ATTORNEY-CLIENT PRIVILEGED AND WORK PRODUCT PROTECTION SELECTIVE WAIVER TO OFAC AND DOJ ONLY — PRIVILEGE PRESERVED AS TO ALL THIRD PARTIES
VOLUNTARY SELF-DISCLOSURE PURSUANT TO 31 C.F.R. § 501.604
Submitted to:
Office of Foreign Assets Control Compliance & Enforcement Division U.S. Department of the Treasury 1500 Pennsylvania Avenue NW Washington, DC 20220
Submitted on behalf of:
Dunmore Energy Holdings Ltd.
By Calderwood & Harkness LLP 1750 Pennsylvania Avenue NW, Suite 800 Washington, DC 20006
Filing Date: June 1, 2023
Calderwood & Harkness Matter No. 1016-00009
Method of Filing: Via OFAC Online Portal and Hard Copy via Overnight Delivery
Prepared by:
Victoria Chambers, Responsible Partner Conrad Reeves, Senior Counsel, Export Controls & Sanctions Jasmine Thornton, Lead Associate
Calderwood & Harkness LLP 1750 Pennsylvania Avenue NW, Suite 800 Washington, DC 20006 Telephone: (202) 555-7100 Facsimile: (202) 555-7101
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I. COVER PAGE AND TRANSMITTAL STATEMENT
Dunmore Energy Holdings Ltd. ("Dunmore" or "DEH"), a Cayman Islands–domiciled exempted company with limited liability, through its undersigned counsel at Calderwood & Harkness LLP, hereby respectfully submits this Voluntary Self-Disclosure ("VSD") to the Office of Foreign Assets Control ("OFAC") of the U.S. Department of the Treasury, pursuant to 31 C.F.R. § 501.604 and in accordance with OFAC's Economic Sanctions Enforcement Guidelines set forth at 31 C.F.R. Part 501, Appendix A.
OFAC has consistently encouraged persons subject to U.S. sanctions jurisdiction to voluntarily disclose apparent violations of OFAC-administered sanctions programs. Dunmore makes this filing in reliance upon OFAC's stated policy of according substantial mitigating weight to voluntary self-disclosures in the enforcement process. Dunmore understands that, pursuant to the Enforcement Guidelines, the filing of a voluntary self-disclosure is a mitigating factor that OFAC will consider in determining the appropriate enforcement outcome, including whether to impose a civil monetary penalty and, if so, the amount of any such penalty.
This VSD concerns apparent violations of OFAC-administered sanctions programs arising from transactions involving Volkhov Industrial Group JSC ("Volkhov" or "VIG"), a Russian industrial conglomerate that was designated under Directive 2 of Executive Order 13662 on November 15, 2019, and subsequently added to the OFAC Specially Designated Nationals and blocked Persons ("SDN") List on April 6, 2022, pursuant to Executive Order 14024. The apparent violations involved crude oil swap transactions, oilfield equipment exports, and structured payments conducted through intermediary entities, specifically Petronova Trading FZE ("Petronova") and Zenith Petroleum DMCC ("Zenith Petroleum"), both registered in Dubai, United Arab Emirates. As detailed herein, forensic analysis has established that these intermediaries maintained undisclosed ties to Volkhov and its Chairman, Arkady Volkhov.
Dunmore respectfully advises OFAC that this filing has been coordinated with the U.S. Department of Justice ("DOJ"), National Security Division, Counterintelligence and Export Control Section ("CES"), which is conducting a parallel inquiry into the same underlying conduct. On April 19, 2022, the DOJ issued Grand Jury Subpoena GJ No. 22-418 to Dunmore, issued by the U.S. District Court for the District of Columbia, Grand Jury 22-2. The lead prosecutor assigned to the DOJ inquiry is Assistant United States Attorney Meredith Calloway, with Trial Attorneys Samuel Kovacs and Diana Pressman of the CES. AUSA Calloway has been notified of this filing and does not object to its submission.
Dunmore reserves all rights and privileges, including but not limited to attorney-client privilege and the protections afforded by the work product doctrine, except to the extent of the selective waiver made herein to OFAC and the selective waiver previously made to the DOJ. This disclosure is made for purposes of this VSD proceeding only and does not constitute a general waiver of any privilege or protection as to any third party, including but not limited to private litigants, foreign governmental authorities, or regulatory bodies. Dunmore relies upon the principles articulated by the D.C. Circuit and other federal courts recognizing the validity of selective waivers in the context of government investigations and voluntary self-disclosures to federal agencies.
The submission that follows provides OFAC with a comprehensive account of the apparent violations, the internal investigation conducted by Calderwood & Harkness LLP with the assistance of Ridgeline Advisory Group LLC, the remedial measures undertaken by Dunmore, and the mitigating factors that Dunmore respectfully urges OFAC to consider in resolving this matter.
II. EXECUTIVE SUMMARY
Dunmore Energy Holdings Ltd. is a Cayman Islands–domiciled exempted company with limited liability (Cayman Islands Registrar of Companies registration number MC-334821), with its operational headquarters located at 1200 McKinney Street, Suite 3400, Houston, Texas 77010. Dunmore is a diversified energy company principally engaged in oil and gas exploration, production, and trading, as well as renewable energy development. For the fiscal year ended December 31, 2021, Dunmore reported annual revenue of approximately $4.87 billion, as audited by Ashford & Whitmore LLP (engagement partner Kenneth Ashford). As of the date of this filing, Dunmore employs approximately 3,200 individuals globally, with operations in the United States, the United Arab Emirates, Germany, Nigeria, the United Kingdom, and other jurisdictions.
The apparent violations that are the subject of this VSD occurred at Dunmore Trading International Ltd. ("DTI"), a wholly owned subsidiary of DEH. DTI is a limited company operating from Level 14, Gate Building 3, Dubai International Financial Centre, P.O. Box 506774, Dubai, United Arab Emirates, under DIFC License No. CL-4827. DTI serves as Dunmore's principal crude oil and petroleum products trading arm and conducts commodity trading, logistics, and certain procurement activities from its Dubai office.
Between approximately March 2020 and April 2022, DTI's Dubai-based trading desk, under the supervision of Derek Hargrave (President, DTI) and with the direct involvement of Natasha Sorokin (Senior Trader, DTI), engaged in a series of crude oil swap transactions and facilitated oilfield equipment exports involving counterparties with undisclosed ties to Volkhov Industrial Group JSC, a Russian industrial conglomerate subject to U.S. economic sanctions. The transactions were primarily conducted through two Dubai-based intermediary entities—Petronova Trading FZE and Zenith Petroleum DMCC—that served, in whole or in part, as conduits for Volkhov-connected commerce.
