Gunvor in Ecuador A predator called Gunvor in the Amazon

The Geneva-based trader has imposed itself as one of the main players in Amazonian crude without winning a single tender. With financial support from Swiss banks, Gunvor convinced Ecuador to become heavily indebted to Asian state-owned companies, pushing the country to drill even deeper into its natural reserves to reimburse them. Toxic emissions, uncontrolled oil spills – local populations live in misery. The US and Ecuadorian judicial authorities are now investigating the payment of bribes by the Gunvor network.

In the light of dusk, two flames are reflected in the eyes of Ana Lucía (first name changed), outlining a silhouette on the wooden wall of her room. The torches of this inhabitant of the area of Pacayacu in eastern Ecuador are perched 30 metres above the ground and crackle like a fire. Ana Lucía’s two ‘velitas’ burn up to 15,000 m3 of gas a day, dispersing toxic fumes up to a 10km radius – even further when the wind is strong – contaminating the atmosphere, plants and rivers in the region.

© Johis Alarcón/Panos
In front Ana Lucías house it never gets dark. As for most who live in the Amazon in Ecuador, she lives near to one of 447 flares of the excess gas that is released when crude oil is extracted.

Like most of the people who live in the Amazon, Ana Lucía lives on land that is part of an oil concession – block 57, operated by the national oil company Petroecuador. Fifty metres from the place she has called home for ten years, there is an unobstructed view of flares of the ‘excess’ gas that is released when crude oil is extracted, as well as huge storage tanks, painted green.

Cradling her two-year-old daughter in her arms, Ana Lucía is suddenly concerned about the possible consequences of our night-time arrival, pointing out a paradox – “I still prefer them to keep the ‘mecheros’ [lighters, in Spanish] burning. When they break down, the smell is so horrendous it makes you feel sick.”

Ecuador’s backyard

Ana Lucía’s daughter continues to sleep peacefully, barely bothered by the background noise of this April night. Collaborators from an international NGO have already visited before to take samples of dust from the roof of the house and a few hairs from the heads of her two older daughters. However, the analysis of the samples did not provide conclusive results – “I imagine they are too young”, she says in a fatalist manner.

Four hundred and forty-seven of these ‘mecheros’ burn in this small pocket of the country, which has been dominated by the oil industry since crude was discovered in 1967. Successive governments have all promised to lift the region out of poverty in exchange for exploitation of the land’s abundant natural resources. Yet all the local populations have reaped are cancer, miscarriages and birth defects.

From 2010 to 2016, the cancer rate in these oil regions was the highest in the world, with over 500 cases per 100,000 inhabitants, according to research by the Spanish doctor Adolfo Maldonado.

“We’re viewed as Ecuador’s backyard”. Donald Moncayo is very angry. Born in 1973 when oil exploitation had already started, he has been organising ‘toxic-tours’ to the polluted sites abandoned by Texaco/Chevron since 2003. Nothing has really changed since extractive operations were ‘nationalised’. Donald Moncayo denounces the collusion between the government and oil companies and the wilful blindness of the health authorities, who have yet to commission a single scientific study in 57 years of extractive activity. “Without studies you cannot prove causality”, he sums up while standing on the Campo Drago oil field, which is a symbol of the handover from US giant Texaco/Chevron to Petroecuador at the turn of the century.

Ecuador awarded oil concessions to nearly 20 companies. Oil exploitation zones are divided into 93 blocks, of which 22 are now exploited by the state company Petroecuador. The state company removed the vegetation to set up its new oil structures. At the heart of the moonlit area, another flare crackles alone, without a guard or security barrier. Twenty metres away the ground sizzles with dead insects; 10 metres away the heat is as suffocating as an oven would be. The ground is covered in crude oil and the water clinging to it reflects multicoloured contamination. “This is the state-of-the-art technology that we were promised” says Donald Moncayo in a strangled tone. Over his head, only the vultures continue their celestial dance unperturbed. Circling around the ‘mecheros’, the birds of prey use the hot air released by the flare to boost their flight even higher.

What’s the big deal?

