(Bloomberg) -- Somewhere off the coast of Eritrea on July 20th last year, the Vernadsky Prospect — stocked with 730,000 barrels of Russian crude — started broadcasting a message: “Armed guard on board.”
The 250-meter long tanker had just passed through the Suez Canal, midway through its 7,400 nautical mile journey from the Russian port of Primorsk to India, one of the few major economies that continues to buy Russian oil following its invasion of Ukraine.
Five days later, the Vernadsky Prospect approached a boat stationed off the coast of Oman called the Genesis, where it dropped off a small team of guards paid to hop on and off ships to defend them from potential attacks in the dangerous waters between Yemen and Somalia. In the Genesis’s hold were scores of UK-licensed military-grade weapons that Britain has spent a year trying to get moved.
The service provided by the Genesis and its sister boats — the Siam and the Antarctic Dream — and the guards they host and ferry to and from tankers is legal and routinely used by companies and ships from many countries. But these boats have become key components of Russia’s ability to profit enormously from its oil trade despite widespread sanctions. The industry’s murky nature — where ships like the Genesis routinely change their flags, and true ownership is often tangled up in networks of companies across multiple jurisdictions — contributes to the challenges the UK and its Western partners have had in their efforts to crack down on Moscow economically.
“The UK’s due diligence regime that should have properly assessed all the risks of these licenses simply failed and now we have weapons licensed by Britain guarding Russian tankers shipping oil to fund the illegal war in Ukraine,” said Liam Byrne, chair of the UK Parliament’s business and trade select committee, and a lawmaker in the governing Labour Party. “It is now vital that ministers look again at the regime for licensing vessel-based armories especially when we know that alternative licensed storage is as scarce as we know it is around the Indian Ocean.”
The three vessels are among a small number of “floating armories” operating around the world, essentially hotels for guards and storage for guns that can generate millions of dollars in revenue each year. As western sanctions on Moscow ramped up, the UK withdrew the three boats’ licenses and has spent over a year trying to get private maritime security companies, or PMSCs, that use the armories to transfer hundreds of weapons to licensed ships or retrieve them.
The armories are owned by Singapore-registered, Dubai-based Sinbad Navigation, one of three companies that dominate the industry in the region and one of the few that still works with tankers carrying Russian oil. Sinbad Navigation itself isn't sanctioned and the services it provides don't run afoul of existing sanctions. At least one of Sinbad’s clients is one of Russian shipping giant Sovcomflot’s security providers, according to company records seen by Bloomberg and people familiar with its operations who requested anonymity to discuss commercial matters and avoid any retaliation.
Last July, just as its operations were being fully absorbed by Sinbad Navigation, a company called MNG Maritime had its licenses to operate the three armories revoked by the UK, which mandated that British security firms using its platforms remove any weapons stored there.
The British government didn’t provide a specific reason and a spokesperson for the department of business and trade said it couldn’t comment on individual cases. MNG lawyers said at the time that it had been told by the government that the revocation related to a “non-UK PMSC providing guards to a sanctioned fleet.”
But by then, Sinbad, already a major shareholder in MNG, had bought out its business partners and took over the firm, effectively moving it out of the country, according to documents seen by Bloomberg and the people familiar with its operations.
A person familiar with the case, who spoke on condition of anonymity because they were unauthorized to talk about it, said that once a license is revoked, the weapons must be removed and transferred to a licensed depot. The UK has struggled to establish where the firearms are — and has no legal right to seize them — because of the change in ownership and domicile, said the person, who spoke on condition of anonymity to discuss confidential matters.
Sinbad Navigation didn’t respond to a detailed list of questions and multiple requests for comment. Sovcomflot declined to comment on a set of questions.
Last July, the Vernadsky Prospect was managed by an entity called Sun Ship Management, a company owned by Sovcomflot that’s been sanctioned. Emails to Sun Ship Management bounced back and the phone number listed on the company's website was not valid. This August the vessel was renamed Voyager and is now listed under a UAE-based management firm called Starfish Ship Management and owned by UAE-based Marvel Marine, according to the Equasis shipping database. Bloomberg was unable to contact the new owners. The address both companies are registered at is a shared workspace in the grandstand of Dubai's Meydan Racecourse next to a five-star hotel. A receptionist at the open plan workspace declined to provide information about any companies registered at the premises.
