In the early hours of May 31, 2023, a drone slammed into the Afipsky oil refinery in Southern Russia. Videos show an explosion followed by a raging fire. “One of the fuel oil distillation units is on fire. The preliminary cause is the strike of a UAV,” Veniamin Kondratyev, the governor of the region, wrote on Telegram shortly after the explosion. Russian officials have blamed Ukraine for other drone attacks, and Ukraine rarely accepts responsibility for such incidents. The Afipsky refinery is only 50 miles east of one of the most important oil export terminals in Russia, the Black Sea port of Novorossiysk.
The strike, and others like it, is widely speculated to be an attempt to disrupt the crucial cash cow that largely funds Russia’s military: The export of petroleum.
A Project On Government Oversight (POGO) investigation, based partly on information provided by Data Desk, an investigative group that specializes in analyzing commodities, reveals that months before the attack, petroleum products from the same facility made their way by boat to a Russia-connected Greek oil refinery and Department of Defense (DOD) contractor, were eventually loaded onto a U.S.-flagged ship, and were delivered to U.S. military bases in the Mediterranean and elsewhere as naval diesel and jet fuel. POGO shared these findings with the Washington Post, which published its own investigation today.
Since Russia’s invasion of Ukraine, the DOD has awarded contracts worth nearly a billion dollars to Motor Oil Hellas, a Greek oil giant with a history of partnership with Russian firms, including Kremlin-controlled oil company Rosneft, which has been repeatedly sanctioned by the U.S. government.
An analysis of shipping, customs, and contracting data and interviews with experts in oil refining and Russian energy reveal that Motor Oil Hellas began regularly importing Russian fuel oils through Turkey in an arrangement that could be designed to evade the recent European Union (EU) and Group of Seven nations (G7) ban on seaborne imports.
“Motor Oil Hellas does not buy, process or trade Russian oil products. All its imports are certified of non sanctioned origin,” the company wrote in response to a detailed list of questions laying out POGO’s findings.
POGO’s analysis further reveals a likelihood that the U.S. military and NATO have been fueling their planes and boats with partially Russian-derived petroleum products since Russia invaded Ukraine in February 2022.
While some shipments to Motor Oil Hellas may be abiding by the evolving landscape of sanctions and embargoes, the dynamic puts the Pentagon in an awkward position: On one hand, the U.S. government is sending billions of dollars of weaponry to Ukraine to defend against Russian President Vladimir Putin’s invasion, and on the other it is likely buying products that contain Russian fossil fuels, the major economic driver of the Russian war machine.
Motor Oil Hellas has fulfilled DOD fuel orders for decades, receiving over $5 billion in contract awards since 2004. But after Putin’s 2022 invasion, the DOD awards spiked, with over half a billion in the fiscal year alone. And a massive new contract awarded in May 2023 totals nearly $479 million for jet fuel and naval distillate. This contract award would bring the total of taxpayer money flowing to the Russia-connected Greek refinery to nearly a billion dollars since Russia’s full-scale invasion.
The Defense Logistics Agency (DLA), the agency within the DOD that manages supply chains, confirmed the new contract award in response to a POGO inquiry and denied any knowledge of wrongdoing by its preferred contractor. “In soliciting and awarding contracts, DLA Energy adheres to the laws and regulations prohibiting or restricting U.S. government agencies from purchasing supplies or services connected to Russia,” Joseph Yoswa, Director of Defense Logistics Agency Public Affairs, wrote in an emailed response.
Since the invasion, the EU, U.S., and other governments have levied sanctions and embargoes on Russian fossil fuel. POGO is focusing mainly on two periods: Before February 2023, when the EU, U.S., and other governments agreed to an embargo and price cap on Russian petroleum products, and the months after the price cap went into place.
Summary of Major Findings
- Russian petroleum products continued to flow to a major Department of Defense contractor after the Russian invasion of Ukraine, through a Russia-connected Greek refinery, and continued after the U.S. banned imports of Russian oil.
- Even after the February 2023 EU and U.S. embargo and price cap, Russian petroleum products still found a way into U.S. military supply chains in two ways. First, Russian crude and fuel oil that previously traveled directly to the Motor Oil Hellas refinery now makes its way through a Turkish port, which effectively launders its origin and eludes the EU embargo. Second, the refinery shifted to import more Kazakh oil, but the DOD’s supply chain still includes sanctioned Russian companies, pipelines, and ports.