Some 3,000 kilometres away, a conversation took place 3 years ago that would have strong repercussions in the tightly knit circles of the trade in Napo and Oriente, two kinds of crude extracted from the Amazonian subsoil. The scene features three disillusioned intermediaries, one of whom works for the trading house, Gunvor, as well as a discreet FBI agent who has secretly been listening to their conversations for months.

Alerted by Ecuadorian investigative journalist Fernando Villavicencio, since 2012, prosecutors at the US Department of Justice (DoJ) have been investigating a vast money laundering network that implicates Petroecuador. Over the course of nine years of investigation, the net progressively closed around Raymond K, a Gunvor intermediary employed by the trader from 2009 to 2019.

© Amazon Watch / AP
Before working for Gunvor, Raymond K was a representative for the oil consortium OCP, which operates the pipeline that leads from Ecuador to Colombia.

Here he is, on 18 February 2018, at a table in the chic restaurant Coral Gables, in a Miami suburb. The 68-year-old Canadian, who has been active around the oil fields of the Ecuadorian Amazon for over 20 years, is feeling the heat due to a US investigation. He spent at least part of the month of February drafting strategies to dig himself out of that hole with his two accomplices, Antonio P and Enrique C, two Ecuadorian entrepreneurs who reinvented themselves as oil consultants late in the day. The matter at hand involved paying bribes to Ecuadorian officials in exchange for favourable contracts.

It came back to bite them. Tracked and recorded for months by the FBI, Raymond K let his guard down and gave away some confidential information on the hot topic of the chain of responsibility within Gunvor. According to the intermediary, quoted in substance by the US judiciary, certain executives at Gunvor “were aware of the bribery schemes”. At the restaurant, Raymond K specifically referenced numerous conversations with executives at the trading house, one of whom had stated about the bribes “I don’t know if I want to know” or another who simply did not consider there to be a problem. Extracts of the criminal complaint filed by the Eastern district of New York, dated 18 August 2020, mention

“Believe me…when I was there with [the Trading Company executives], [the Trading Company executive] said ‘what’s the big deal?’”.

The three men felt abandoned by Gunvor, which seemed ready to let go of these convenient scapegoats. Raymond K has not worked for the trader since 2019. On 18 November 2020, Gunvor committed publicly to give up using intermediaries. Is this announcement connected to the affairs brewing between the Amazonian jungle and Miami? Was the trader – convicted by the Swiss judicial authorities in late 2019 of corruption in the DRC and Côte d’Ivoire – informed of the investigation in the US? When questioned by Public Eye, Gunvor asserted that it had ended the relationship with the intermediary “for compliance reasons before being notified of any investigation.”

On 6 April 2021, Raymond K himself pleaded guilty to paying USD 70 million of commissions from 2012 to 2019, including USD 22 million of bribes to three Ecuadorian officials to obtain contracts that were favourable to Gunvor. He risks a sentence of 20 years in prison, but this story is only the tip of the iceberg.

Gunvor's response

They’re in a tight spot!

Shunned by the international financial system

Let us look back at a history of frustrated empowerment and broken promises. In November 2006, Rafael Correa was elected as head of Ecuador’s government. A wind of change is blowing through Latin America with a wave of elections of ‘Bolivarian’ heads of state who promised to break away from US imperialism and from the control its multinational companies enjoyed over countries’ natural resources. Correa’s record spoke for itself. As Minister of Economy and Finance, he had just helped to revoke the concession belonging to the US company Occidental Petroleum Corporation (or Oxy) which then turned against Ecuador, accusing it of breach of contract.

© Rodrigo Buendia/AFP
His hands full of crude oil, former President Rafael Correa launched his campaign "the dirty hands of Chevron" in 2013. Eight years later, only the names of the polluters changed.

At the head of his country and its ‘Citizens’ Revolution’, the young forty-year-old also then promised to make Chevron – which has been active in the Ecuadorian Amazon since the end of the 1960s – pay for all the environmental damage caused by decades of unconstrained oil extraction. His campaign entitled ‘The Dirty Hand of Chevron’ restored hope to thousands of Ecuadorian who were the victims of this black gold. Years later, the two legal battles led to humiliating and onerous defeats for the Ecuadorian state, which had to pay over a billion dollars in damages to the multinationals.

