Nathan Reynoso 
July 3, 2025
By Dr. Gubad Ibadoghlu, Visiting Senior Fellow at London School of Economics and Political Science (LSE)
The UK’s Sanctions and Azerbaijan’s Involvement in the Russian Oil Supply Chain
The United Kingdom’s recent decision to impose sanctions on Azerbaijani-affiliated, state-owned enterprises allegedly involved in facilitating Russia’s circumvention of international oil sanctions has once again brought into sharp relief the geopolitical sensitivities surrounding Azerbaijan’s energy sector. On May 9, 2025, the UK government sanctioned the Zangezur, an Aframax-class oil tanker owned by the Azerbaijan Caspian Shipping Closed Joint-Stock Company (ASCO).
The UK also imposed sanctions on two Hong Kong–registered private entities, BX Energy and Nord Axis LTD, both reportedly controlled by corporate interests based in Dubai, and on five individuals — Etibar Eyyub, Tahir Garayev, Ahmad Kerimov, Anar Madatli, and Talat Safarov — who are associated with these companies and others, most notably Coral Energy, which was restructured and rebranded as 2Rivers Energy following a management buyout in 2024.
According to official statements from the UK government, Etibar Eyyub, one of the sanctioned traders, was found to have links to both BX Energy and Nord Axis LTD, underscoring the interconnected nature of these commercial networks.
Coral Energy, originally established in 2010 by Tahir Garayev, underwent a major organizational transformation in 2024 when its senior leadership—Chief Executive Officer Talat Safarov, Chief Financial Officer Ahmad Kerimov, and Anar Madatli—acquired full ownership of the firm. Following this internal acquisition, the company rebranded as 2Rivers Group, retaining operational headquarters in Dubai and Singapore, and reportedly initiating plans to establish a subsidiary office in Switzerland.
Following the rebranding, Coral Energy’s trading activities were transitioned to a newly established entity, Safira Global Trading. The original company, Coral Energy, was previously sanctioned in December 2024 for engaging in the sale of Russian-origin crude oil at prices below the internationally agreed price cap, thereby violating the terms of Western-imposed sanctions frameworks.
Coral Energy has also been identified as one of the commercial clients of SOCAR Trading S.A., with offtake agreements for the purchase and sale of crude oil at both the Supsa terminal in Georgia and the Ceyhan terminal in Türkiye. According to market sources, 2Rivers Energy (former Coral Energy) is believed to maintain informal ties with influential political and economic stakeholders within Azerbaijan’s ruling elite.
The Zangezur, a 115,000-deadweight-ton (DWT) Aframax tanker, and one of the first vessels of its kind in Azerbaijan’s maritime fleet, was commissioned approximately two years ago. In the past year alone, it has reportedly called at Russia’s Primorsk port—the country’s primary Baltic oil export terminal—11 times, while also making six calls to ports in the Eastern Mediterranean and Aegean Sea, notably Türkiye’s Nemrut Bay, home to the STAR Refinery, which is owned by Azerbaijan’s State Oil and Gas Company, SOCAR.
According to various media sources, all three Azerbaijani-flagged Aframax tankers— Karabakh, Shusha, and Zangezur—have been actively engaged in the transport of Russian crude oil from Primorsk to Nemrut Bay since November 2023. SOCAR confirmed that these vessels were acquired in 2023 through a joint venture with ASCO. Industry analysts and data from the London Stock Exchange Group suggest that Azerbaijani-linked entities have contributed to lowering logistical costs for Russian oil exports by offering transportation services amid increasingly stringent Western restrictions.
The UK’s imposition of sanctions on the Zangezur may presage similar measures against its sister vessels, the Karabakh and Shusha in forthcoming sanctions packages. This trajectory places Azerbaijan in a diplomatically delicate position: while it maintains its status as a strategic energy partner to Western states, it is concurrently perceived as a discreet enabler of Russia’s shadow oil trade.
In this context, Azerbaijan appears to be navigating a complex geopolitical balancing act — allegedly supporting the re-export of Russian hydrocarbons while deriving economic advantages from gray-market trade.1 The UK government’s formal accusation of Azerbaijan’s involvement in the covert delivery of sanctioned Russian oil to European markets underscores the growing international concern regarding the opacity of global energy supply chains.
Sanctions Regime against Russia’s Shadow Fleet and Azerbaijan’s Dilemma
Sanctions targeting the so-called shadow fleet—a network of vessels operating outside conventional oversight mechanisms—form a critical component of the International Price Cap Coalition’s broader strategy to restrict Russia’s oil revenues following its full-scale invasion of Ukraine in 2022. The coalition, comprising G7 nations and allied partners, implemented a price cap on Russian seaborne crude oil effective from December 5, 2022, and on refined petroleum products from February 5, 2023. These measures were designed to diminish the Kremlin’s fiscal capacity to sustain its war effort while maintaining stability in global energy markets.