- The oil embargo and sanctions have fostered a thriving gray market, where shipping companies, charterers, and commodities traders willing to take risks — reputational, legal, and environmental — are rewarded for keeping Russian oil flowing by obscuring its origin. The DOD continues to participate in this supply chain through its massive new contract with Motor Oil Hellas and by using Greek shipping giants that have been considered “sponsors of war” by the Ukrainian government.
The Department of Defense purchases and uses the vast majority of petroleum across the U.S. federal government, accounting for over 75% of consumption in fiscal year 2022. Within DOD, the Defense Logistics Agency serves as the gas station, acquiring petroleum products on the market and then selling them to “customers” like the Air Force. Last year alone, the agency purchased 84 million barrels of petroleum products at a cost of $11.9 billion.
Defense Logistics Agency has a global footprint, buying fuel from companies and governments around the world and ensuring its delivery to U.S. and NATO military installations. Oil companies that operate refineries, like Motor Oil Hellas, bid on the lucrative contracts for products like diesel and jet fuel.
The Greek economy, like many in Europe, relied heavily on Russian energy. Greek companies dominate the global ownership of oil tankers, and a handful of oil and shipping oligarchs have huge influence in Greek politics. As Russia began its campaign in Ukraine in 2014, and as things escalated since then, these oligarchs have not shown any reluctance to continue their relationships with Russian industry. Greek shipping companies continue to dominate the seaborne transport of Russian fossil fuel, especially from its Black Sea ports. As other Western companies avoided the transport of Russian products in the wake of the invasion of Ukraine, Greek shipping and oil companies rushed to fill the gap.
“We see Greek companies providing almost the largest tanker fleet for the transportation of Russian oil. I am sure that this does not meet the interests of Europe, Greece, or Ukraine.”Ukrainian President Volodymyr Zelenskyy
The influence of these firms has proven especially contentious as the EU ramps up its sanctions against Russia. Greece (along with Hungary) has held up new sanctions packages, demanding looser restrictions on oil trade, drawing the ire of Ukrainian and EU officials.
“We see Greek companies providing almost the largest tanker fleet for the transportation of Russian oil,” Ukrainian President Volodymyr Zelenskyy said at a conference last year. “I am sure that this does not meet the interests of Europe, Greece, or Ukraine.”
There is some evidence of institutional knowledge at DOD of the connections between Motor Oil Hellas and Russian companies. A 2018 Naval Postgraduate School study examined the potential for Russian influence in the Greek energy sector, and found numerous connections between Motor Oil and Russian companies. Some of those companies are now sanctioned by the U.S. government.
Tracking the Original Source of DOD Fuel Components
At oil refineries, crude oil from various origins is broken up into its various components and then reconfigured into fuel products. These processes sometimes occur across multiple refineries. This makes it very difficult to work backwards and figure out the true origin of a gallon of fuel. Buyers of the ultimate product often don’t know which companies or governments profited along the supply chain.
But by analyzing customs records and shipping data, schematics of refineries, and corporate disclosures, it is possible to infer the likely origin of the fuel, and the beneficiaries of the transport and processes. POGO tracked shipments of fossil fuels from Russian ports to Motor Oil Hellas’s Corinth refinery where they were likely refined into fuels to satisfy DOD contracts, and confirmed the delivery of these fuels to U.S. military installations in Italy, Greece, Spain, and elsewhere.
Since the invasion on February 24, 2022, Motor Oil Hellas has received over 39 million barrels of petroleum products directly from Russian ports, according to customs and shipping data, across 161 shipments. Of those shipments, 22 arrived on vessels owned or managed by Greek shipping companies that Ukraine had included on a list of companies that contribute to Russia’s war effort. According to Ukraine’s government, this list represents a “powerful reputational tool” rather than a legal one. Greece, irked by the name and shame campaign against one of their most powerful industries, held up the 11th EU package of sanctions until the companies were removed. The companies were briefly removed from the Ukrainian list. However, they were relisted in recent weeks, after the companies refused to publicly condemn the war, according to Ukrainian officials.