In late 2008, the Correa government also suspended the repayment of part of its debt that it declared to be ‘illegitimate’. Civil society applauded, but Ecuador found itself shunned by the international financial system. The country was bankrupt and needed to find new economic partners to revive its main source of foreign currency. 

No one knew it at the time, but this growing international isolation would send Ecuador into the arms of Gunvor and its fellows.

Misalliance between peoples and brokers

On 27 January 2009, Ecuador sealed its shift towards China with hugs and handshakes. The state-owned entities PetroChina, UNIPEC, Sinochem and their Thai counterpart PetroThailand (PTT) indicated their eagerness to provide the funds required for oil extraction in exchange for a supply of barrels over several years. The agreement was set up within the framework of the ‘strategic alliance’ between friendly countries and enabled Rafael Correa – who had not stopped vilifying the ‘vendepatria’ (those who sell their countries) during his election campaign – to save face.

Yet it was nothing but a smokescreen. According to the US criminal complaint, Gunvor had worked behind the scenes to get this operation concluded:

“The Trading Company assisted in securing financing for approximately USD 5.4 billion in oil-backed loans from the State-Owned Entities to Petroecuador”.

At this stage, Gunvor and the companies that gravitate around it came in at the end of the chain and cashed in the barrels to sell them to US or South American refineries, as demonstrated by the research from the environmental firm

Ecuador awarded oil concessions to nearly 20 companies. Oil exploitation zones are divided into 93 blocks, of which 22 are now exploited by the state company Petroecuador.

Swiss traders are used to this kind of contract, which is known in the jargon as a ‘prefinancing’ operations (further explained in Public Eye report “Trade Finance Demystified”). Specifically, the large traders use lines of credit made available by banks – and even, sometimes, funded from their own balance sheets – to lend money to national oil companies (NOCs). The NOCs commit to reimburse the loan, which is usually subject to unfavourable interest rates, with future supplies of crude or refined petroleum products. It’s an excellent deal for any creditor. However, for producer countries, all it does is mortgage the nation’s natural resources for years or even decades to come.

We obtained a copy of the contract concluded by Petroecuador and Petrochina. Under its terms, a loan of USD 1 billion was provided in exchange for the supply of crude oil for 24 months at an interest rate of 7.25%.

© Periodismo de investigación
First prefinancing contract between Petroecuador and Petrochina signed in 2009. The loan of USD 1 billion is to be paid back within 24 months at an interest rate of 7.25%. Source: Periodismo de investigación

We also hold a copy of the 2011 contract, under which another loan of USD 1 billion was provided in exchange for the supply of barrels of oil, this time over a period of 30 months at an interest rate of 7.08%. Agreements of this nature were subsequently concluded 16 times.

Making yourself indispensable

It was nonetheless a whole galaxy of traders gravitating around Gunvor that took control of the Ecuadorian Amazon’s oil production. Taurus Petroleum, Castor Petroleum, Core Petroleum and Gunvor literally monopolised the market in Amazonian crude for the 15 years following the election of Rafael Correa. A notorious fact is that, while Gunvor was still the leader in exporting Russian oil, it never won a single one of Petroecuador’s oil block tenders – but the trader knows how to find its way through new markets.

Concerning details suggest that these companies work in close collaboration while avoiding to compete with each other.

Their directors know each other and form associations to set up new companies which share not only the export market but also, often, the same lawyers in Ecuador. At times their own managers simply move from one company to another.

Taurus Petroleum was set up by the American Ben Pollner in Geneva in 2003. It was already known for having snapped up USD 4 billion of Iraqi crude after the first Gulf War, within the framework of the UN Oil-for-Food programme. This created cause for concern, as the company was for a while suspected by the Volcker Commission of having participated in a vast bribery affair that benefitted Saddam Hussein. In the 2000s, the trader turned to Ecuador, where it swiftly imposed itself as one of the main exporters of crude to the US. It had been undertaking this activity primarily under the company name of the Castor Group, which had branches in Delaware, Geneva and Panama.

