Eni inadvertently buys oil from Iran, violating U.S. sanctions

Jonathan Browning, Laura Hurst and Alberto Brambilla November 12, 2021

(Bloomberg) - Eni SpA, one of Europe’s largest oil companies, said it unwittingly purchased a consignment of crude from Iran -- an act that would have breached U.S. sanctions.

In 2019, the Rome-based company bought a shipment of oil that was purported to have come from Iraq -- a fact that authorities in Baghdad denied. Eni said in a statement to Bloomberg Tuesday that subsequent investigations including using satellite tracking, established the crude was, in fact, Iranian.

The details came to light following a London lawsuit for unfair dismissal filed by an employee fired over the oil transaction. Eni told the court that its investigators determined that the manager and her boss deliberately omitted abnormal test results that would have shown the cargo’s origin was unclear, according to a judgment in the case.

The Italian oil giant was forced to return a shipment of about 700,000 barrels of oil after laboratory results confirmed that the crude wasn’t the Iraqi grade the company had expected, the judges said in the filing. Eni shipped the cargo all the way to the Sicilian port of Milazzo, where it has a refinery, before having to transport it back to the Middle East, a roundtrip of about 10,700 miles.

The employment claim was brought by Francesca Delladio, who was fired as Eni’s manager of oil trading operations for her part in the incident. Her boss, Alessandro Des Dorides, was dismissed separately, the judges noted.

Eni said Delladio was fired for missing several red flags and withholding information from the company’s oil refining unit, according to the judgment from the tribunal. 

However, she told the tribunal that she simply executed a contract, and that it was a trader, Francesco Galdenzi, “who was the one in a position to investigate the strategy, history and background of the cargo.”

Eni said that there was never a corporate intent to violate the oil embargo.

“Thanks to the effectiveness of the controls carried out by Eni, the crude oil load was rejected,” the company said in a statement.

Des Dorides isn’t connected to the London lawsuit or the incident that led to it, his lawyer said. Delladio’s lawyer declined to comment on the case, but her witness statement for the proceedings said she was made a “scapegoat” for what happened. 

The oil was sold to Eni by a series of firms including Napag Trading Ltd., which was the “principal party” in the transaction, according to Napag’s lawyers. Napag vehemently denies “it was aware or had any suspicion that the oil cargo loaded onto the tanker originated from Iran,” the lawyers said.

Galdenzi told Eni’s internal auditors at a meeting that the price for the oil was “very good,” according to the company’s account of events reported in the judgment.

Galdenzi authorized a payment of 42 million euros ($48.2 million) despite the analysis showing that the crude didn’t match the quality of Iraq’s Basrah Light oil, the judges found. International oil trades are normally conducted in dollars.

The judges said that by the time he came to authorize payment, Galdenzi would also have been aware that its sulfur and density were inconsistent with Basrah Light. The cargo was also transferred onto the White Moon from another vessel, something that was also unusual, according to the judgment.

Galdenzi, who is currently head of business development crude for Eni’s Trade & Biofuels division according to his LinkedIn, referred questions to his employer. Eni said Tuesday that Galdenzi was himself misled.

In call transcripts filed by Eni in the U.K. employment lawsuit, Delladio and Des Dorides discussed keeping a complete set of test results away from Eni’s oil refining and marketing unit.

The conversations were revealed in a previously unreported judgment dated May 5 of this year, and a follow-up ruling posted on Nov. 5.

The court found that Delladio was unfairly dismissed because Eni failed to undertake a reasonable investigation that could have identified potentially mitigating circumstances. However, the tribunal also suggested there was an 80% chance that Delladio would still have been fired if the investigation had been carried out properly.

Eni told the tribunal that Delladio missed or ignored warning signs and an executive of her status should have had suspicions when the test results came back. Measurements of density and sulfur content are among the “very basics” of crude trading, an Eni investigator said in a letter cited by the court.

The first test results came through to Delladio on May 5, 2019, showing density measurements outside the standard parameters of so-called light crude from the Basra field and were forwarded to Des Dorides and Galdenzi, according to the ruling. Follow-up measurements confirmed abnormal figures by May 10 but the full analysis was not forwarded to Eni’s refining and marketing unit for another seven days.

The judges said Delladio failed to forward the test results on a “timely basis,” and she “was at best disingenuous, and at worst arguably dishonest, or if one accepts that she had forgotten about the receipt of the results on 10 May 2019, careless in performing an important part of her job role.”

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