In May last year an ageing tanker loaded with Russian oil dropped anchor two nautical miles off Denmark’s coast after its engine failed, leaving it without power for six hours.
Built in 2005, the Canis Power was already well past her best and in the shipping industry the incident was viewed as a warning. Like other vessels in the so-called shadow fleet that transports Russian oil, the ultimate owner of the elderly ship was unknown. Had the incident resulted in a collision or a spill of its 300,000 barrels of oil, it was unclear who, if anyone, would have covered the costs.
Since the first western restrictions on Russian oil exports were introduced in December 2022, Moscow has assembled a fleet of more than 400 such vessels currently moving some 4mn barrels of oil a day beyond the reach of the sanctions and generating billions of dollars a year in additional revenue for its war in Ukraine.
Western governments have responded by imposing restrictions on individual shadow fleet vessels — Canis Power was added to UK and EU sanctions lists in June. But the use of offshore corporate structures has meant western officials have struggled to identify who owns the tankers, how they were acquired or who oversees their operations.
Corporate records and correspondence reviewed by the Financial Times lift that veil of secrecy for the first time. The FT’s investigation shows how Russia’s Lukoil used its shipping arm to finance a 74-year-old British accountant called John Ormerod to acquire the Canis Power and at least 24 other second-hand tankers between December 2022 and August 2023, at a total cost of more than $700mn.
Each ship was bought by a different special purpose company incorporated by Ormerod in the Marshall Islands but Lukoil’s Dubai-based Eiger Shipping DMCC provided the funds by paying in advance to charter the vessels.
At the same time, Dubai-based companies linked to a Karachi-born British shipping magnate called Muhammad Tahir Lakhani were appointed to manage the ships, according to people with knowledge of the structures.
The complex set of arrangements shows how Lukoil, Russia’s second-largest oil producer, was able to fund the acquisition of a fleet of vessels while hiding its involvement from public view.
The transactions also show how lawyers and shipbrokers, including London-listed Braemar, facilitated the purchase of the vessels, which led to the enlargement of Russia’s fleet.
Together, the 25 ships have transported some 120mn barrels of oil from Russia since they were originally acquired by Ormerod. At a conservative estimate of $60 a barrel that would amount to $7.2bn in exports.
It is not alleged that the transactions have broken any laws. Although Lukoil has been under US sanctions since 2014, neither Eiger Shipping DMCC nor its Dubai-based owner Litasco Middle East DMCC, is a sanctioned entity. Dubai-based companies are also not required to comply with the west’s restrictions if they do not use G7 financing or services.
The rules were designed to reduce the Kremlin’s revenues, while allowing Russian exports to continue to flow so as not to push up global oil prices.
However, individuals and companies that have helped to assemble and operate the shadow fleet are increasingly in the cross hairs of western governments.
In July, 44 European leaders including UK Prime Minister Sir Keir Starmer issued a call to action pledging to disrupt and deter the shadow fleet by targeting its “ships and facilitators”.
“We urge ship owners and operators, the marine insurance industry, ship brokers and other relevant maritime stakeholders to adhere to their relevant obligations, and support the prevention, detection and reporting of ‘shadow fleet’ activities,” the leaders said.
“I won’t allow Russia’s shadow fleet of oil tankers, and the dirty money it generates, to flow freely through European waters and put our security at risk,” Starmer added.
Prior to Vladimir Putin’s invasion of Ukraine in February 2022, Russian oil exports mainly relied on western tankers, which dominate the global shipping fleet.
In an effort to curtail the Kremlin’s oil revenues, the US, EU, UK and other G7 countries soon banned their companies from providing ships, insurance or financing for Russian exports after December 5 2022 unless the oil was sold at a discount to market prices.
In response, Russia set about gaining access to its own fleet of vessels registered in countries outside of the G7. In the final months of 2022 the tanker market boomed as Russian companies and their intermediaries set about buying second-hand vessels and western owners seized a rare opportunity to dispose of old tankers at premium prices.