In 2009, Gunvor acquired the entirety of Castor, its expertise, its key personnel and its shares. Castor Petroleum’s vice-president was none other than… Raymond K, Gunvor’s intermediary who was tracked by the FBI. In Geneva, the company even took on the name of Gunvor SA in 2011, although Gunvor continued to operate under the company name of Castor in Ecuador from 2009 to 2011.  

Freshly landed in Latin America, Gunvor set about consolidating its control over the strategically important Petroterminal de Panamá, which was part of the acquisition of Castor Americas. It even strengthened its capacities from the end of 2012. The installation includes storage warehouses at the two ends of the pipeline, which make it possible to blend, i.e. to mix different quality crude in order to export it to the two coasts of the US without having to pay the taxes levied on use of the Panama Canal. Raymond K said that at the time he spent his life between Panama and the Bahamas, where he was an employee of the branch of Gunvor.

However, the Canadian is also at home in Ecuador, where he worked for the oil consortium OCP and Occidental Petroleum Corporation, which operated block 15. Responsible for local community relations, he is as much a man of the people as he is a political beast. In an irony of sorts, when Rafael Correa kicked out the US multinational that employed him, Raymond K got back in through the window thanks to his relationship with Enrique C.

Nicknamed the ‘oil tsar’ in Ecuador, the businessman Enrique C is the man sitting at Raymond K’s table in Miami while the FBI’s is listening closely. Together they are going to help set up a triangular oil structure between the state companies and private traders. It will become the largest corruption scandal in the history of Ecuador’s oil sector – as Fernando Villavicencio likes to call it: the Ecuadorian equivalent to the Brazilian anti-corruption ‘Lava Jato’ operation.

The oil curse

For Ecuador, this triggers, once more, the start of a vicious cycle of indebtedness. The country borrowed some USD 20 billion during Correa’s ‘Chinese’ decade, mostly repayable with crude oil at interest rates of 6-8%, or against infrastructure work to be undertaken by Chinese companies. After it was restructured in 2009, Ecuador’s external debt skyrocketed once again, reaching USD 64 billion in 2020 or 68.9% of GDP. Nearly a third of the country’s budget is spent on repaying its creditors, which represents 2.3 times what the country spends on public health.

The new lines of credit serve to reimburse the old lines or to invest in new oil or mining infrastructure, which in turn feeds the vicious circle that negatively impacts the needs of the population and the environment. The state invests billions in the modernisation of the Esmeraldas refinery and to construct the Pacifique refinery. The outcome is disastrous, because the first is not operational while the second never came to fruition.

“That’s the tragedy of this country – we are obliged to export crude to import petroleum products”

summarises Alberto Acosta, Rafael Correa’s Minister of Energy and Mines. The history of oil in Ecuador presents a perfect example of the resource curse.

© Johis Alarcón/Panos
On behalf of the government, men from local communities are cleaning polluted pools dating from the oil production by Texaco/Chevron. The works have lasted seven years already.

From 2014 to 2020, 87% of Ecuador’s petroleum production (over 660 million barrels) was used to reimburse debt, according to reports published by the environmental NGO The booming oil activities are draining the ground used to build them. The oil wells of the region of Lago Agrío, operated by Texaco/Chevron since 1972, are starting to run dry. Drilling must go deeper and further into the Amazon. In 2013, a taboo is broken: after committing to preserve the Yasuní national park – which is a UNESCO Biosphere Reserve since 1989 and a site for isolated indigenous groups – Rafael Correa confirmed that the oil industry would be able to move further into the Amazon.

For Eduardo Pichilingue, the emblematic block 43, which marks the entrance to the Yasuní natural park, is “the last frontier of extractivism”. The environmentalist who Public Eye met with had himself joined Correa’s first government to protect what he calls the “crown jewel”. However, he considers that the former leader ended up surrounded by “the same people who had driven the oil boom of the 1970s. They are the people who said that oil would provide the resources to fund the country’s development”.