While other European companies have voluntarily curtailed business operations in Russia or put out statements condemning the invasion, Motor Oil Hellas has done neither. In the latest annual report, there is only a brief mention of the invasion: “The dramatic Russian – Ukraine conflict, apart from leading to intolerable loss of human life, has put the world in a significant risk of energy crisis and associated economic costs.”
The company assures investors later in the filing that they do “not consider that any negative effect on an international level” will result from Russia’s invasion. Motor Oil Hellas certainly hasn’t experienced a negative effect. From 2021 through 2022, the company has seen a boost in profits of 277%, which it attributes to “exceptionally strong refining margins” in jet fuels and diesel, the very two products that the U.S. military is buying in bulk. This matches a trend identified by Ukrainian civil society groups that some European oil and shipping companies seem eager to fulfill orders originating in Russia, filling a vacuum left by companies that voluntarily withdrew from Russia-related business.
“It’s totally unacceptable that laundered oil can be freely supplied to any customer. And well, this example with Department of Defense is just outrageous,” said Oleh Savytskyi, a campaign manager at Razom We Stand, a Ukrainian nongovernmental organization (NGO) advocating for a full embargo and divestment from Russian fossil fuels.
In September 2022, investigators from UK-based NGO Global Witness met with Defense Criminal Investigative Service representatives, who investigate criminal wrongdoing on behalf of the Department of Defense. They laid out in detail how procurement of Russian crude and intermediate oil products by European refineries created a significant risk of Russian-origin oil ending up in finished fuels being shipped to UK and U.S. military bases.
POGO attempted to find out what actions the representatives took after the briefing, but the Defense Criminal Investigative Service would neither confirm nor deny the existence of any investigations. Since that meeting, the Defense Logistics Agency has continued to award lucrative contracts to Motor Oil Hellas.
Motor Oil’s Friendly History with Russian Companies
In late 2017, Motor Oil Hellas entered into a five-year trilateral agreement with Rosneft, the Russian state-owned oil company, and Petrocas Energy, at the time 49% controlled by Rosneft and majority owned by a Kremlin-associated Russian businessman. The agreement laid out plans for deliveries of raw Russian material and fuel oils to Motor Oil Hellas for five years, with a total potential of 7.5 million tons per year.
The relationship with Petrocas goes back further than 2017 — the companies traded at least 2 million tons of petroleum products that year alone — and the timing is revealing: It shows Motor Oil’s willingness to do business with Russian state-controlled companies as Putin’s military occupation of Ukraine intensified.
Russia’s first military actions in Ukraine date back to 2014, the beginning of the Russo-Ukrainian War, when unmarked Russian troops took over government buildings in Crimea, eventually resulting in an annexation of the Ukrainian territory. The move resulted in EU and international sanctions against Russian state-controlled entities.
Nearly a year later, as a brutal war raged in the Donbas region of Eastern Ukraine, Rosneft purchased a 49% stake in Petrocas Energy. Rosneft was under U.S. sanctions at the time for its support of the Russian annexation of Crimea. Rosneft’s head, Igor Sechin, a member of Putin’s inner circle, was also under sanctions.
None of these collaborations seem to have been in violation of any EU sanctions regimes, though none of the deals appear on Motor Oil’s website or investor filings.
Throughout this time, the Defense Logistics Agency continued to buy fuel from Motor Oil Hellas, and the contracts would grow exponentially after the invasion. The Defense Logistics Agency, it appears, had no qualms about giving lucrative contracts to a firm with a recent history of business with a U.S.-sanctioned, Russian state-controlled entity. It is unclear whether the Defense Logistics Agency was aware of the five-year agreement between Motor Oil Hellas and sanctioned Russian state-owned businesses at the time it awarded the recent contracts. The Defense Logistics Agency did not specifically answer this question when queried by POGO.
“Offerors and contractors participating in U.S. government acquisitions are responsible for ensuring compliance with applicable laws and regulations concerning business with Russia and Russian companies. Offerors must certify their compliance, with such laws and regulations as part of the acquisition process, and they must apply acquisition restrictions to subcontractors and suppliers as Federal procurement regulations require,” Yoswa, the DLA public affairs representative, wrote in an emailed response.