However, the actual impact of the price cap mechanism only gained prominence in subsequent assessments, many of which pointed to its limited effectiveness. On December 5, 2022, G7+ countries implemented a ban on imports of Russian crude oil and a USD 60 per barrel price cap on the commodity when transported by Western owned/insured tankers. According to a report published by the Center for the Study of Democracy (CSD), a month later, Romania, an EU Member State, received a shipment of gasoil from the STAR refinery in Türkiye, which uses Russian crude.
A report published on February 24, 2025, by the Centre for Research on Energy and Clean Air (CREA) underscores these concerns. According to CREA, during the first three years of the war, Russia earned an estimated EUR 847 billion from global fossil fuel exports. Notably, in the third year alone, Russian revenues from fossil fuels reached EUR 242 billion, with projections for 2025 estimating annual earnings of approximately EUR 237 billion.
Moreover, Russia successfully consolidated its market position in key non-Western economies. China (EUR 78 billion), India (EUR 49 billion), and Türkiye (EUR 34 billion) emerged as the top three importers of Russian fossil fuels, collectively accounting for 74% of Russia’s total fossil fuel revenues in the third year of the invasion. The year-on-year growth in import values for India (8%) and Türkiye (6%) further signals deepening energy interdependence.
CREA’s analysis also reveals the pivotal role of Russia’s shadow fleet in circumventing sanctions. In the third post-invasion year, approximately 558 Russian shadow tankers were involved in transporting 167 million tons of oil—61% of Russia’s total seaborne oil exports—valued at EUR 83 billion. Of this, 78% comprised crude oil shipments (EUR 57 billion) and 37% consisted of refined oil products (EUR 26 billion).
In response to these persistent evasions, the European Union adopted its 15th sanctions package on December 16, 2024, targeting an additional 52 vessels, and raising the total number of shadow fleet vessels under EU sanctions to 79. Recognizing the evolving sophistication of Russia’s circumvention tactics, the EU emphasized the need to bolster enforcement mechanisms.
Further tightening of sanctions followed. In a sweeping attempt to dismantle the structural enablers of Russia’s oil export infrastructure, on January 10, 2025, the US Treasury escalated its measures, targeting Gazprom Neft and Surgutneftegas, over the use of 180 vessels, and a broad range of actors, including oil traders, oilfield service providers, insurance firms, and energy sector officials.
The EU’s 16th sanctions package, adopted on February 24, 2025, expanded the scope by blacklisting 74 additional vessels, increasing the total to 153. On May 9, 2025, the United Kingdom unveiled its largest sanctions package to date, targeting nearly 100 additional tankers after having previously listed around 130 vessels tied to the Russian oil trade. This action sent a strong deterrent signal to the shadow fleet and its logistical enablers.
On May 15, 2025, the EU introduced its 17th sanctions package, which marked the most comprehensive crackdown to date. Member states agreed to designate 189 additional vessels, bringing the total number of sanctioned ships associated with the shadow fleet to approximately 340. The majority of these vessels were aging tankers, often employed to obscure cargo origin, ownership, and insurance compliance.
Ironically, despite its significant role in facilitating Russian oil exports through the gray market, the ASCO-owned tanker Zangezur had not been included in any sanctions packages targeting vessels linked to the Russian oil trade—until it was finally designated by the United Kingdom. Since November 2023, Zangezur has reportedly served as a key conduit for transporting crude oil owned by Russia’s Lukoil from the Primorsk port to Türkiye’s Nemrut Bay, where the oil is processed at SOCAR’s STAR refinery. Nevertheless, the vessel was conspicuously absent from previous sanctions lists issued by the European Union—across three separate packages—and by the United States in a major round of designations.
Significantly, for the first time, in May 2025, the UK extended its sanctions to include vessels, trading companies, and individuals affiliated with Azerbaijan, marking a shift in the enforcement strategy by targeting Azerbaijani linked actors suspected of facilitating the sale and transit of Russian crude oil and petroleum products. Independent analyst Maximilian Hess describes the UK sanctions as a “warning shot” amid Azerbaijan’s close energy ties with the West, “This is a clear signal that if Azerbaijan continues attempts to circumvent sanctions on Russia, its diplomatic standing and overall economy could face serious risks.”
The Role of SOCAR’s STAR Refinery in Sustaining Russian Oil Flows to Europe
The strategic partnership between Russia’s Lukoil and Azerbaijan’s State Oil Company (SOCAR) has significantly expanded the reach of Russian crude oil into European markets via Azerbaijan, while also creating new opportunities for Russian companies to participate in regional energy infrastructure projects. This collaboration enables Russian firms to capitalize on enhanced access to Europe by leveraging SOCAR’s extensive oil and gas infrastructure in both Azerbaijan and Türkiye.