The apparent violations identified by Dunmore's internal investigation fall into three principal categories:
(1) Crude Oil Swap Transactions (Category 1). Between June 2020 and February 2022, DTI executed fourteen (14) crude oil swap transactions with Petronova Trading FZE and Zenith Petroleum DMCC, with an aggregate notional value of approximately $218.7 million. Forensic analysis conducted by Ridgeline Advisory Group LLC determined that at least nine (9) of these transactions, with an aggregate notional value of approximately $156.3 million, involved crude oil ultimately sourced from or destined for entities controlled by or affiliated with Volkhov Industrial Group JSC. These transactions potentially violated Directive 2 under Executive Order 13662 (sectoral sanctions on the energy sector of the Russian Federation) and, to the extent any activity continued on or after April 6, 2022, the SDN-blocking provisions under Executive Order 14024.
(2) Oilfield Equipment Exports (Category 2). Between August 2020 and January 2022, DTI facilitated the export of oilfield drilling equipment and components valued at approximately $12.4 million. These shipments were routed through Caspian Logistik GmbH, a German logistics intermediary, to end users in Russia. Forensic evidence indicates that the ultimate end users of the equipment were entities controlled by or affiliated with Volkhov Industrial Group JSC, and that end-user certifications provided by Caspian Logistik were potentially false. These exports potentially violated OFAC prohibitions against transactions benefiting SDN- or SSI-listed entities, as well as Section 746.5 of the Export Administration Regulations ("EAR").
(3) Payment Structuring (Category 3). Between March 2020 and March 2022, approximately $34.2 million in payments were routed through a series of intermediary accounts at Crescent Commercial Bank PJSC in Dubai. A total of 127 individual wire transfers were identified by the forensic analysis. The payment structures were designed to obscure the beneficial ownership of Volkhov-connected entities and to evade sanctions compliance screening by U.S. correspondent banks.
The aggregate financial exposure across all three categories of apparent violations is substantial. The fourteen crude oil swap transactions represent approximately $218.7 million in total notional value, of which the nine tainted transactions account for approximately $156.3 million. The oilfield equipment exports total approximately $12.4 million. The structured payments aggregate approximately $34.2 million across 127 individual wire transfers. While there is overlap among these categories—certain payments relate to the crude oil swap transactions and equipment exports—the total quantum of potentially violative activity is significant.
In recognition of the seriousness of these apparent violations and as a demonstration of its good faith commitment to compliance, Dunmore has voluntarily disgorged $8.75 million to the U.S. Treasury. This payment, made on November 30, 2023, represents the estimated net profits derived from the nine tainted crude oil swap transactions, calculated as $156.3 million in notional value multiplied by an estimated net margin of 5.6%, yielding approximately $8.75 million (rounded). The disgorgement calculation was prepared by Ridgeline Advisory Group LLC and is detailed in Appendix H hereto.
Dunmore has further undertaken comprehensive remediation measures designed to prevent the recurrence of similar conduct. These measures include the appointment of Priya Nayar as Chief Compliance Officer effective August 1, 2022, replacing Gerald Fisk, who departed the company on June 10, 2022. On October 1, 2023, Dunmore's Board of Directors formally adopted an Enhanced Sanctions & Export Controls Compliance Program, developed with the assistance of Pemberton Investors Solutions LLC. All personnel primarily responsible for the apparent violations—including Derek Hargrave and Natasha Sorokin—have been separated from the company. Dunmore has cooperated fully with the DOJ's parallel investigation, producing 438,916 responsive documents, making multiple proffers, providing access to cooperating witnesses, and delivering a comprehensive 176-page internal investigation report.
III. DISCLOSING PARTY INFORMATION
A. Entity Identification
Full Legal Name: Dunmore Energy Holdings Ltd.
Short Name / Trade Name: Dunmore; DEH
Entity Type: Exempted company incorporated with limited liability under the laws of the Cayman Islands
Cayman Islands Registrar of Companies Registration Number: MC-334821
Date of Incorporation: March 15, 2012
Registered Office: Harbour Place, 4th Floor, 103 South Church Street, George Town, Grand Cayman KY1-1002, Cayman Islands
Operational Headquarters: 1200 McKinney Street, Suite 3400, Houston, Texas 77010, United States of America
Telephone (Houston): (713) 555-2400
Industry: Oil and gas exploration, production, and trading; renewable energy development
Annual Revenue (Fiscal Year Ended December 31, 2021): Approximately $4.87 billion (USD), as audited by Ashford & Whitmore LLP, Houston, Texas (engagement partner: Kenneth Ashford, CPA)
Approximate Global Headcount: 3,200 employees as of the date of this filing
Majority Shareholder: Greystone Capital Partners Fund IV, L.P., holding approximately 62.5% of the equity of DEH. The general partner of Greystone Capital Partners Fund IV, L.P. is Greystone Capital Management LLC. The Managing Partner of Greystone Capital Management LLC is Richard Fairbanks. Greystone Capital Management LLC maintains its principal office at 399 Park Avenue, 32nd Floor, New York, New York 10022.
Minority Shareholders: Management of Dunmore Energy Holdings Ltd. holds approximately 22.5% of the equity, through a management equity participation plan. Thornbury Infrastructure Fund II, L.P. holds approximately 15% of the equity. The general partner of Thornbury Infrastructure Fund II, L.P. is Thornbury Asset Management Ltd. The Managing Director of Thornbury Asset Management Ltd. is Helen Cresswell. Thornbury Asset Management Ltd. maintains its principal office at 25 Old Broad Street, London EC2N 1HN, United Kingdom.
Tax Identification: DEH does not hold a U.S. Employer Identification Number; its U.S. subsidiary, Dunmore upstream Americas LLC, holds EIN 84-2937561. DEH is registered with the Cayman Islands Tax Information Authority.
Principal Banking Relationships: Greaves Bancorp (primary U.S. banking relationship, Houston); Camberwell Trust Bank (primary UAE banking relationship, Dubai); Adriatic Trust Bank (primary European banking relationship, Hamburg and London).
B. Key Subsidiaries Involved
The following subsidiaries of Dunmore Energy Holdings Ltd. are relevant to this VSD:
Dunmore Trading International Ltd. ("DTI"). DTI is a wholly owned subsidiary of DEH. DTI is a limited company registered in Dubai, United Arab Emirates, within the Dubai International Financial Centre ("DIFC"), holding DIFC License No. CL-4827. DTI's principal office is located at Level 14, Gate Building 3, Dubai International Financial Centre, P.O. Box 506774, Dubai, UAE. DTI was incorporated in the DIFC on September 1, 2015, and serves as Dunmore's principal crude oil and petroleum products trading arm. DTI employs approximately 85 individuals, including traders, logistics and shipping personnel, finance and accounting staff, and support personnel. DTI operated the trading desk at issue in this VSD and was the entity through which the apparent violations were principally conducted. DTI's trading operations generate approximately $1.8 billion in annual revenue.