The Shipments After the Invasion
In the weeks following the invasion, amid uncertainty in the global oil markets, Motor Oil’s refinery took increased deliveries of fuel oils — important components for refining diesel and aviation fuel — directly from Russian ports. One such shipment illustrates how the DOD’s supply chain incorporated Russian product.
On March 24, 2022, just over a month after the invasion, commodity trader Coral Energy purchased 20 kilotons of fuel oil, according to customs records. The product was purchased in Euros, and the listed destination was Greece. The manufacturer is listed as Afipsky, the same Russian refinery that was bombed earlier this year. The Afipsky refinery is part of the Safmar group, owned by Mikhail Gutseriev, a sanctioned Russian oligarch with close ties to Belarusian president Alexander Lukashenko, a close ally of Putin.
According to freight and shipping records, the fuel oil traveled by rail to the Russian port of Taman, where it was loaded onto the Seamaster IV, at the time a Greek-owned oil tanker. Shipping data and satellite imagery show the vessel leaving Taman on April 6 with a destination of Motor Oil Hellas’s refinery, briefly stopping to load more oil from Novorossiysk, and arriving in Greece on April 17 and unloading its cargo. The vessel was not broadcasting its position when it departed from Taman, a sign it may have been attempting to mask its activity at the port.
A few weeks later, shipping data reveals several shipments of F-76 naval diesel and jet fuel from Motor Oil Hellas to U.S. military installations in Greece, Italy, Spain, and Greenland. Contracting data from this time period indicate that the Defense Logistics Agency ordered both jet fuel and naval distillate from Motor Oil Hellas.
As far as the Defense Logistics Agency is concerned, these shipments contain Greek products: F-76 naval diesel, and JP-8 and JP-5 jet fuels. But expert analysis of customs and shipping records, and schematics of the Motor Oil Hellas refinery, reveal a very high likelihood that Russian petroleum products made their way into the finished products.
After the Price Cap
On December 2, 2022, the U.S. and the EU agreed to an embargo on Russian seaborne oil, and on December 5 implemented a price cap on Russian petroleum products. Under this new regime, businesses involved in the oil trade would have to certify that the products were purchased under the predetermined level of $60 per barrel for Russian crude oil. In February 2023, two more categories of Russian oil products were added, allowing $45 per barrel for low-end products (like fuel oil) and $100 per barrel for premium products (like diesel). Under the embargo, the U.S. and EU nations are prohibited from taking seaborne shipments of Russian crude oil and oil products, regardless of the purchase price.
The price cap included a 45-day transition period, allowing voyages in progress to complete their shipments until January 19, 2023.
Shipping and customs data show a significant shift in the way Motor Oil Hellas acquired petroleum products at this time, another indication that prior to the implementation of the price caps and while Motor Oil was an important piece of the DOD petroleum supply chain, it was relying heavily on products of Russian origin.
After the bans on Russian crude and oil products went into effect, it appears that Motor Oil Hellas found a workaround. As direct imports from Russia to Europe fell, Russian imports to Turkey spiked. Shipping and customs data show an influx of “Turkish” oil products and crude to Motor Oil Hellas. This points to a problem known as “laundering,” where traders will attempt to obscure the true origin of the product by shipping it to an intermediary country, like India, China, or, in this case, Turkey.
POGO traced the journey of one such shipment from Russia to Turkey and then to Motor Oil Hellas in Greece. This shipment, one of dozens over recent months, is illustrative of a broader oil-laundering strategy.
The Elbrus, a chemical products tanker managed by Sovcomflot, a Russian Federation-controlled shipping company under sanctions in the U.S. and EU, delivered over 198,000 barrels of vacuum gas oil (VGO) from the Russian port of Novorossiysk to the Turkish port of Dortyol on July 5, 2023. Shipping data provided by Data Desk reveal the seller as Rosneft.
Over a week later, a shipment of 183,000 barrels of vacuum gas oil left Dortyol bound for Motor Oil Hellas aboard the Stone I, a Greek-owned tanker. While this is less than the approximately 198,000 barrels, it’s still close enough to be considered a match by experts who analyze oil movements.
