How Europe’s commodities traders took a gamble too far on Putin’s regime

IN RUSSIA’S FROZENLNG north is a megaproject that has long been seen as an answer to President Vladimir Putin’s prayers. By the mid-2020s the Vostok oilfield is expected to supply about 15% of Russia’s crude exports. By that time Rosneft, the Russian oil giant leading the effort, plans to ship Vostok oil via the Northern Sea Route, a shortcut through the Arctic to Asia. The route will enable Russia to bypass the West geopolitically as well as geographically, allowing oil to travel along waters beyond the control of the American navy and out of reach of Western sanctions. Besides Rosneft, its backers include two mostly European oil and gas traders, Trafigura and Vitol. For years they have competed fiercely to be among the biggest buyers of Russian crude.These firms are part of a group of commodities traders, including Glencore and Gunvor, that often thrive amid geopolitical turmoil. They are clear-eyed realists who in the past have struck deals with autocrats to gain access to cheap raw materials. In recent years some have doubled down on Russia, doing business with the figures who surround Mr Putin, such as Rosneft’s boss, Igor Sechin, and winning big oil and liquefied natural gas () contracts (piped gas is the domain of Gazprom, a state monopoly). The arrangement served both sides well. The traders invested in Russia and secured more supply from the world’s third-biggest oil-producing country and biggest natural-gas exporter. Higher energy prices bolstered Russia’s hard-currency reserves.