Dunmore upstream Americas LLC ("DUA"). DUA is a wholly owned subsidiary of DEH. DUA is a limited liability company organized under the laws of the State of Delaware (formation date: June 22, 2014), holding U.S. Employer Identification Number 84-2937561. DUA's registered agent is Pemberton Industries, 1209 Orange Street, Wilmington, Delaware 19801. DUA's principal office is co-located with DEH's operational headquarters at 1200 McKinney Street, Suite 3400, Houston, Texas 77010. DUA conducts Dunmore's upstream oil and gas exploration and production operations in the United States, primarily in the Permian Basin, the Eagle Ford Shale, and the DJ Basin. DUA employs approximately 1,400 individuals. While DUA was not directly involved in the transactions at issue, certain DUA personnel provided operational and technical support to DTI, and DUA's U.S. banking relationships were used to facilitate certain aspects of the transactions described herein.
Dunmore Renewables GmbH. Dunmore Renewables GmbH is a wholly owned subsidiary of DEH. It is a Gesellschaft mit beschränkter Haftung registered in Hamburg, Germany (Handelsregister: HRB 152847, Amtsgericht Hamburg). Its registered office is located at Überseeallee 12, 20457 Hamburg, Germany. The Managing Director of Dunmore Renewables GmbH is Tobias Engel (German national). Dunmore Renewables GmbH was incorporated on March 10, 2017, and conducts Dunmore's European renewable energy development operations, including wind and solar projects. Dunmore Renewables GmbH employs approximately 120 individuals. Dunmore Renewables GmbH was tangentially involved in one transaction with Caspian Logistik GmbH, as described in Section VI.B.3 below.
Dunmore Exploration West Africa Ltd. ("DEWA"). DEWA is a wholly owned subsidiary of DEH. DEWA is a limited company registered in Lagos, Nigeria, with its principal office at 14B Kofo Abayomi Street, Victoria Island, Lagos, Nigeria. DEWA conducts Dunmore's upstream exploration and production operations in West Africa, including operations offshore Nigeria and Ghana. DEWA was not directly involved in the transactions at issue in this VSD but is included in the description of subsidiaries for completeness and because DEWA's document custodians were included in the global document collection conducted during the internal investigation.
C. Key Personnel
The following individuals are key personnel relevant to this VSD. Unless otherwise indicated, all individuals listed below are or were employees or officers of Dunmore or its subsidiaries during the relevant period.
Callum Renshaw — Chief Executive Officer, Dunmore Energy Holdings Ltd. Mr. Renshaw is based in Houston, Texas, and has served as CEO of DEH since January 2018. Mr. Renshaw was not directly involved in the day-to-day trading operations of DTI but bore ultimate executive responsibility for the company's global operations.
Marcus Wellbourne, Esq. — General Counsel, Dunmore Energy Holdings Ltd. Mr. Wellbourne is based in Houston, Texas, and has served as General Counsel since February 2016. Mr. Wellbourne oversees all legal affairs of DEH and its subsidiaries. Mr. Wellbourne was the first senior executive to whom the potential sanctions exposure was reported by Gerald Fisk on April 11, 2022, and he authorized the retention of Calderwood & Harkness LLP on April 14, 2022.
Priya Nayar — Chief Compliance Officer, Dunmore Energy Holdings Ltd. Ms. Nayar was appointed to the position of CCO effective August 1, 2022, succeeding Gerald Fisk. Ms. Nayar is based in Houston, Texas, and reports directly to the CEO and the Board of Directors. Prior to joining Dunmore, Ms. Nayar served as Deputy Chief Compliance Officer at a major international energy company and held positions at OFAC and the Bureau of Industry and Security. Ms. Nayar has led the development and implementation of Dunmore's Enhanced Sanctions & Export Controls Compliance Program.
Sandra Whitfield — Chief Financial Officer, Dunmore Energy Holdings Ltd. Ms. Whitfield is based in Houston, Texas, and has served as CFO since April 2019. Ms. Whitfield oversees the financial operations of DEH and its subsidiaries, including the finance and treasury functions that processed certain of the wire transfers at issue.
Derek Hargrave — Former President, Dunmore Trading International Ltd. (Dubai). Mr. Hargrave is a British national who was based in Dubai, UAE during the relevant period. Mr. Hargrave served as President of DTI from March 2017 until his separation from the company. Mr. Hargrave was placed on administrative leave on July 1, 2022, and was formally separated from Dunmore on October 1, 2022. Mr. Hargrave approved and directed the trading desk's engagement with Petronova Trading FZE and Zenith Petroleum DMCC, signed off on transaction documentation, and authorized the equipment exports described herein. As detailed in Section VI below, evidence obtained during the internal investigation suggests that Mr. Hargrave was aware of the Volkhov connections underlying these transactions. Mr. Hargrave is represented by personal counsel: James Overstreet of Overstreet & McClain PLLC, 2200 Ross Avenue, Suite 3600, Dallas, Texas 75201.
Natasha Sorokin — Former Senior Trader, Dunmore Trading International Ltd. (Dubai). Ms. Sorokin is a Russian-American dual national who was based in Dubai, UAE during the relevant period. Ms. Sorokin joined DTI in January 2019 as a Senior Trader specializing in Russian-origin crude oil and petroleum products. Ms. Sorokin served as DTI's primary point of contact with Sergei Volkov of Petronova Trading FZE and was directly involved in the execution of the crude oil swap transactions at issue. Ms. Sorokin was placed on administrative leave on May 16, 2022, and was formally separated from Dunmore on September 15, 2022. Personal communications recovered during the investigation, including encrypted messaging application records, reveal that Ms. Sorokin had knowledge of the ultimate parties to the transactions. Ms. Sorokin is represented by personal counsel: Philip Keane of Wexford Keane LLP, 2000 K Street NW, Suite 650, Washington, DC 20006.
Gerald Fisk — Former Chief Compliance Officer, Dunmore Energy Holdings Ltd. (Houston). Mr. Fisk served as CCO of DEH from June 2017 until his departure from the company on June 10, 2022. Mr. Fisk was responsible for the administration of Dunmore's sanctions and export controls compliance program during the period in which the apparent violations occurred. Mr. Fisk's supervisory deficiencies, as described in Section VIII below, contributed materially to the failure to detect the apparent violations. Mr. Fisk departed Dunmore under internal pressure. Mr. Fisk is represented by personal counsel: Catherine Blackthorn of Blackthorn & Associates LLP, 700 Louisiana Street, Suite 4300, Houston, Texas 77002.