In October 2023, SOCAR and Lukoil concluded a comprehensive agreement allowing the processing of up to 200,000 barrels per day of Russian crude at SOCAR’s STAR refinery in Türkiye. SOCAR invested almost USD 7 billion in the construction of the STAR refinery. As part of the deal, Lukoil extended a USD 1.5 billion loan to SOCAR. Although STAR temporarily reduced and then suspended Russian oil imports in mid-2023 due to pressure from Western financial institutions, it resumed purchases shortly before finalizing the agreement with Lukoil. Since early 2024, the refinery has consistently received Russian crude under this arrangement.
The STAR refinery, owned by SOCAR, sources the majority of its crude oil from Lukoil, refines it, and exports the processed petroleum products primarily to European markets. Following recent capacity upgrades and additional investment, in 2024 the STAR refinery increased its annual processing capacity from 10 million to 13 million tons.
This expansion enabled Türkiye to increase its energy imports from Russia, with Lukoil maintaining its role as a principal supplier under long-term agreements.
In 2023, STAR emerged as a major supplier of refined petroleum products to the European Union, delivering an estimated 23 million barrels. According to recent analysis by Global Witness based on Kpler data, EU imports of Russian-origin fuels from STAR increased markedly in 2024. Research by the CREA and CSD indicates that during the first half of 2024 G7+ countries imported EUR 1.8 billion worth of oil products derived from Russian crude through three key refineries, including STAR in Türkiye.
As of 2024, STAR’s crude feedstock is approximately 98% dependent on Russian oil, with 73% of its supplies coming directly from Lukoil, a company under US sanctions. Notably, around 87% of STAR’s seaborne exports are directed to G7+ countries. As a result, a substantial portion of the refinery’s export revenues—derived from sales in European markets—ultimately flows back to Russia. The refinery has been a significant purchaser of Russian Urals blend crude under term contracts with Lukoil.
Conclusion
The limited effectiveness of the price cap mechanism has been underscored by the persistent operation of shadow tankers involved in circumventing Western sanctions. According to the CREA, approximately 558 such vessels continued to transport sanctioned Russian crude oil and petroleum products on the gray market in the third year following the invasion of Ukraine. These shadow fleets operate below the price cap thresholds established by the G7, directly violating the sanctions regime. As a result, over 750 vessels have been subject to sanctions—340 by the EU, 230 by the United States, and 180 by the United Kingdom.
CREA’s analysis reveals that this circumvention strategy is part of a broader framework of Russian energy diplomacy, in which Kremlin-aligned shadow fleets facilitate continued oil exports, thereby sustaining federal revenues. From February 2022 to early 2025, Russia earned an estimated EUR 847 billion from fossil fuel exports. In 2024 alone, revenues reached EUR 242 billion, with projections for 2025 nearing EUR 237 billion. Oil and gas revenues contributed USD 120.3 billion to Russia’s federal budget in 2024—30% of total government income—despite a declining share from previous years. These revenues have supported a sharp escalation in military expenditure, which reached an estimated USD 149 billion in 2024—representing 7.1% of GDP and 19% of total government spending—according to the Stockholm International Peace Research Institute (SIPRI).
Moreover, the role of third countries in facilitating indirect imports of Russian-origin fuels has become increasingly prominent. Global Witness and CSD have documented a dramatic rise in EU imports of fuels processed at the STAR refinery in Türkiye, which is owned by Azerbaijan’s SOCAR. In 2024, approximately 98% of STAR’s crude oil feedstock originated from Russia, with 73% supplied by Lukoil, a sanctioned Russian entity. Despite this, around 87% of STAR’s seaborne exports were directed to G7+ countries, undermining the intent of Western sanctions. CREA and CSD estimate that in the first half of 2024 alone, G7+ countries imported EUR 1.8 billion worth of petroleum products derived from Russian crude through three key refineries, including STAR.
Despite sweeping sanctions regimes imposed by the G7+, there has been no significant decline in Russia’s oil and gas revenues—a reflection of what many analysts describe as the West’s sanctions inconsistency or “sanctions hypocrisy.” Evasion mechanisms remain widespread, largely due to the divergent approaches among G7+ countries, often explained under the guise of energy diplomacy. A particularly striking example involves the ASCO-owned tanker Zangezur, which, since November 2023, has reportedly served as a key conduit for transporting crude oil owned by Russia’s Lukoil from the port of Primorsk to Nemrut Bay in Türkiye, where the oil is processed at SOCAR’s STAR refinery. This vessel’s role in facilitating the movement of Russian crude through gray-market channels—despite not being subject to any Western sanctions—illustrates the persistent challenges in enforcement.
Furthermore, other Azerbaijani-flagged Aframax tankers, have also avoided inclusion in sanctions lists issued by the European Union—across three distinct sanctions packages—and by the United States in a significant round of designations. The continued omission of these vessels, despite their apparent involvement in the Russian oil trade, underscores the gaps and inconsistencies in current sanctions enforcement. These enforcement failures risk undermining the credibility and efficacy of international efforts to curtail Russia’s wartime revenues.
- The grey market, a term frequently used in the world of trading, refers to the trade of a commodity through channels that are unofficial, unauthorized, or unintended by the original manufacturer or producer. ↩︎