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iFact Investigation Suggests Russian Oil Reaches Europe Through Georgia

iFact, a local media outlet focused on investigative journalism, has published its investigative report entitled “Invisible Cargo: the Path of Sanctioned Oil from Russia To Europe” on January 22 suggesting that Russian oil reaches Europe through Georgia.

According to iFact in 2023-2024, 99,000 tons of Georgian-origin oil worth a total of Euros 49 million entered Spain from Georgia.

The information is obtained by iFact and was first published on https://ifact.ge

The questions that iFACT asked were how this was possible considering that 1) Georgia doesn’t produce this amount of oil, and 2) that this export data is not found in the database of the National Statistical Service of Georgia, but are found in Spain.

iFact notes that in spite of the international sanctions on the direct oil imports from Russia, the indirect route according to the scheme Russia-third country – Europe has allowed Moscow to sell the sanctioned commodity and circumvent the sanctions.

In addition to its previous investigations into Georgia’s alleged involvement in the sanctions’ circumvention related to the sanctioned luxury vehicles and export to Russia of dual use items, this particular investigation focuses on how Russian oil allegedly enters Europe via Georgia.

Spike in Oil Exports

iFact notes that throughout the investigation it studied official statistics from Georgia and foreign countries, including oil-importing and exporting companies, and compared “thousands of data points from four independent databases”. The investigators also tracked the movement of Russian cargo through the territory of Georgia and spoke to specialists in rail and maritime transportation.

As a result the main findings of the organization have been:

  • Since the war in Ukraine in 2022, oil exports from Georgia to European countries have increased almost 15 times.
  • Since the war in Ukraine began, Russia has continued to be Georgia’s leading oil importer, via maritime and railway transportation.
  • Official data released by Geostat (Georgian Statistics Office) regarding oil imports and exports from Georgia to Europe do not match the official data from the UN’s international trade database or other authoritative sources.
  • More oil and petroleum products enter Georgia from Russia than officially recorded by Georgian authorities.
  • More oil and petroleum products are “Georgianized” in Europe than Georgia itself extracts.

Mismatch in Georgian vs International Data

Using several databases, such as volza. com, comptradeplus.un.org, and others iFact discovered discrepancies between official Georgian data statistics and international data. The investigation notes that when Georgia is set as the reporting party on the UN trade portal, the information matches Geostat’s figures. However, “the system shows entirely different data if Spain is selected as the reporting party, and we search for how much oil was imported from Georgia to Spain.”

The publication offers several examples to show the discrepancies. For instance, it says that according to the Geostate database, no oil was exported to Spain from Georgia in 2023, while international databases show that $25 mln of oil was exported from Georgia to Spain that year.

The publication notes that the National Statistics Office of Georgia collects statistical information from various agencies and in this case, trade statistics must be provided by the Revenue Service. Thus, if agencies fail to deliver complete information to Geostat, it cannot reflect accurate statistics in its records.

What is the explanation for the discrepancies?

Ifact addressed both Geostat and the Revenue Service to clarify the foreign data. The Geostat response was that the discrepancy could be caused by so-called triangular trade, either with or without resale. Ifact explains:

Triangular trade with resale occurs when, for example, a Russian company sells oil to a Georgian company, and the Georgian company resells it to an Italian one. However, the cargo never physically enters Georgia, going directly from Russia to Italy. In such cases, this shipment would not be reflected in Georgia’s official statistics, as it never entered the country’s territory.

Triangular trade without resale means the goods are exported from Russia to Georgia and then sold and shipped to Italy. In this case, Italy might indicate that the cargo was received from Russia, Russia records the export to Georgia, and Georgia records the export to Italy. Ultimately, this creates asymmetry in the statistical data between countries, leading to different versions.

Ifact notes that the Revenue Service did not answer the inquiry at all, and has not cooperated with the publication.

What do Experts Say?

When clarifying the matter further with the export-import and oil trade field experts, who spoke on condition of anonymity as they either work in government agencies or fear losing their job if they speak openly, iFact learned about the so-called ship-to-ship transfer (STS) practice, whereby the cargo is transferred while the ship is en route, via pipeline, to another tanker in neutral waters, where no country’s customs jurisdiction applies.

This method of selling oil is apparently entirely legal and used to be practiced before the Russia-Ukraine war, however since the eruption of the war, it has become a loophole for selling Russian oil.

Greece apparently had a problem preventing such transaction in 2023, according to the Bloomberg article, cited by iFact, as the transfer occurred outside the country’s territorial waters.

Seafarers’ Account

Ifact talked anonymously to a Georgian sailor, who has been a seafarer for years and who shared that he sometimes does not know where the oil is being taken, learning about the destination only after the departure. He confirmed his ship carries Russian oil without the knowledge of the final destination.

Another source, a captain has shared that even captains don’t know where the cargo on his tanker will ultimately end up. He also noted that sometimes the hiring company looks for a buyer when the ship is in the sea.

Georgian Oil in Europe

Ifact notes that while Georgian oil reserves are estimated to be around 35 mln barrels, the consumption of petroleum products has not increased much in recent years. However, iFact notes “the sharp rise in imports and exports stands out, raising suspicions that imported oil is being sold to other countries. According to Georgia’s official foreign trade data, since the war in Ukraine in 2021, the export of oil and petroleum products to EU member states has increased by 1,465.%,  while globally, it has grown by approximately 440%.”

Source: iFact

How Does Georgianized Oil Reach Europe?

In the second part of the investigation, iFact details how the sanctioned oil transport companies and the exporter-importer companies involved in the transactions in Georgia, operate. It asked the question: Since oil extraction in Georgia does not exceed 40,000 tons annually, it becomes evident that oil produced in other countries is being “Georgianized” before reaching Europe. How does this happen technically?”

The report explains that the exported or re-exported cargo is accompanied by a Certificate of Origin containing detailed information such as the exporter’s and importer’s name, registration code, address, as well as a description of the exported goods, place of departure and destination, etc.

When the “Country of Origin” field lists Georgia, it indicates that the oil was either produced or processed in Georgia. Officially, the country of origin can be different from where the oil was exported or re-exported to. For instance, if Russian-extracted oil is shipped from a Romanian port, Russia will be the country of origin, and Romania will be the exporter.

When and under what circumstances can country of origin information be changed? According to iFact’s sources, there are two ways in which this can happen, both of which can take place in Georgia:

  1. Blending the oil – once the oil has been physically blended, it becomes difficult to determine which oil belongs to which country. For example, suppose 25,000 tonnes of Russian crude oil arrives at a Georgian port, mixed with 5,000 tonnes of Georgian oil. In this case, the cargo can be exported to Europe as Georgian oil.
  2. Changing the documentation of the origin of the oil – this can occur at the port, at a distribution point, from a foreign country, whereby the oil arriving, from Russia, can be labeled as Georgia and send it to Europe. Another option is to label it as oil originating from another country, for example Kazakhstan, rather than Russia.

iFact brings examples of similar schemes revealed and described by Bloomberg or Politico. Politico for example revealed that Bulgaria, which exported on average 1.1. bln worth of oi in 2020-2021 exported $4 bln in 2022 and $2.7 in 2023.

iFact contacted three countries’ relevant agencies -Belgium, Italy and Spain – that received large quantities of the so-called “Georgian-origin” oil.

Out of these three only Spain responded, its Tax Agency informing the publication that in 2023-2024 99.000 tons of Georgian oil worth $49 mln were imported to Spain from Georgia. This data matches information found on Volza and Comtrade databases, iFact notes.

This post is also available in: ქართული (Georgian) Русский (Russian)

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