Omar Al-Rashidi — Head of Middle East Operations, Dunmore Trading International Ltd. (Dubai). Mr. Al-Rashidi is a UAE national based in Dubai. Mr. Al-Rashidi had operational awareness of the trading desk activities and the relationships with Petronova and Zenith Petroleum. Mr. Al-Rashidi has cooperated fully with the internal investigation and has provided detailed accounts of the trading desk's practices, counterparty relationships, and the roles of Mr. Hargrave and Ms. Sorokin. Mr. Al-Rashidi is a cooperating witness and has been made available for interviews by the DOJ.
Yves Leclerc — Director of Logistics & Shipping, Dunmore Trading International Ltd. (Dubai). Mr. Leclerc is a French national based in Dubai. Mr. Leclerc was responsible for arranging logistics and shipping for DTI's trading operations, including the oilfield equipment exports described in Section VI.B below. Mr. Leclerc coordinated directly with Klaus Weidemann at Caspian Logistik GmbH regarding the shipment of equipment to Russia.
Rajesh Malhotra — Controller, Dunmore Trading International Ltd. (Dubai). Mr. Malhotra is an Indian national based in Dubai. Mr. Malhotra was responsible for processing and authorizing wire transfers in connection with DTI's trading operations, including the wire transfers at issue in Section VI.C below.
Tobias Engel — Managing Director, Dunmore Renewables GmbH (Hamburg). Mr. Engel is a German national based in Hamburg. Mr. Engel was tangentially involved in one equipment procurement transaction that was subsequently shipped via Caspian Logistik GmbH to Russia, as described in Section VI.B.3 below.
D. Counsel Information
Calderwood & Harkness LLP serves as defense counsel for Dunmore Energy Holdings Ltd. in connection with this matter. Calderwood & Harkness was retained by Dunmore on April 14, 2022, to conduct a comprehensive internal investigation and to represent Dunmore in connection with any government inquiries arising from the matters described herein.
The following attorneys at Calderwood & Harkness LLP are responsible for this matter:
Victoria Chambers — Partner, White Collar Defense & Investigations Practice Group, Washington, D.C. office. Ms. Chambers serves as the Responsible Partner for this engagement. Ms. Chambers has over twenty-five years of experience representing clients in OFAC enforcement matters, DOJ investigations, and complex internal investigations involving sanctions and export controls.
Conrad Reeves — Senior Counsel, Export Controls & Sanctions Practice Group, Washington, D.C. office. Mr. Reeves has extensive experience counseling clients on OFAC compliance, voluntary self-disclosures, and enforcement matters, as well as BIS export control matters under the EAR.
Jasmine Thornton — Lead Associate, White Collar Defense & Investigations Practice Group, Washington, D.C. office. Ms. Thornton has served as the lead associate on this engagement, coordinating the document review, witness interviews, and forensic accounting analysis.
All communications regarding this VSD should be directed to:
Victoria Chambers, Partner Conrad Reeves, Senior Counsel Calderwood & Harkness LLP 1750 Pennsylvania Avenue NW, Suite 800 Washington, DC 20006 Telephone: (202) 555-7100 Facsimile: (202) 555-7101
Email: vchambers@calderwoodharkness.com; creeves@calderwoodharkness.com
IV. OFAC PROGRAMS AND LEGAL AUTHORITIES AT ISSUE
The apparent violations described in this VSD implicate the following OFAC-administered sanctions programs, executive orders, regulations, and legal authorities. This section provides a summary of the relevant legal framework to contextualize the conduct described in Section VI below.
A. Executive Order 13662 and Directive 2 (Sectoral Sanctions — Energy Sector of the Russian Federation)
Executive Order 13662, "Blocking Property of Additional Persons Contributing to the Situation in Ukraine," signed by the President on March 20, 2014, as amended, authorizes the Secretary of the Treasury, in consultation with the Secretary of State, to impose sanctions on persons determined to be operating in specified sectors of the Russian Federation economy, including the financial services, energy, metals and mining, engineering, and defense and related materiel sectors. E.O. 13662 provides the authority for the Sectoral Sanctions Identifications ("SSI") List and the associated Directives.
Directive 2, issued pursuant to E.O. 13662 and amended on September 29, 2017, prohibits U.S. persons from transacting in, providing financing for, or otherwise dealing in new debt of longer than 90 days maturity or new equity of persons determined to be operating in the energy sector of the Russian Federation economy and identified on the SSI List. Directive 2 applies to the identified persons on the SSI List and to entities in which such persons own a 50% or greater interest, directly or indirectly.
Volkhov Industrial Group JSC was designated under Directive 2 of E.O. 13662, effective November 15, 2019, as a person determined to be operating in the energy sector of the Russian Federation economy. As a result, beginning on November 15, 2019, U.S. persons were prohibited from dealing in new debt or new equity of Volkhov or entities 50% or more owned by Volkhov, and from engaging in certain other transactions as specified in Directive 2.
Relevance to this VSD: Transactions conducted by DTI between June 2020 and April 5, 2022, involving Volkhov-connected intermediaries, potentially violated the prohibitions set forth in Directive 2 under E.O. 13662, to the extent that U.S. persons were involved in transactions constituting new debt, financing, or other dealing with Volkhov or entities in which Volkhov held a 50% or greater interest.
B. Executive Order 14024 and Full SDN blocking Sanctions
Executive Order 14024, "Blocking Property With Respect To Specified Harmful Foreign Activities of the Government of the Russian Federation," was signed by the President on April 15, 2021. E.O. 14024 authorizes the Secretary of the Treasury, in consultation with the Secretary of State, to impose full blocking sanctions on persons determined, among other criteria, to operate or have operated in specified sectors of the Russian Federation economy, including the technology, defense, and related materiel, financial services, aerospace, electronics, and energy sectors, as well as persons determined to be responsible for or complicit in activities undermining democratic processes or institutions, among other bases.
On April 6, 2022, OFAC added Volkhov Industrial Group JSC to the Specially Designated Nationals and blocked Persons ("SDN") List pursuant to E.O. 14024. The SDN designation of Volkhov imposed full blocking sanctions, which prohibit all transactions by U.S. persons, and all transactions within U.S. jurisdiction, involving the property or interests in property of Volkhov. Full blocking sanctions require that any property or interests in property of the designated person that come within the possession or control of a U.S. person, or that come within the United States, be blocked (frozen) and reported to OFAC.
Relevance to this VSD: Any transactions involving Volkhov, or entities 50% or more owned by Volkhov, that occurred on or after April 6, 2022, were subject to the full blocking provisions of E.O. 14024. While the internal investigation did not identify completed transactions on or after April 6, 2022, the investigation assessed whether any pending transactions, open positions, or unsettled obligations existed as of that date.