In the meantime, the orders from the Defense Logistics Agency keep on flowing. A few weeks later, on August 30, after the shipment departed from Turkey aboard the Stone I, the agency submitted a purchase order for $38 million of JP-5 jet fuel from Motor Oil Hellas. A U.S.-flagged tanker arrived at the refinery on September 5, and delivered the fuel to Naval Supply Point Diego Garcia, a small U.S. Navy base located in the Indian Ocean.
According to Viktor Katona, lead crude analyst at commodities analytics firm Kpler, Turkish refineries do not have sufficient capacity or complexity to supply the numbers of barrels going to Greece from the Turkish port. “The Russian VGO going to Dortyol has no plausible explanation other than rebranding,” he explained, after reviewing the shipping records. “The VGO needs to come from a sophisticated refiner that can work with a heavy residue yield. Turkey's VGO is a non-existent category in the markets.”
“With 99% certainty you know that the VGO going coming into [the terminal] is not intended for the Turkish market,” he said. “If it talks like a cat, if it looks like a cat, if it meows like a cat, most probably it’s a cat.”
Katona also noted that Dortyol, the Turkish port, did not export any vacuum gas oil between October 2020 and December 2022, and that there has been a significant increase in Turkish exports of the product since the invasion, another indication that the arrangement was designed to evade the EU embargo on direct seaborne shipments from Russia. Turkey, though it maintains a NATO membership, is not a member of the EU and therefore not beholden to the embargo.
This is one of many shipments from Dortyol to Motor Oil Hellas. From February to September 2023, over 4 million barrels of oil and oil products had been delivered to the Greek refinery via Turkey, according to data from commodities firms Kpler and Refinitiv. Meanwhile, deliveries to DOD facilities continued, with one captured by a Military Sealift Command photographer. DOD imagery shows the U.S.-flagged Stena Polaris, a bulk tanker under contract by the U.S. Navy, departing the U.S. Navy facility in Rota, Spain, on June 23, 2023.
In terms of the legality of the transactions, Katona explained that it depends on how Turkish customs is characterizing the cargo. If it turns out that new certificates of origin are issued claiming that the cargo is Turkish, without the cargo undergoing any substantial transformation, it may violate Turkish law. POGO asked Motor Oil Hellas and Turkish officials to provide certificates of origin for the shipments in question, but did not get a response.
Blended, Transformed, but Still Benefitting Russian Companies
While shipments of Russian fuel oil laundered through Turkey appear to be the most egregious examples of Russian petroleum products making their way to a DOD contractor and into the DOD supply chain, there are more subtle routes around the sanctions as well. Before the price cap came into force, petroleum was arriving at Motor Oil Hellas from a variety of Russian ports. Following the cap, however, shipments now seem to be arriving mostly from Russia’s Novorossiysk port, from a berth that specifically services the Caspian Pipeline Consortium (CPC), a massive pipeline system that transits Kazakh oil to the Black Sea’s Russian ports. Where previously the country of origin for products was left blank, it now indicates cargos originate from Kazakhstan.
While this may look good on paper, the reality is more complicated. The Caspian Pipeline Consortium is owned by 11 companies, with Russian companies — including state-owned enterprises — making up 36.5%. Some of these entities are under sanctions, but this hasn’t stopped U.S. oil giants like Chevron, Exxon, and Shell from participating in the partnership, with express permission and even encouragement from the U.S. Treasury. Additionally, the consortium benefits from several exclusions (activists would call them loopholes) inserted into EU and U.S. legislation allowing petroleum from the pipeline to continue flowing, despite Russian ownership and involvement. Not only do companies selling Russian crude still benefit from consortium sales, but Russian companies service the pipeline, profiting along the way as oil flows through the network.
So, apart from the profits made by Russian companies using the Caspian Pipeline Consortium infrastructure, is the oil itself Kazakh or Russian? Estimates vary, but the U.S. Energy Information Administration stated in March 2022 that 10% is Russian crude, and may fluctuate to as much 15%.
After the Biden Administration issued an executive order banning the import of Russian fossil fuel products in 2022, the U.S. Treasury issued an advisory excluding CPC Blend oil by name. Another Treasury advisory clarified that the ban does not include “any Russian Federation origin good that has been incorporated or substantially transformed into a foreign-made product,” a convenient loophole for those in the oil refining business, which is transformative by its nature.