Some of the firearms stored on the armories now owned by Sinbad were registered or certified for export via the UK, Djibouti and Malta, according to people familiar with the PMSCs’ operations who requested anonymity to avoid any potential commercial retaliation. One of the people said that Sinbad had over the years seized some weapons belonging to PMSCs that hadn’t paid storage bills. Another said that a British company that had hundreds of weapons stored on the armories had transferred those weapons legally to a non-UK security firm registered in Singapore called PVI. PVI continues to work with Sinbad, and the two firms share owners, according to documents seen by Bloomberg and company registers. The people spoke on condition of anonymity to discuss commercial matters.
A UK government spokesperson said figures for the total number of UK-licensed firearms for use on floating armories were not published or readily available. A spokesperson for the UK tax and customs office, HMRC, who are responsible for the enforcement of most export licensing controls, declined to comment. In response to a Freedom of Information request this October, the Department for Business and Trade said there are no records of firearms transferred from UK PMSCs to non-UK entities since Jan. 1, 2023. Malta’s Commerce Department didn’t reply to several requests for comment made over email and telephone. A spokesperson for the office of Djibouti’s president declined to comment.
After Moscow’s invasion of Ukraine and the ensuing European embargo, Russia’s crude oil has increasingly flowed to India, through dangerous waters. That’s forced Moscow to increasingly rely on the services of security firms and floating armories.
Multiple rounds of US, UK and European Union sanctions have targeted Sovcomflot and dozens of tankers, along with curtailing ships and services used to move Russian crude by prohibiting firms in the Group of Seven countries and EU from dealing with oil sold above a $60 price cap. Western companies are allowed to provide transportation, insurance and other services if the oil is sold below the threshold.
In response to the sanctions regime, Moscow has assembled a covert fleet of tankers, and exploits dark cross-country trade routes and legal loopholes to get its hands on banned goods and keep its crude flowing.
“They exploit loopholes in the system,” said Baiba Braže, Latvia’s foreign minister. “These activities, though technically legal, are reckless and detrimental to our shared security interests.”
Moscow has repeatedly criticized western sanctions and says they’re illegitimate.
Russia shipped about 615 million barrels of oil to India in 2023, compared to just 6.5 million barrels in 2021, the last full year before the invasion. Seaborne shipments to Europe dropped to just 37 million barrels from about 490 million barrels over the same period, and to zero so far this year. Bloomberg identified 63 shipments to India in September via the Suez Canal and Red Sea, 59 in August and 55 in July.
Vessels transporting Russian oil have been using security companies that depend on Sinbad’s floating armories nearly everyday, according to records reviewed by Bloomberg. Normally three or four armed guards — mostly Indian, Sri Lankan and Nepalese nationals — are involved in each safeguarding operation. With firearms strapped over their shoulders, the guards embark onto a ship before it enters a high-risk area. They get off a few days later once in safer waters, usually onto a rubber dinghy for a short journey to another floating armory.
Two US Treasury officials, speaking on condition of anonymity because they’re unauthorized to discuss government policy, said that companies that provide security for vessels involved in price-cap violations could potentially be at risk — as potential enablers — of sanctions.
Still, going after ancillary service providers isn’t a silver bullet, experts say. “Any sanctions would only be as effective to the extent the service provider is exposed directly or indirectly to the sanctioning countries’ jurisdictions,” said Daniel Tannebaum, global anti-financial crime practice leader at consulting firm Oliver Wyman.
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In its latest sanctions package, the EU targeted several vessels for evading existing restrictions, banning them from using European ports, waters and services. The UK and US have cracked down on these practices too.
The maritime security industry emerged about two decades ago following a surge in piracy from Somalia in the Gulf of Aden and Indian Ocean.
To respond to those threats, shipping companies began hiring PMSCs to safeguard ships. Hiring armed protection was often a requirement to get cargo ships insured for travel.
With governments concerned about storing large volumes of weapons on land, floating armories quickly became an essential service. “In the early days, security teams and weapons would be on board but” as they approached land “the team would throw weapons overboard” to avoid violating local laws, said Corey Ranslem, CEO at Dryad Global, a maritime intelligence firm. “Floating armories are much easier.”
Piracy incidents have fallen to about 60 actual or attempted attacks in the first half of this year, from more than 400 in 2010, according to the International Chamber of Commerce’s International Maritime Bureau. Security prices have dropped, operators have gone bust or merged, and many of the firms and people involved in the industry have shifted away from the West in search of more lenient licensing regimes and lower costs.
