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Shell Admits To Buying Discounted Russian Oil Despite Embargo

British oil company Shell admitted that it purchased a cargo of oil Saturday, even after it divested from large shares in the Russian energy industry amid Russia’s invasion of Ukraine.

The Wall Street Journal first reported Friday that the energy titan purchased a shipload of Urals crude oil, about 100 metric tons’ worth, from an oil broker called Trafigura Group Pte. Ltd, which the Journal identified as one of the largest commodity traders and one of the largest Russian oil exporters. The Journal also reported that Shell obtained the oil at a record discount. The Trafigura Group failed to sell the cargo, so Shell was able to purchase it for $28.50 below the standard Brent crude price per barrel, the largest discount on record. The Brent price closed on Friday at just over $118 per barrel, according to Nasdaq.

While the U.S. and its Western allies have mostly left out the Russian energy sector in their sanctions campaign against Russia, oil refiners have reportedly completely cut off Russian crude oil because they could not find funding to buy Russian oil, nor ships to carry it. The embargo has led to a backup in the Russian supply chain, which has, in turn, led to producers scaling back operations. However, WSJ reported, citing a source close to Shell’s trading strategy, that the company was using Russian oil to plug gaps in the oil supply chain while it seeks out alternative sources of supply.

In a statement posted to Twitter from its official account, Shell said that it purchased the oil in order to prevent a disruption in the oil supply, confirming WSJ reporting. “Yesterday we made the difficult decision to purchase a cargo of Russian crude oil,” Shell said in a statement. “Our refineries produce petrol and diesel as well as other products that people rely on every day. To be clear, without an uninterrupted supply of crude oil to refineries, the energy industry cannot assure continued provision of essential products to people across Europe over the weeks ahead. Cargoes from alternative sources would not have arrived in time to avoid disruptions to market supply.”

The company said that it has been “in constant discussion with governments” about the impact of the Russian invasion on the energy supply. “We have acted throughout in accordance with what we have understood was the intent to allow energy flows from Russia for the time being in order to provide security of energy supply,” Shell said. “We didn’t take this decision lightly and we understand the strength of feeling around it. We will continue to choose alternatives to Russian oil wherever possible, but this cannot happen overnight because of how significant Russia is to global supply.” In the meantime, Shell promised to donate its profits from Russian oil sales to a dedicated fund for humanitarian aid.

Shell, along with fellow British oil titan BP, divested their companies from stakes in the Russian energy sector amid the invasion of Ukraine. The Daily Wire reported that, prior to its embargo, Shell was involved in joint ventures with Russian oil giant Gazprom. The company also owned a 27.5% stake in a Russian liquified natural gas facility, as well as a 50% stake in two Russian energy development ventures. Shell was also involved in the construction of the Nord Stream 2 natural gas pipeline.

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