One of the buyers was Ormerod, an Eton-educated chartered accountant who has little public profile but is known within London’s close-knit shipping industry. From 1975 he held a series of shipping jobs at Hambros Bank, Bankers Trust and Den Norske Bank before setting up his own financial advisory company, Ormerod Allen & Co, in 1990.
Among the first of the vessels Ormerod acquired was the Kudos Stars. Built in 2005, it was previously owned by Greece’s Delta Tankers and plied routes all over the world. On or around December 5 2022, Freyana Shipping Ltd, which was incorporated in the Marshall Islands around the same time, agreed to buy the vessel for $35mn, according to an agreement seen by the FT.
Freyana was wholly owned by a second Marshall Islands company called Grand Eagle Maritime Inc, which was wholly owned by a third Marshall Islands company called Eudora Ltd. Ormerod was the sole director of all three companies, and owned 100 per cent of Eudora at the time of the transactions, the records show.
The purchase was financed by Eiger, which had agreed in advance to rent the vessel for two years for 129.3mn UAE dirham ($35.2mn), according to a charter agreement dated November 30 2022 and signed by Litasco Middle East’s finance director Valery Kildiyarov.
Ormerod used similar structures to acquire a further 24 vessels between December 2022 and August 2023, mainly from western sellers. Each vessel was bought by a different Marshall Islands subsidiary of Grand Eagle Maritime and then flagged in the Cook Islands.
Among the most expensive was the 2007-built Galian 2, bought in January 2023 from a subsidiary of the Libyan National Oil company for around $43mn.
Such prices are two to three times the historical value of a tanker of a similar size and age, shipbrokers say. In total, Ormerod’s companies paid more than $700mn in purchase and delivery costs to assemble the fleet, the records show.
In a written response to questions, lawyers representing Ormerod said he was approached by Eiger in late 2022 “to buy ships for their general trade”. Ormerod was told Eiger was concerned that “charter rates would increase and that it made sense to buy vessels in order to fix their costs”, they added.
Given Eiger was ultimately owned by Russia’s Lukoil, Ormerod sought legal advice and undertook “extensive due diligence” to establish that the proposed purchases would not violate any sanctions, they added.
Lukoil did not respond to a request for comment. Lukoil’s Litasco Middle East, which controls Eiger, said it conducted its operations “in strict compliance with all relevant laws and in adherence to its corporate compliance policy”. Kildiyarov did not respond to a direct request to comment through LinkedIn.
The other prominent figure involved in the development of Eiger’s fleet has been Lakhani, four people with knowledge of the structure said. Documents show that a Lakhani family-owned company was involved in at least some of the acquisitions.
Born in 1962, Lakhani, who says he once played tennis for Pakistan in the Davis Cup, got his start in the industry as a supervisor in a Pakistani ship-recycling yard owned by a family friend.
In 1985 he married his wife, Uneza, who had inherited a stake in a Dubai-based trading business from her father. Together they renamed the company Dubai Trading Agency (DTA) and by the late 1990s it was one of the biggest ship recyclers in the world, claiming to buy and sell, for cash, over 100 ageing vessels a year.
Lakhani describes himself as the managing director and chairman of DTA and over the years has set up a slew of companies offering ship recycling and other marine services, including DTA Maritime LLC and DTA Maritime Services LLC.
In 2000 his family, including his two sons, moved to London and Lakhani became a British citizen in 2009. He moved back to Dubai in 2012 and was vice-chairman of the UAE Shipping Association until 2019.
Lakhani is a controversial figure in the sector. In April 2020, UK courts issued worldwide freezing orders against Lakhani and his sons after lenders to some of their ship recycling businesses accused them of fraud. Lakhani has since been found liable, in two related court cases, for deceiving the investors and ordered to repay his former partners more than $100mn.
Two months before the freezing order, Lakhani transferred his stakes in DTA Maritime and DTA Maritime Services to Uneza, corporate records show. Today she owns 49 per cent of both companies, alongside a local sponsor, and is the sole director of each entity.
Ormerod met Lakhani almost 40 years ago and the two men have been friends ever since, according to people familiar with both men.