“If any refinery can launder Russian petroleum products, all that Russian companies have to do is find an intermediary to refine or blend the product.”
In order to continue moving CPC Blend oil, ships supplying Motor Oil Hellas will have to transit an increasingly hostile Black Sea. The port of Novorossiysk, the location of a major CPC oil terminal, is also home to a Russian navy base. On August 4, Ukrainian sea drones attacked the port, damaging a Russian warship. Drones also damaged a Russian oil tanker that a Ukrainian Security Service source told CNN was “transporting fuel for the Russian military.” The Ukrainian Security Service acknowledged responsibility for both attacks. A day later, Ukraine declared Novorossiysk, among other Russian Black Sea ports, as a “war risk area” starting August 23.
“Everything the Russians are moving back and forth on the Black Sea are our valid military targets,” Oleg Ustenko, economic advisor to Ukrainian President Zelenskyy told Politico.
Among activists, refining and “transformation” represents a significant loophole in the current embargo and sanctions regime. If any refinery can launder Russian petroleum products, all that Russian companies have to do to ensure the profits will continue to flow is find an intermediary country to refine or blend the product. A coalition of Ukrainian, British, and European NGOs recently sent a letter to the U.S. Congress calling for action to close the refining loophole. The Centre for Research on Energy and Clean Air, a Finnish nonprofit, estimates that in the 12 months after the invasion, Western countries bought € 42 billion in “laundered” Russian oil products from refineries in India, the United Arab Emirates, China, Singapore, and Turkey.
“It’s quite scandalous that European countries continue to purchase this oil without any limitations,” said Savytskyi.
For this reason, the Department of Defense likely assessed the ongoing purchase of partially Russian derived fuel from Motor Oil Hellas as perfectly legal fuel that has undergone a “substantial transformation” under the law. But it raises questions about oversight of important DOD supply chains, and whether the department is aware of the ultimate beneficiaries of billions of dollars in contracts.
The U.S. Treasury recently touted its success at reducing Russian oil revenues while keeping the products moving. But experts are skeptical, noting that the price caps may be too high to stop the financing of the invasion, and that the lack of any real enforcement means the caps are widely circumvented.
Alarmingly, the implementation of the caps appears to have led to a rush on Russian oil, and January 2023 was the strongest month of oil exports since 2019, according to the Centre for Research on Energy and Clean Air. The center has called the price cap excessively high and calculated that Russia makes over half a billion Euros a day selling oil products. The center also found that ships owned or insured in the EU and UK make up 65% of Russia’s oil shipments. Shipping data reveals that Motor Oil Hellas may have participated in this rush, having made dozens of shipments of Russian fossil fuels during the period before the price cap.
The International Working Group on Russian Sanctions, a project based at Stanford University, has called for a reduction in the cap to $45 per barrel of crude oil, and ultimately to $30 per barrel, which it estimates would severely limit oil revenues for Russia. The G7 group of nations had initially planned to consider lowering the cap, but deferred the decision in March 2023, ultimately shelving the price cap reviews altogether. The working group has also called for companies operating in countries with sanctions to be obligated to disclose business ties with Russia.
There is also growing evidence that the “attestations,” pieces of paper carried by shipping companies and charterers claiming the oil on board was purchased below the price cap, are insufficient. Studies by economists from the Kyiv School of Economics found that Russian oil is selling for over $70 per barrel, a healthy profit margin, and supported by European shipping and insurance companies. One report found “evidence for widespread violations of the price cap on Russian crude oil,” and found that shipments were facilitated by Western companies.
“There are actually no mechanisms to verify and the governments, they don't even collect the attestations and don’t monitor and enforce the price cap regime,” said Savytskyi.
“It just shows how all the Western countries are addicted to oil and how they are hooked up to oil and can accept any oil from any country, even a country that is engaged in a genocidal war,” said Savytskyi. “What we experienced here in Ukraine is total destruction which is fueled by this whole system of oil addiction.”
If you have information on Russian oil making its way into DOD supply chains, please contact Jason Paladino at [email protected] or via encrypted email at [email protected] or contact POGO via Signal at 1-202-658-5828.