C. 31 C.F.R. Part 589
The implementing regulations for the Ukraine/Russia-related sanctions programs are codified at 31 C.F.R. Part 589 (the "Ukraine-/Russia-Related Sanctions Regulations"). These regulations define key terms, including "U.S. person," which encompasses U.S. citizens, U.S. permanent resident aliens, entities organized under the laws of the United States or any jurisdiction within the United States (including foreign branches), and any person within the United States. 31 C.F.R. § 589.312. The regulations further define "prohibited transaction" and set forth the licensing requirements and procedures applicable to the Ukraine/Russia-related sanctions programs. The regulations incorporate by reference the Directives issued under E.O. 13662, including Directive 2.
Relevance to this VSD: The definitions and prohibitions set forth in Part 589 are central to the jurisdictional analysis and violation analysis presented in Sections VI and VII of this VSD.
D. The OFAC 50% Rule
OFAC's "50% Rule" is set forth in OFAC's "Revised Guidance on Entities Owned by Persons Whose Property and Interests in Property Are blocked," published on August 13, 2014. Under the 50% Rule, the property and interests in property of entities owned, directly or indirectly, 50% or more in the aggregate by one or more blocked persons are themselves considered blocked, regardless of whether the entity itself appears on the SDN List. The 50% Rule requires that U.S. persons treat such entities as if they were SDN-listed persons and comply with all applicable prohibitions.
The 50% Rule analysis is critical to this VSD because Petronova Trading FZE does not itself appear on the SDN List. However, as detailed in Section VI.A.1 and Appendix E, the forensic investigation conducted by Ridgeline Advisory Group LLC, together with corporate registry research and documentary evidence recovered during the internal investigation, established that Volkhov Industrial Group JSC held a controlling interest in Petronova through layered intermediary ownership structures. Specifically, the evidence supports that Volkhov, through its Chairman Arkady Volkhov and entities controlled by him, held at least a 50% beneficial ownership interest in Petronova, thereby triggering the 50% Rule and rendering Petronova's property and interests in property blocked under the applicable sanctions programs.
Relevance to this VSD: The application of the 50% Rule to Petronova is analyzed in detail in Section VI.A.1 and Appendix E.
E. International Emergency Economic Powers Act (IEEPA)
The International Emergency Economic Powers Act ("IEEPA"), 50 U.S.C. §§ 1701–1706, provides the statutory authority for the Executive Orders and sanctions programs administered by OFAC. IEEPA authorizes the President, after declaring a national emergency with respect to any unusual and extraordinary threat to the national security, foreign policy, or economy of the United States, to investigate, regulate, or prohibit certain transactions involving foreign countries or nationals thereof.
Violations of IEEPA carry significant penalties. Under the current penalty structure, civil penalties may be imposed up to the greater of $356,579 per violation (adjusted annually for inflation) or twice the amount of the transaction that is the basis of the violation. 50 U.S.C. § 1705(b). Criminal penalties for willful violations include fines of up to $1,000,000 and imprisonment of up to 20 years. 50 U.S.C. § 1705(c). These penalty provisions apply to violations of the Executive Orders and regulations described above.
Relevance to this VSD: IEEPA provides the underlying statutory authority for both the civil and criminal penalty frameworks applicable to the apparent violations described herein.
V. BACKGROUND: HOW THE APPARENT VIOLATIONS WERE DISCOVERED
A. OFAC Designation of Volkhov (April 6, 2022)
On April 6, 2022, OFAC announced a series of new SDN designations targeting Russian persons and entities in connection with the ongoing conflict in Ukraine and Russia's harmful foreign activities. Among those designated was Volkhov Industrial Group JSC, a Russian industrial conglomerate headquartered at 12 Kutuzovsky Prospekt, Moscow 121248, Russia, chaired by Arkady Volkhov. Volkhov was added to the SDN List pursuant to E.O. 14024, subjecting it to full blocking sanctions.
Notably, Volkhov had previously been designated under Directive 2 of E.O. 13662, effective November 15, 2019, as a person determined to be operating in the energy sector of the Russian Federation economy. The April 6, 2022 SDN designation represented an escalation of the sanctions applicable to Volkhov, from the sectoral restrictions of Directive 2 to the full blocking provisions of E.O. 14024.
B. Internal discovery (April 11, 2022)
On April 11, 2022, five days after the new SDN designations, Gerald Fisk, then serving as Chief Compliance Officer of DEH, conducted a routine OFAC screening refresh of Dunmore's counterparty database in connection with the newly published SDN designations. This screening refresh was performed manually using OFAC's SDN List search tool, as Dunmore's compliance program at the time did not employ automated, real-time screening (a deficiency discussed in Section VIII below).
During the screening refresh, Mr. Fisk identified a potential match between the name "Volkhov Industrial Group" and DTI's existing trading counterparty Petronova Trading FZE. Specifically, Mr. Fisk identified that Sergei Volkov, the Managing Director of Petronova, shared a surname phonetically similar to "Volkhov" and that DTI's internal records reflected that Petronova had been described by DTI traders as having ties to Russian energy interests. Mr. Fisk also noted that DTI had previously received communications from Petronova referencing Russian-origin crude oil supplies consistent with the type of product associated with Volkhov's energy sector operations.
Upon identifying this potential exposure, Mr. Fisk immediately notified Marcus Wellbourne, General Counsel of DEH, on the same day, April 11, 2022. Mr. Wellbourne instructed Mr. Fisk to suspend all further trading activity with Petronova and Zenith Petroleum pending further review. Mr. Wellbourne simultaneously notified CEO Callum Renshaw and CFO Sandra Whitfield of the potential issue.
C. Retention of Counsel (April 14, 2022)
On April 14, 2022, three days after Mr. Fisk's initial identification of the potential exposure, Dunmore retained Calderwood & Harkness LLP to conduct a comprehensive internal investigation into the potential sanctions violations and to represent Dunmore in connection with any government inquiries. Victoria Chambers, Partner in Calderwood & Harkness's White Collar Defense & Investigations Practice Group, was assigned as the Responsible Partner. Conrad Reeves, Senior Counsel in the Export Controls & Sanctions Practice Group, was assigned as co-lead for sanctions-specific analysis. Jasmine Thornton was assigned as Lead Associate.
Calderwood & Harkness immediately commenced the internal investigation, directing the preservation of documents and electronic communications across all relevant Dunmore entities and custodians. On April 15, 2022, Calderwood & Harkness issued a written litigation hold memorandum to all relevant custodians and IT personnel at DEH, DTI, DUA, Dunmore Renewables GmbH, and DEWA, directing the preservation of all documents, electronically stored information ("ESI"), and other materials potentially relevant to the investigation.
D. DOJ Inquiry (April 19, 2022)
On April 19, 2022, five days after Dunmore retained Calderwood & Harkness, the U.S. Department of Justice, National Security Division, Counterintelligence and Export Control Section, issued Grand Jury Subpoena GJ No. 22-418 to Dunmore Energy Holdings Ltd. The subpoena was issued by the U.S. District Court for the District of Columbia, Grand Jury 22-2, and was served upon Dunmore via its registered agent in Houston, Texas. The subpoena called for the production of documents relating to Dunmore's transactions with Petronova Trading FZE, Zenith Petroleum DMCC, Caspian Logistik GmbH, and any entity affiliated with Volkhov Industrial Group JSC.
