Trafigura told by Ecuador to avoid Russia oil amid sanctions

Ecuador’s state oil company told commodity trader Trafigura Group to avoid importing Russian fuels into the Latin American nation amid concerns the country may get entangled in sanctions. 

Petroecuador issued the warning more than 12 hours after Trafigura finished discharging a cargo of mostly Russian diesel at the Ecuadorian port of Esmeraldas on Sunday. It’s unclear if Trafigura, the top supplier of fuels to the country, will comply with the request. 

The state oil company “has requested Trafigura to comply with sanctions imposed by the United States and the European Union on the Russian Federation” and to “avoid importing fuels of Russian origin, that could be affected by sanctions,” according to a statement from the Quito-based company. 

In June Trafigura signed a contract to supply diesel oil, the type used for power generation, to Petroecuador. The contract doesn’t impose any restrictions by origin although it does state that the oil company wouldn’t be able to obtain a letter of credit in case the cargo is of Russian origin or sold by a Russian company. Without the letter of credit the deal gets riskier as the trader could incur losses in case Petroecuador backs out financially from the deal. 

The contract is for six diesel cargoes, out of which four already have been delivered. A spokesperson said Trafigura doesn’t comment on individual shipments and it will continue to comply in full with European Union sanctions. 

Petroecuador said suppliers guarantee the products they deliver may be freely bought and sold and have no links to “contraband, money laundering, let alone international sanctions.” The company accepted the Russian diesel cargo but warned Trafigura to comply with the contract moving forward, according to a statement. 

Traders and oil producers are rushing to sell Russian oil ahead of an EU ban on crude oil and oil products that gradually takes effect starting in December. The ban, aimed at starving Vladimir Putin of cash to finance the war on Ukraine, is part of the block’s pushback against the invasion.