachaganak.

Since the start of the Ukraine war in 2022, CPC paid at least $816 million to shareholders Transneft and Rosneft, Russia’s biggest oil company – and $321 million in taxes to Russian authorities.

The key findings of the investigation:

• Western companies, led by Chevron Corp., made payments to subcontractors who didn’t perform the work.  In one case, they authorized a $48-million advance payment for work — including building electricity lines to a new pumping station in southern Russia — that went missing as soon as it was paid.
• Western oil companies — affiliates of Chevron, ExxonMobil, Italy’s Eni S.p.A. and Shell — sought to curry favor with Putin allies and the politically influential Kazakh elite by granting them hefty contracts.
• CPC cut corners on safety and downplayed the severity of a 2021 oil spill that didn’t just lead to environmental damage but also to allegations of financial corruption. The consortium ultimately lost a Russian court case and paid a $98.7-million fine for environmental damage.
• At least five whistleblowers alleged that Western oil companies’ dealings in Russia or Kazakhstan included improper payments in violation of the Foreign Corrupt Practices Act, a US law that prohibits bribes to foreign officials.
• Although the Russian government effectively controls the pipeline, since the war on Ukraine, Kazakhstan hired a US lobbying firm for a nearly $4-mn annual contract, to help the pipeline remain sanctions-free.

Caspian Cabals is an investigation by the International Consortium of Investigative Journalists into the 1500-km Caspian Pipeline Consortium (CPC), one of the world’s largest crude oil pipeline systems used by both Russia and Kazakhstan.

In a statement to ICIJ, Sally Jones, a senior media adviser for Chevron, said Chevron and international oil companies “have sought to provide critical technical support to enable safe and reliable operations of the Caspian Pipeline Consortium.”

“Chevron is committed to ethical business practices, operating responsibly, conducting its business with integrity and in accordance with the laws and regulations of each of the jurisdictions in which it operates,” she said.

She did not respond directly to questions about Chevron’s role in the pipeline or complaints about overpriced contracts, alleged kickbacks or conflicts of interest.

Exxon did not respond to requests for comment, nor did the governments of Kazakhstan or Russia.

A spokesman for Shell said the company does not tolerate bribery in any form. An Eni spokesperson said, “We are committed to upholding the highest standards of transparency, ethical conduct and environmental responsibility.”

Eni referred questions about the pipeline to CPC, which did not respond to multiple requests for comment.

Notably, India did not feature on the destination map for CPC oil — Kazakh as well as Russian — until early 2022.

Now, India has emerged as the biggest market for CPC-Russia (CPC-R) oil, followed by Turkey and China.

Tanker data from commodity market analytics firm Kpler shows that nearly 67 per cent of CPC-R crude made its way to India in the first nine months of 2024, while the figure for 2023 was even higher at 83 per cent.

Consider this: Between March 2022 and March 2024, 82 of the 117 oil tankers carrying CPC-R oil, that set sail from the Black Sea loading terminal, discharged the oil at Indian ports.

Between January 2021 and February 2022, just five of the 72 tankers hauling CPC-R had undertaken the long journey to Indian ports. The reason, industry insiders and experts say, is rather simple.

When Russian oil was allowed to flow freely globally, it made little sense financially and logistically for Indian refiners to buy crude from a faraway geography like Russia. The discounts, however, have turned that argument on its head.

While India’s private sector refining giant Reliance Industries (RIL) has been the biggest buyer of CPC-R crude, public sector players Indian Oil Corporation (IOC), Bharat Petroleum Corporation (BPCL), Hindustan Petroleum Corporation (HPCL), and Mangalore Refinery and Petrochemicals (MRPL) have also been buying this oil, vessel tracking data shows.

In the first nine months of 2024, Indian refiners cumulatively imported over 30 million barrels of CPC-R crude, with shipments coming in every month, vessel data shows.

In all, 45.56 million barrels of CPC-R crude were shipped globally during the period, the other notable importers being Turkey and China, while some volumes went to Pakistan. CPC-R accounted for over 6 per cent of India’s overall oil imports from Russia for the period. Russia accounts for over 40 per cent of India’s total oil imports.

In contrast, the CPC-Kazakhstan (CPC-K) crude purchases by Indian refiners have been few and far between, with isolated cargoes coming to India sporadically, just as the case was with CPC-R oil before Russia invaded Ukraine.

“The Kazakh part (of CPC oil going to India) is still minimal. The CPC-K is really mostly traded in the Mediterranean region. So, it would be going towards the Mediterranean refiners,” said Viktor Katona, head of crude analysis at Kpler.

RIL, IOC, BPCL, HPCL, and MRPL did not respond to The Indian Express’s request for comments.

But officials in the Indian government and refining sector The Indian Express spoke to underlined that Indian oil and gas companies are neither part of the CPC project nor its stakeholders, but they are its customers.

“We buy oil from many countries and many companies. As customers, we can only ensure that our deals are clean. What happened or what may happen internally in a supplying company or country is something beyond our control and most often also beyond our knowledge,” an oil industry source in India said.

India is the world’s third-largest consumer of crude oil and depends on imports to meet over 85 per cent of its requirement. New Delhi has time and again emphasised that its priority is to secure its energy supplies and that the country is willing to buy oil from any country or company that is not under sanctions.

Russian oil is technically not under any sanction by the US or its allies, and is only subject to the price cap.