“My mother never fished again”

On the bank of the river Coca, a tributary to the Amazon, children play in newly formed crevasses. The ground there is still moist, swallowing them up to their ankles, knees or, for the smallest, their waists. Here, on 8 April 2020, the river reasserted its rights, washing away 35 hectares of soil before returning to its usual river bed. That day, exactly one year ago, the erosion caused by decades of extraction also caused two pipelines to rupture. The equivalent of 15,000 barrels of crude oil spilt along the Cocoa and Napo rivers over a distance of 363 kilometres that reached up to Peru.

© Johis Alarcón/Panos
Like most of the other members of the Quechua community, Cecilia Grefa had to turn her back on the polluted river. She is now dependent on rain water as well as sporadic food deliveries.

Cecilia Grefa remembers it. She is a member of the Quechua ethnic group (the largest of Ecuador’s 14 indigenous groups) and the 60-year-old is part of one of the 105 communities affected by the erosion caused by the extractive industry. That day, she nearly left her fishing net behind. Between the current and the debris, it took two people to pull her out of the water and get her out, covered in crude oil. “I came out all ugly”, she says, rubbing her arms as if they were still covered in oil. “I couldn’t sleep anymore; no ointment could sooth the burns”.

Finally, the rain washed away the most visible residue from the banks. But the water and the soil are still contaminated. Sat next to her mother, Verónica is one of the people who have decided to fight for their cause. As if she needed to justify her decision, she says “My mother never fished again”. Tired of there being no reaction, in early April approximately 30 members of the community blocked the road used by the trucks for three days. Petroecuador finally promised some dikes, built using pipes from the pipeline, which continue to sit under the shade of the trees.

For Verónica it is clear that “it is no longer possible to cohabit with the industry”.

All the more so because the great hopes of national development based on ‘black gold’ went up in smoke due to the deceit of the industry. Even though the national oil company Petroecuador operates most of the drills, private companies have largely retaken control of Amazonian oil. An unusual clause removing destination limits on exchanged crude has been inserted into the ‘strategic alliance’ contracts between state-owned companies. For traders, the profit, like the devil, is in the detail.

Ships change course

The overwhelming majority of the tonnes of Oriente and Napo extracted from around the Verónica’s village never arrived at the Asian ports where they were supposedly headed. In reality, Gunvor and its colleagues have been taking control of this crude since 2009 and have been selling it onto the Peruvian, Chilean, Panamanian and above all the US markets, making a very tidy margin.

The deals have got even better as Venezuela has progressively become isolated and the US sanctions targeting its main source of foreign currency, crude oil, have taken their toll. Little by little, due to its quality Ecuadorian crude is taking over as an alternative to its Venezuelan cousin. The traders, who act in tandem with Asian SOEs, are further increasing their profits while avoiding transporting goods to the other side of the world.

This trend is confirmed by the analysis of the bills of lading (documents describing ships’ cargo) and customs figures.

European banks make significant profits from the ‘extractivist mission’ in the Amazon through commercial relations with Gunvor, Castor, Taurus and Core Petroleum. They fund the purchase of their barrels and offer guarantees for the transport from the port of Esmeraldas to Chevron, ExxonMobil or Marathon’s US refineries. From 2009 to 2020, they provided financing for 155 million barrels of crude from the Amazon worth an estimated USD 10 billion. The top six largest funders include four Geneva-based banks: ING, Credit Suisse, BNP Paribas and UBS, according to the report published by Amazon Watch and last August.

© Amazon Watch /
Swiss Banks are hungry for Amazon crude oil. The top six largest funders include four Geneva-based banks. Source: Amazon Watch / "European Banks Financing Trade of Amazon Oil to the U.S.", 2020.

The investigative journalist Fernando Villavicencio proceeded with calculating the differential between the price of Amazonian crude sold by Petroecuador and the much higher price charged when it arrives at international refineries, where actual tender processes take place and the price is closer to that of a competitive market.

The conclusion is a three-to-five-dollar difference per barrel for the prices charged at US refineries; up to seven dollars for prices charged in Peru. It’s a tidy sum considering that 1.3 billion barrels of Napo and Oriente have been pledged in 16 prefinancing agreements that run up to 2024. Fernando Villavicencio assesses the loss of earnings for the Ecuadorian state to be around USD 4 billion (taking a reference of a 3-dollar differential per barrel).