But the Yemen-based Houthi attacks on vessels crossing the Suez Canal have ramped up since the Israel-Gaza war began, hitting one of global shipping’s most important routes and sending security prices skyrocketing, people familiar with the industry who didn’t want to be named discussing commercial matters, said.
One of the people said Sinbad runs about 200 trips a month. That can cost security companies using Sinbad’s services more than $4,000 each way, plus accommodation and storage charges, double the price a year ago, four of the people familiar with the sector said. They spoke on condition of anonymity to discuss commercial matters and avoid any potential retaliation.
Sinbad’s floating armories have changed flags recently. Saint Kitts and Nevis removed the boats from its flag register after the UK revoked their licenses, according to authorities in the island nation.
Genesis is now sailing under the flag of land-locked Mongolia and Siam under the flag of Tanzania, according to the monitoring service MarineTraffic. The Tanzania flag is on a “black list” and described as “very high risk” due to poor safety standards by the Paris MOU, an organization that helps ensure safe shipping.
The vessels were insured by a London-based provider until some point last year, according to a person familiar with the matter who spoke on condition of anonymity to talk about confidential commercial information. Bloomberg wasn’t able to verify who currently insures them through publicly available shipping databases.
The three Sinbad ships can together house dozens of guards for weeks at sea, providing them with dormitories and meals. Estimates provided by people familiar with the vessels and public reports indicate they together hold more than 1,000 firearms.
One of the firms that has used those guns is PVI, according to records seen by Bloomberg.
A company called Protection Vessels International — that goes by PVI, according to its website — went into liquidation in the UK in June owing £4.3 million ($5.7 million), according to a Companies House filing. The registry shows that the company shared a major shareholder with MNG Maritime, the company whose licenses the UK revoked. PVI’s liquidators declined to comment.
A similarly named firm — PVI Risk Management Pte. Ltd. – was registered in Singapore last August, according to the southeast Asian nation’s corporate registry. The company offers services that include using Sinbad’s armories, according to a person familiar with the matter. Another person said that Sinbad runs most of PVI’s Indian Ocean operations, including its contracts, guards and weapons. Both people spoke on condition of anonymity to discuss commercial matters.
Company names listed outside the registered addresses of Sinbad and PVI in Singapore didn’t include either company during a recent visit by a Bloomberg reporter. Someone who works at the building listed as PVI’s registered address on Singapore’s business database said they’d never heard of the firm. An employee at the shared office registered for Sinbad said the company hadn’t operated there since 2022.
The main shareholder of the Singapore-registered entity is Marianne Rose Fadri Faderanga, a 39-year-old Filipino, according to the UK business register. In September, she signed a resolution filed on the UK Companies House register putting MNG Maritime into liquidation, further cutting Sinbad’s ties to Britain. MNG’s liquidators didn’t reply to a request for comment.
Faderanga is listed as the license manager of Sinbad Navigation Company DMCC, according to the Dubai Multi Commodities Centre registry, and the firm’s finance manager, according to her LinkedIn page. She is also the business partner of Sinbad’s owner, Yemeni national Ibrahim Abulohoum, according to five people familiar with the company.
An invoice seen by Bloomberg and a person familiar with the matter who requested anonymity to discuss confidential information indicated that Sinbad has banked with Citi in Singapore, where Sinbad Navigation Pte. Ltd. is registered. Bloomberg was unable to verify whether the company has accounts with other banks too, and for example may use different lenders for different clients and business operations. Citi declined to comment.
Faderanga and Abulohoum didn’t respond to a detailed list of questions and several requests for comment. Bloomberg contacted a manager at PVI Risk Management but didn't receive a response to questions.
One of the people who previously worked with Faderanga and Abulohoum said that the Yemeni businessman began taking on Russian vessels in the months before the invasion of Ukraine and continued to do so after sanctions were introduced. The person, like others, spoke on condition of anonymity to discuss commercial matters and due to worries about any potential retaliation.
During the three months through to this July, India relied on Russia for 40% of its seaborne crude oil imports, according to shipping analysts at BIMCO. Many of the deliveries were protected by Sinbad’s armory services.
--With assistance from Alex Wickham, Alex Longley, Julian Lee, Petra Sorge, Simon Marks, Philip Heijmans, Chanyaporn Chanjaroen, Anthony Di Paola and Demetrios Pogkas.
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