The DOJ investigation is led by the following government personnel:
•  Lead Prosecutor: Assistant United States Attorney Meredith Calloway, National Security Division, U.S. Department of Justice
•  Trial Attorneys: Samuel Kovacs and Diana Pressman, Counterintelligence and Export Control Section, National Security Division
•  FBI Case Agent: Special Agent Paul Reinhardt, FBI Counterintelligence Division, Washington Field Office
Calderwood & Harkness promptly engaged with the DOJ upon receipt of the subpoena and has maintained an open and cooperative dialogue with the government throughout the investigation.
E. Internal Investigation
Calderwood & Harkness conducted a comprehensive internal investigation from April 2022 through May 2023, encompassing document collection and review, forensic accounting analysis, witness interviews, and legal analysis.
Forensic Accounting. Calderwood & Harkness retained Ridgeline Advisory Group LLC, a Washington, D.C.–based forensic accounting and financial advisory firm, to conduct a forensic analysis of the transactions at issue. The engagement was led by Dr. Margaret Liu, CPA, CFE, under Ridgeline engagement number RAG-2022-0319. Ridgeline's forensic work included the analysis of financial records, wire transfer data, trading documentation, bank statements, and corporate ownership structures. Ridgeline delivered its final forensic accounting report on April 1, 2023. The report detailed the financial flows associated with the crude oil swap transactions, the equipment exports, and the structured payments, and provided the beneficial ownership analysis of Petronova Trading FZE that is summarized in Appendix E.
Electronic discovery. Calderwood & Harkness retained Nexagen Analytics Inc., a New York–based e-discovery and data analytics firm, to manage the collection, processing, and hosting of electronically stored information. The engagement was managed by Brian Cavanaugh of Nexagen, under project number NX-DEH-2204. Nexagen collected ESI from document custodians and data sources across six jurisdictions (the United States, the United Arab Emirates, Germany, the Cayman Islands, Nigeria, and the United Kingdom). The collection yielded a total universe of 2,347,812 documents. Following the application of search terms, date filters, and de-duplication, 438,916 documents were deemed responsive to the investigation. A total of 12,847 documents were withheld on the basis of attorney-client privilege or work product protection, and privilege logs were prepared and maintained.
Witness Interviews. Calderwood & Harkness conducted a total of 47 witness interviews across three rounds:
•  Round 1 (May 18 – June 30, 2022): 22 interviews of current and former employees, including Derek Hargrave, Natasha Sorokin (through counsel), Gerald Fisk (through counsel), Omar Al-Rashidi, Yves Leclerc, Rajesh Malhotra, and other DTI and DEH personnel.
•  Round 2 (August 5 – September 30, 2022): 15 follow-up interviews, informed by the initial findings of the forensic accounting analysis and document review, including additional sessions with Omar Al-Rashidi and Yves Leclerc, and initial interviews of financial institution personnel and external logistics contacts.
•  Round 3 (February 15 – March 15, 2023): 10 targeted interviews, focused on specific transactions and payment flows identified by Ridgeline's forensic analysis, including additional sessions with cooperating witness Omar Al-Rashidi.
All interviews were conducted pursuant to Upjohn warnings, advising each interviewee that Calderwood & Harkness represented Dunmore (and not the individual), that the interview was privileged, and that Dunmore held the privilege and could choose to waive it.
Internal Investigation Report. Calderwood & Harkness completed its internal investigation and compiled its findings in a comprehensive 176-page internal investigation report, which was finalized and submitted to the DOJ on May 15, 2023. The report details the factual findings, forensic accounting results, and legal analysis supporting the conclusions presented in this VSD.
F. Coordination with DOJ
This VSD is being filed in coordination with the ongoing DOJ investigation. AUSA Meredith Calloway has been notified of this filing and is aware of its contents.
Throughout the investigation, Calderwood & Harkness has maintained a cooperative relationship with the DOJ and has provided the following:
Proffers. Calderwood & Harkness made two oral proffers to the DOJ:
•  Initial Proffer (July 15, 2022): Provided the DOJ with an initial overview of the apparent violations, the scope of the internal investigation, and preliminary findings regarding the Petronova and Zenith Petroleum relationships.
•  Supplemental Proffer (November 20, 2022): Provided the DOJ with supplemental findings from the forensic accounting analysis, including the beneficial ownership analysis of Petronova, the wire transfer analysis, and the identification of the nine tainted crude oil swap transactions.
Document Productions. Calderwood & Harkness made two document productions to the DOJ:
•  First Production (November 1, 2022): 287,412 documents, Bates-stamped DEH-DOJ-000001 through DEH-DOJ-287412.
•  Second Production (January 30, 2023): 151,504 documents, Bates-stamped DEH-DOJ-287413 through DEH-DOJ-438916.
In total, Dunmore produced 438,916 responsive documents to the DOJ, exclusive of the 12,847 documents withheld on privilege grounds.
Witness Access. Dunmore has made its employees available for interviews by the DOJ, including cooperating witness Omar Al-Rashidi.
Internal Investigation Report. As noted, Calderwood & Harkness submitted its 176-page internal investigation report to the DOJ on May 15, 2023. This report is available to OFAC upon request, subject to the selective waiver protocol described in Section I above.
VI. DETAILED DESCRIPTION OF APPARENT VIOLATIONS
A. Category 1: Crude Oil Swap Transactions with Volkhov-Connected Intermediaries
1. Overview of Counterparties
The crude oil swap transactions at issue were conducted between DTI and two Dubai-based counterparties: Petronova Trading FZE and Zenith Petroleum DMCC. The following provides a detailed description of each counterparty, including the results of the beneficial ownership analysis that established the Volkhov connections underlying these transactions.
Petronova Trading FZE.  Petronova Trading FZE is a Free Zone Establishment registered in the Jebel Ali Free Zone Authority ("JAFZA"), Dubai, United Arab Emirates. Petronova's registered address is Office 1407, Al Shafar Tower, Dubai Internet City, Dubai, UAE. Petronova's Managing Director is Sergei Volkov, a Russian national and UAE resident. Petronova was incorporated in JAFZA on February 12, 2017, and holds itself out as a commodity trading company engaged in the trading of crude oil, refined petroleum products, and petrochemicals. Petronova maintains banking relationships with Crescent Commercial Bank PJSC (Dubai) and Beaumont National Bank (Dubai).