He is not the only person to be concerned. Public Eye obtained a report by the Ecuadorian audit office dated November 2010 that notes a loss of earnings of USD 34.5 million for Petroecuador solely on the basis of its 2009 prefinancing agreement with Petrochina. It also notes that it is ultimately intermediaries like Taurus Petroleum who resell Napo and Oriente crude. So, what is going on?

Why are Ecuadorian officials not reacting?

Why did they not renegotiate the price of the barrel in the subsequent prefinancing contracts that were concluded?

Opaque offshore entities

The first part of the answer lies in Panama; more specifically in the documents of the company Mossack Fonseca, which were hacked and leaked as part of the Panama Papers data leak in 2016. The documents included consulting contracts from 2009 between two companies controlled by Enrique C and one of his associates (Livingston Financial and Eston Trading) and Waterway Petroleum, a branch of Gunvor that at the time was based in the British Virgin Islands. The latter entity committed to pay a whole one dollar per barrel of crude delivered. This is where we come back to our two friends from the restaurant.

Waterway Petroleum, a branch of Gunvor, made payments to offshore companies controlled by intermediary Enrique C, to a bank account at Banvivienda, which ended up closing the bank accounts in light of the lack of justification for the transfers.

This kind of mechanism for distributing commission was used repeatedly, notably, according to the US judiciary, via bank accounts in Singapore controlled by Gunvor “beginning in or about January 2013, to promote the system of bribery and money laundering”. In the small world of trading in Geneva, rumours were already circulating (see box below). The Panamanian bank Banvivienda had, for its part, ended up closing its bank account at Eston Trading, where Waterway Petroleum made payments, in light of the lack of justification for the transfers.

The US criminal complaint is scathing. In order to convince Petroecuador officials to draft contracts that were damaging to their country and to obtain confidential information,

Gunvor allegedly paid commissions to three Ecuadorian officials.

They were anonymised but ultimately recognisable by the descriptions of their biographies. According to the US Department of Justice, “Raymond K […] and others [editor’s note, at Gunvor] knew that these payments would be used, at least in part, to pay bribes to Ecuadorian officials”.

According to our information, the individuals in question were Nilson Arias, known as ‘el Gordo’ and the international business manager at Petroecuador until 2017; his successor, who resigned in 2020; and José Agusto Briones who, from 2017 to 2020, held the post of secretary to the Presidency of the Republic and of Minister of Energy and Mines. The latter has been put into preventive detention on 14 April of last year, and was found dead in his cell the 23rd of May. The official version points towards a suicide. Petroecuador blacklisted Gunvor, asking Chinese state-owned entities to do the same.

In the light of these Pacayacu ‘mecheros’, these revelations have had little impact on the life of Ana Lucía’s family. Whatever goes on with Amazonian crude, the pumpjack continues its monotonous movement until it runs dry. While the Public Eye photographer is showing her daughters the basics of the 7th art, we ask Ana Lucía if she has a message for the Swiss banks and traders who fund the extractive activity. Their names mean nothing to her, but she nods gently and says “We live here because we have nowhere to go”. Fifty metres away, Ana Lucía’s two torches will continue to burn all night long.

Rival traders but with the same modus operandi

They may well be rivals in Geneva, but traders are sometimes forced to use the same intermediaries. In November 2020, Public Eye revealed how Gunvor and Vitol had been obliged to do business together to cover up payments, with the same Parisian restauranteur, who called himself a ‘straw man’.

Other intermediaries take on another scale and manage to make themselves unavoidable on ‘their’ market. This seems to have been the case in Ecuador. Following the testimony of one of its executives, in December 2020, Vitol admitted its guilt to the US judiciary in relation to a case of bribes paid to Ecuadorian officials in exchange for favourable fuel supply agreements. False consulting contracts, offshore companies and a corrupt Ecuadorian official identified simply as ‘El Gordo’ by the US DoJ – there are clear parallels with the Gunvor scandal in the same country. Above all, the descriptions of the Ecuadorian consultants correspond perfectly in the two cases. 

Public Eye Case Studies Shedding light on dark business