Braemar shares slide after report shines spotlight on Russian shadow fleet deals

Braemar shares slumped more than 9% during Thursday trading to their lowest level since April after the UK shipbroker was linked to the sale of ships that ended up in the Russian shadow fleet.

The Financial Times reported that Braemar acted as a broker for at least nine complex ship purchase deals involving a UK-based financier that were ultimately financed by Russia’s second-largest oil producer, Lukoil.

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It is not alleged that any of the transactions broke laws, but they highlight the complex nature of deals for elderly ships that have moved to the Russian shadow fleet for inflated prices.

Since the invasion of Ukraine in 2022, hundreds of ships have been sold into a dark fleet of tankers carrying Russian oil, usually facilitated by Western shipbrokers, lawyers and other intermediaries. Such profitable deals are an emotive topic in shipping circles.

The nine reported Braemar-brokered deals were among 25 vessel buys by shipping finance veteran John Ormerod between December 2022 and August 2023 at a cost of more than $700m, the Financial Times reported on Thursday, citing corporate records and other documents.

The deals outlined by the newspaper point to a wider issue across the industry as vessels move beyond the control of Western regulators and insurers.

About 800 tankers had left the big 12 protection and indemnity clubs by April this year because of compliance demands around trading in Russia, the International Group of P&I Clubs told the British Parliament.

Many of the ships bought by Ormerod ended up in fleets managed by Dubai-based companies that were later hit by UK sanctions, the Financial Times report said.

Radiating World Shipping Services and Star Voyages Shipping Services were based in the same single-desk office in Dubai.

They were blacklisted by the UK in December 2023 for “obtaining a benefit from or supporting the Government of Russia through carrying on business in a sector of strategic significance … namely the Russian energy sector”.

The two companies are linked to Dubai-based ship recycling entrepreneur Muhammad Tahir Lakhani, the newspaper reported. A business associate of Lakhani, Shahid Naziri, acted as CEO for the two companies.

In a statement to the Financial Times, James Gundy-led Braemar said: “For every transaction that Braemar considers undertaking, it conducts all appropriate due diligence with know-your-customer checks, legal, compliance and regulatory adherence.”

It declined to comment further. Its shares at lunchtime on Thursday were down 27p ($0.35), or 9.18%, to 267p on the London Stock Exchange mid-afternoon on Thursday. They closed at 277p, down 5.8%.

Clarksons, the other major shipbroker listed on London Stock Exchange, was down less than 1%, while the FTSE 100 index of the largest UK companies by value was slightly up on the day.

Law firm Watson Farley & Williams (WFW) acted as the escrow agent on behalf of the seller in some of the deals.

The sales were said to have been financed by advance chartering payments agreed with Eiger Shipping, the transport arm of Lukoil’s trading wing.

A WFW spokesperson said its due diligence “gave us no reason to presume that Mr Ormerod was not the ultimate beneficial owner of the purchasing entities”.

The spokesperson said there was also no evidence that Lakhani or United Arab Emirates-based Eiger Shipping was connected with any of the deals in which it acted.

“Our involvement was limited to the sale and purchases and ended once the transactions concluded. We therefore have no knowledge or control of what the buyers did with these ships or how they traded them,” the spokesperson said.

“We always advise clients to ensure that if they are looking to conduct Russian trades, they should do so in full compliance with the [G7] price cap legislation.

“We would not represent any client or be involved in any transaction to the extent that, to our knowledge, the price cap or any other sanctions laws were in danger of not being complied with.”

Lakhani did not respond to a request for comment, and nobody answered the phone at Ormerod’s business address on Thursday.

Ormerod’s lawyers told the FT that he ended his ownership links to the vessels by September 2023 after becoming aware of the number of voyages related to Russia.

They told the newspaper that the businessman was approached by Eiger in late 2022 to buy ships for general trade.

He sought legal advice and undertook due diligence to ensure that the deals did not breach sanctions. They also told the newspaper that Lakhani was not involved in Ormerod’s purchase and transfer of the vessels.

In a statement to the Financial Times, Lakhani said he “never had any involvement or facilitated the breach of any sanctions”.