The forensic investigation conducted by Ridgeline Advisory Group LLC, in conjunction with corporate registry research conducted by Calderwood & Harkness and its local counsel in the UAE and the British Virgin Islands, established that Petronova is beneficially owned and controlled by entities and individuals closely affiliated with Volkhov Industrial Group JSC and its Chairman, Arkady Volkhov. The beneficial ownership analysis, summarized in Appendix E and detailed in Ridgeline's forensic report, revealed the following ownership structure:
(a) Petronova's registered shareholder is Cascade Holdings Limited, a company registered in the British Virgin Islands (BVI Company No. 1987234). Cascade Holdings Limited holds 100% of the shares of Petronova.
(b) Cascade Holdings Limited is, in turn, owned by two entities: (i) Volga Resources SARL, a company registered in Luxembourg, holding 55% of the shares; and (ii) Baltica Capital Partners Ltd., a company registered in Cyprus, holding 45% of the shares.
(c) Volga Resources SARL's ultimate beneficial owner is Arkady Volkhov, Chairman of Volkhov Industrial Group JSC, who holds his interest through a series of additional intermediary entities.
(d) Baltica Capital Partners Ltd. is controlled by Dmitri Kovalenko, a senior executive of Volkhov Industrial Group JSC, through his personal holding company.
Based on this analysis, Volkhov Industrial Group JSC, through Arkady Volkhov and affiliated persons, held a beneficial ownership interest of at least 55% in Petronova, and potentially up to 100% when accounting for the Kovalenko-controlled interest through Baltica Capital Partners Ltd. This ownership interest exceeds the 50% threshold established by OFAC's 50% Rule, rendering Petronova's property and interests in property blocked under the applicable sanctions programs. The evidence further supports the conclusion that Petronova served as a front company or conduit for Volkhov-controlled commerce, and that its primary function in the transactions at issue was to obscure the involvement of Volkhov and its affiliates.
Sergei Volkov, Petronova's Managing Director, maintained close personal and professional relationships with Arkady Volkhov and other senior Volkhov executives. Documentary evidence recovered during the investigation, including email correspondence and encrypted messaging records, confirms that Volkov acted at the direction of Volkhov Industrial Group in conducting the crude oil swap transactions with DTI.
Zenith Petroleum DMCC.  Zenith Petroleum DMCC is a DMCC (Dubai Multi Commodities Centre) company registered in Dubai, UAE. Zenith Petroleum's registered address is Unit 2201, Jumeirah Bay Tower X2, Cluster X, Jumeirah Lakes Towers, Dubai, UAE. Zenith Petroleum's Managing Director is Farhan Qureshi, a Pakistani national and UAE resident. Zenith Petroleum was incorporated in the DMCC on August 3, 2018, and holds itself out as a petroleum products trading company.
Zenith Petroleum was involved in two of the fourteen crude oil swap transactions at issue (Transactions No. 7 and No. 11 in the Transaction Summary Schedule at Appendix A). While the direct ownership links between Zenith Petroleum and Volkhov are less clear than those established for Petronova, the forensic evidence indicates that Zenith Petroleum facilitated transactions in which crude oil was ultimately sourced from or destined for Volkhov-controlled entities. Specifically, shipping documentation, bills of lading, and cargo inspection certificates obtained during the investigation establish that crude oil in the Zenith Petroleum transactions originated from production facilities operated by subsidiaries of Volkhov Industrial Group in the Volga-Urals region and Western Siberia. Additionally, payment flow analysis revealed that funds received by Zenith Petroleum from DTI were subsequently transferred, in whole or in part, to accounts associated with Petronova Trading FZE and entities linked to the Volkhov ownership structure.
The investigation was unable to definitively establish that Zenith Petroleum's ownership structure independently triggers the OFAC 50% Rule. However, the totality of the evidence—including the sourcing of crude oil from Volkhov-controlled production facilities, the payment flows to Volkhov-affiliated entities, and the coordination between Zenith Petroleum and Petronova—supports the conclusion that the Zenith Petroleum transactions involved dealings with Volkhov-connected property and interests in property.
Volkhov Industrial Group JSC.  Volkhov Industrial Group JSC is a Joint Stock Company registered in Moscow, Russia, with its headquarters at 12 Kutuzovsky Prospekt, Moscow 121248, Russia. Volkhov's Chairman is Arkady Volkhov. Volkhov is a Russian industrial conglomerate with significant operations in the energy sector, including crude oil production, refining, and petrochemical manufacturing. Volkhov controls production assets in the Volga-Urals region and Western Siberia.
Volkhov's OFAC designation history is as follows:
•  November 15, 2019: Designated under Directive 2 of Executive Order 13662 (Sectoral Sanctions Identifications List), as a person determined to be operating in the energy sector of the Russian Federation economy.
•  April 6, 2022: Designated as a Specially Designated National on the SDN List, pursuant to Executive Order 14024, subject to full blocking sanctions.
The full OFAC designation history for Volkhov is set forth in Appendix F.
2. Description of Transactions
Between June 2020 and February 2022, DTI's Dubai-based trading desk executed a total of fourteen (14) crude oil swap transactions with Petronova Trading FZE and Zenith Petroleum DMCC. The aggregate notional value of these fourteen transactions was approximately $218.7 million.
The forensic analysis conducted by Ridgeline Advisory Group LLC determined that at least nine (9) of the fourteen transactions, with an aggregate notional value of approximately $156.3 million, involved crude oil that was ultimately sourced from or destined for entities controlled by or affiliated with Volkhov Industrial Group JSC. These nine transactions are classified as "tainted" in the Transaction Summary Schedule at Appendix A. The remaining five (5) transactions, with an aggregate notional value of approximately $62.4 million, did not present sufficient evidence of a direct Volkhov nexus to be classified as tainted. However, Dunmore discloses all fourteen transactions for completeness and transparency, as all were conducted with the same counterparties that are the subject of this VSD.
The nine tainted crude oil swap transactions are summarized below. A detailed transaction-by-transaction schedule, including all fourteen transactions, is provided in Appendix A.
The structure of these transactions was consistent across the nine tainted trades. In each instance, DTI entered into a crude oil swap agreement with either Petronova or Zenith Petroleum under which DTI would receive delivery of crude oil of a specified grade (typically Urals Blend, ESPO Blend, or Siberian Light) at a specified delivery point (typically FOB Primorsk, FOB Ust-Luga, FOB Kozmino, or CIF Fujairah). DTI would then resell the crude oil to third-party buyers in Asia, Europe, or the Middle East. The swap transactions were documented using ISDA Master Agreements and confirmations, with payment terms denominated in U.S. dollars.
The evidence obtained during the investigation established that, in each of the nine tainted transactions, the crude oil was ultimately sourced from production facilities operated by subsidiaries of Volkhov Industrial Group JSC. Shipping documentation, including bills of lading, cargo inspection certificates, and certificates of origin, identified loading terminals and production sources associated with Volkhov-controlled entities. In the case of the two Zenith Petroleum transactions (Transactions No. 7 and No. 11), while the shipping documentation was less directly traceable, the payment flow analysis confirmed that funds paid by DTI to Zenith Petroleum were subsequently transferred to accounts associated with Petronova and other entities in the Volkhov ownership structure.