Lakhani is not named in the records relating to the acquisitions of the vessels, but senior employees from DTA Maritime Services are, in some cases. For at least six of the transactions the company’s financial controller Subba Rao Varanasi is listed alongside Ormerod as one of the individuals legally authorised to act on behalf of the Marshall Islands entity buying the vessel.
In three cases a person called Kowshik Kuchroo is also named. Kuchroo is an executive director at DTA Maritime Services and runs much of the business, according to public websites and people who know him.
In March and April 2023 Ormerod gave up his ownership of at least 14 of the special purpose companies, but then used similar structures to acquire more vessels in May, June and July, the records show.
Lawyers for Ormerod said he decided to divest his ownership after becoming “aware of and concerned by the number of voyages relating to Russian trade” and disposed of the companies at “nil value”. Ormerod had ended his involvement in all of the 25 vessels in question by September 2023, they added, before any of the tankers were sanctioned.
Ship tracking data shows that most of the vessels switched to exclusively moving Russian oil immediately after Ormerod acquired them. In total, 97 per cent of the oil transported by the fleet since Ormerod’s acquisitions has come from Russia and 82 per cent from Lukoil.
The ownership of at least 14 of the special purpose companies in the Marshall Islands was transferred to a person called Syed Zafar Tahir, the records show.
That man, who also goes by Syed Zafar Tahir Rizvi, was previously involved in setting up a partnership between DTA Maritime and Pakistan’s shipping-focused Bahria Foundation, where he has worked, two of the people said.
In social media posts he has been listed as a representative of Vista Maritime Travel Tourism LLC, which is owned by Uneza, according to records dated February 2024. Rizvi could not be reached for comment.
Ormerod’s lawyers said Lakhani was not involved in “any way” in Ormerod’s acquisition and subsequent transfer of the vessels.
Ormerod requested assistance from individuals at DTA Maritime Services when he was buying the vessels, limited to administrative support such as arranging for inspections of ships, the lawyers said.
Ormerod’s lawyers at the time introduced him to Rizvi and Ormerod had no knowledge of any relationship between Rizvi and Lakhani’s family, the lawyers added.
Lakhani said he has no knowledge of Rizvi’s involvement with any of the alleged activity. Varanasi and Kuchroo did not respond to requests for comment.
There is evidence that raises questions about whether Lakhani’s principal role has been in managing the crewing and operation of the ships. Two sources familiar with the structure say this was the case, and records of some of the companies involved show connections to his family.
Shipping regulations require that ship management companies register their involvement with specific vessels. After Ormerod bought the ships, 16 were registered with a management company called Radiating World Shipping Services and six with a group called Star Voyages Shipping Services. The companies, which are both based in Dubai, were added to UK sanction lists in December 2023.
Corporate records show that as recently as February 2023, Lakhani’s wife, Uneza, owned 70 per cent of Star Voyages when the company was known as Ocean Radiating World Shipping Services. Lakhani told the FT that Uneza held the stake until June 2023 and that the company was dormant during that period.
One of two other shareholders at the time was a Pakistani national called Shahid Naziri, who was also a shareholder in Radiating World, according to corporate records also dated February 2023. On a corporate website that no longer functions, Naziri was described as the chief executive and founder of both companies.
The management of the vessels in the Radiating World and Star Voyages fleets has since been transferred to four new Dubai-based ship management companies set up between June and August 2023. Three of the companies — Breath Shipping Services, Almuhit Alhadi Marine Services and Alqutb Alshamali Marine Services — are owned by single Pakistani shareholders with limited public profiles.
The other company, One Moon Marine Services, is owned by a woman called Sabiha Abdul Aziz, who is a relative of Uneza. Neither Aziz, Naziri nor any of the six management companies responded to requests for comment. With the exception of Star Voyages, Lakhani said that neither he nor his immediate family has any involvement in, or knowledge of, any of the companies.
In July, the UK government specifically called out one of the vessels in the fleet, Rocky Runner, for seeking to “escape previous UK action by changing its operator”. The 19-year-old tanker was initially managed by Radiating World and moved to Breath Shipping a few weeks after Radiating World was sanctioned.
In a statement to the FT, Lakhani said he “never had any involvement or facilitated the breach of any sanctions”.
Russian oil companies and traders have intentionally sought out non-Russian owners and operators to disguise their links to such vessels, says Craig Kennedy, an expert on the shadow fleet at Harvard University.
“The Russians were very much trying to create as much distance between Moscow and the shadow fleet as they could because it makes it that much harder for sanctioning entities to say this is a Russian creature,” he says.
In total Kennedy estimates that Russian companies have spent more than $10bn buying second-hand vessels since 2022, largely funded by Russian banks.
“Moscow is very deliberately trying to keep this distance as a way of protecting its investment and also by spreading it out over many different entities,” he adds.
Ormerod’s transactions also provide a rare insight into the role lawyers and shipbrokers may have played in the enlargement of the shadow fleet, raising questions about what those parties knew about the source of his funds and Eiger’s role.
London has been a global centre of the maritime industry for centuries, and Braemar is one of the sector’s leading brokers, matching buyers and sellers of vessels in return for a percentage of the purchase price.
Ormerod’s lawyers, and one other person familiar with the matter, said in a statement that Braemar knew of Eiger’s role in the transactions. The lawyers added that Ormerod met with representatives of Braemar and Eiger together at a hotel in central London to discuss Eiger’s requirements.
Braemar confirmed it had served as the broker for at least nine of Ormerod’s purchases but declined to comment on its knowledge of Eiger’s involvement. “For every transaction that Braemar considers undertaking, it conducts all appropriate due diligence with know-your-customer checks, legal, compliance and regulatory adherence,” it said in an emailed statement.
In most cases Ormerod’s payments were made to escrow agents, which are commonly used in shipping transactions to hold funds while ownership of a vessel is transferred. Such agents are normally required by the sellers to identify the ultimate beneficial owner of the entity buying the vessel, and the source of the money.
A spokesperson for law firm Watson Farley & Williams, which acted as escrow agent for at least 11 of the transactions, said it had conducted “thorough due diligence” on the parties involved and was not aware that Eiger was funding the purchases.
Dimitrios Sioufas at Theo V Sioufas Escrow Services LLP, which was the escrow agent on 13 of the transactions, said it undertakes “detailed Know Your Customer checks on all counterparties” but declined to comment further citing commercial confidentiality.
Seven of the 25 vessels originally acquired by Ormerod have now been sanctioned by the UK or the EU: Canis Power, Vela Rain, Galian 2, Rocky Runner, Dynamik Trader, Fighter Two and Ocean Amz.
The other vessels he acquired were Kudos Stars, Stratos Aurora, Azure Celeste, Andaman Skies, Phonix Way, Mando One, Turbo Voyager, Aquilla Major, Lupus Two, Pavo Rock, Fast Kathy, Eastern Pearl, Sinar G, Sea Fidelity, Ocean Faye, Nari Strength, Tranquil Sea and Swiftsea Rider.
Several have since changed their names. Rocky Runner is now Lorena Grand, Dynamik Trader has become Lokosao and Canis Power is called N Cerna. All three have moved their flag from the Cook Islands to Barbados.
Western officials are not only concerned about the revenues such vessels generate for the Russian state. They are also worried about the environmental and safety risks they pose.
Most western oil companies consider scrapping their tankers after 15 years due to wear and tear and the cost of maintenance. In contrast, the average age of a Russian shadow fleet tanker is 18 years and most are unlikely to have adequate oil spill insurance, says Benjamin Hilgenstock, an oil sanctions expert at the Kyiv School of Economics Institute.
“Shadow tankers carrying Russian oil pass through European waters, including in the Baltic Sea and Mediterranean, several times per day,” he adds. “Several incidents have already happened and a major disaster is really only a question of time.”
In April the Canis Power, which broke down in the Danish straits 18 months ago, will have been ploughing the oceans for 20 years. When this story was published it was in the Black Sea having just passed through the Bosphorus, one of the busiest shipping lanes on the planet.
Data visualisation by Cleve Jones and Chris Cook
https://www.ft.com/content/b9dee3f3-c2f8-4aa1-b0d9-d207f815b6e5