Nature of Violation. During the period from November 15, 2019 (the date of Volkhov's designation under Directive 2 of E.O. 13662) through April 5, 2022 (the day before Volkhov's SDN designation), transactions with Volkhov-connected entities potentially violated the prohibitions of Directive 2, which restricts U.S. persons from transacting in, providing financing for, or otherwise dealing in new debt or new equity of persons on the SSI List operating in the energy sector. While the crude oil swap transactions were not themselves debt or equity instruments, the provision of financing or the facilitation of transactions benefiting Volkhov-connected entities potentially constituted prohibited dealings under Directive 2 and the broader prohibitions applicable to U.S. persons.
To the extent that any transaction activity, including pending settlements or open positions, continued on or after April 6, 2022—the date of Volkhov's SDN designation—such activity would have constituted a violation of the full blocking provisions of E.O. 14024. The internal investigation identified one pending settlement that was processed on April 7, 2022 (Transaction No. 13, with a settlement date of April 7, 2022), which is included in the nine tainted transactions. Dunmore acknowledges that this settlement constituted a potential violation of the SDN-blocking provisions.
3. Roles of Key Individuals
Derek Hargrave (President, DTI). Mr. Hargrave served as President of DTI and was the most senior Dunmore executive in Dubai during the relevant period. As President, Mr. Hargrave had supervisory authority over DTI's trading desk and was responsible for approving all significant trading relationships and transactions. The evidence obtained during the investigation establishes that Mr. Hargrave approved and directed the trading desk's engagement with Petronova Trading FZE and Zenith Petroleum DMCC. Mr. Hargrave personally signed off on the ISDA Master Agreements with Petronova (executed March 12, 2020) and Zenith Petroleum (executed May 5, 2021), as well as individual transaction confirmations for the larger trades. Internal email correspondence and witness testimony from cooperating witness Omar Al-Rashidi indicate that Mr. Hargrave was aware of the Volkhov connections underlying the Petronova relationship. Specifically, Mr. Al-Rashidi reported that Mr. Hargrave had acknowledged to him, in a conversation in approximately September 2020, that Petronova was "connected to the Volkhov group" but stated that the relationship was commercially advantageous and that the sectoral sanctions were "manageable" given DTI's Dubai structure.
Natasha Sorokin (Senior Trader, DTI). Ms. Sorokin served as DTI's primary point of contact with Sergei Volkov of Petronova Trading FZE and was directly responsible for the execution of the crude oil swap transactions. Ms. Sorokin joined DTI in January 2019 as a Senior Trader specializing in Russian-origin crude oil and petroleum products. She was recruited specifically for her expertise in Russian energy markets and her existing network of contacts among Russian-origin trading companies in the Gulf region. The investigation recovered extensive personal communications between Ms. Sorokin and Sergei Volkov, including encrypted messaging application records (Signal and Kestrel Data Systems), which reveal that Ms. Sorokin had detailed knowledge of the ultimate parties to the transactions and was aware that the crude oil was sourced from Volkhov-controlled production facilities. In one recovered Signal message, dated August 22, 2021, Ms. Sorokin wrote to Volkov: "The Urals cargo from Primorsk — is this the same VIG barrels as last time? Need to know for the inspection cert." Volkov responded: "Yes, same source, same quality. All docs will be handled by Moscow." This and similar communications demonstrate Ms. Sorokin's knowledge of and participation in the scheme to channel Volkhov-controlled crude oil through Petronova.
Omar Al-Rashidi (Head of Middle East Operations, DTI). Mr. Al-Rashidi served as Head of Middle East Operations at DTI and had operational awareness of the trading desk's activities, including the relationships with Petronova and Zenith Petroleum. Mr. Al-Rashidi has cooperated fully with the internal investigation and has provided detailed accounts of the trading desk's practices, the nature of the Petronova and Zenith Petroleum relationships, and the roles of Mr. Hargrave and Ms. Sorokin. Mr. Al-Rashidi has stated that he raised concerns about the Petronova relationship to Mr. Hargrave on at least two occasions (in approximately October 2020 and March 2021), but that Mr. Hargrave dismissed these concerns and directed that trading with Petronova continue. Mr. Al-Rashidi has been designated a cooperating witness and has been made available for interviews by the DOJ.
B. Category 2: Oilfield Equipment Exports via Caspian Logistik GmbH
1. Counterparty: Caspian Logistik GmbH
Caspian Logistik GmbH is a Gesellschaft mit beschränkter Haftung registered in Hamburg, Germany (Handelsregister: HRB 163258, Amtsgericht Hamburg). Caspian Logistik's registered address is Mönckebergstraße 22, 20095 Hamburg, Germany. The Managing Director of Caspian Logistik is Klaus Weidemann, a German national. Caspian Logistik was incorporated on July 15, 2016, and describes itself as a logistics and freight forwarding company specializing in energy sector equipment and supplies for the Caspian region and Central Asia.
Despite its stated focus on the Caspian and Central Asian markets, the investigation established that Caspian Logistik served as a logistics intermediary for the shipment of oilfield drilling equipment and components from various origins to end users in Russia. The investigation found that Caspian Logistik maintained significant commercial relationships with entities affiliated with Volkhov Industrial Group and that Klaus Weidemann had traveled to Moscow on multiple occasions to meet with Volkhov representatives.
2. Description of the Exports
Between August 2020 and January 2022, DTI facilitated the export of oilfield drilling equipment and components to Russia through Caspian Logistik GmbH. The equipment was valued at approximately $12.4 million in aggregate across multiple shipments. The equipment consisted primarily of downhole drilling tools, drill pipe assemblies, mud pump components, and related oilfield service equipment.
The equipment was classified under the Export Administration Regulations ("EAR") under Export Control Classification Numbers ("ECCNs") 2B350 (chemical and biological equipment, which captures certain high-specification valves, pumps, and related components used in oilfield applications) and 2B999 (specific processing equipment not elsewhere specified or included). The classification of the equipment under these ECCNs triggered additional export control requirements, including end-user certification and license determination obligations.
The shipments were routed from various points of origin—including the United States, the United Kingdom, and Germany—through Caspian Logistik GmbH's Hamburg facility, where they were consolidated and re-shipped to end users in Russia. The end-user certifications provided by Caspian Logistik to DTI identified the end users as independent Russian oilfield service companies. However, the forensic investigation established that the named end users were either fictitious entities or shell companies controlled by or affiliated with Volkhov Industrial Group JSC. Specifically:
(a) End-user certifications for three shipments identified the end user as "SibTech Petroleum Services LLC, Tyumen, Russia.