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Saudi Aramco’s Dealings with Dodgy Competitor

1.5 billion dollars of suspicious transactions

By Saja Mortada

Banking documents reveal suspicious payments sent to Saudi Aramco

At the height of the car wash scandal, considered one of the biggest corruption scandals in history and which implicated the Brazilian government-owned Petrobras in 2014, the giant oil company sent large sums of money to the Saudi Arabian state-owned oil company Saudi Aramco, in a process flagged as suspicious by Deutsche Bank.

It was not the scandal of corruption, bribery and money-laundering of Petrobras alone that shocked Brazil’s economy and its political systems, as between mid-2014 and early 2016, the global economy also faced one of the biggest declines in oil prices since WW2, reaching 70%.

In the same period, specifically between September 2014 and October 2016, Petrobras sent 29 payments totalling $1.5 billion to Saudi Aramco over four different time periods, with one set of transactions reaching around $600 million, according to bank documents.

The data obtained by BuzzFeed News and shared with ICIJ, ARIJ and other media partners, indicates a set of suspicious transactions between the Brazilian oil giant Petrobras and the Saudi oil company Aramco from 2014-2016.

These transactions, contained in suspicious activity reports or SARs, were filed by Deutsche Bank with the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN).

SARs are not evidence of wrongdoing. They reflect views by watchdogs within banks, known as compliance officers, reporting transactions that bore signs that deserve further scrutiny.

Why Petrobras?

The suspicious activity report (SAR) was filed to the Financial Crimes Enforcement Network (FinCEN) by Deutsche Bank because “negative information was found for Petroleo Brasileiro SA (Petrobras) regarding allegations of bribery, corruption and money-laundering,” according to the document dated December 18, 2014.

Petrobras’s banker, Banco do Brasil responded to a Deutsche Bank query and said it “didn’t identify any issues that may give some reason for suspicion about the purpose of the transaction,” according to the report.

Banco do Brasil said it couldn’t tell Deutsche Bank anything more about the bribery and corruption allegations surrounding Petrobras. “All we know are news released by press and Petrobras, in their website. So, we don't have conditions to issue any opinion about the facts,” the bank told Deutsche Bank, according to the suspicious activity report.

The former general manager of both Petrobras and Banco de Brasil, Aldemire Bendine, was implicated in 2018 in the car wash scandal, and was sentenced to 11 years in prison for money laundering and using his position to obtain bribes.

In successive SARs, Deutsche Bank noted that it was reporting transactions involving Petrobras, including some with Aramco, because “there was an unusual variation of transaction amounts” and because Deutsche Bank was “unable to confirm the commercial purposes” of all the transactions. The bank does not specify whether the transactions to Aramco are among those that it could not determine the purpose of.

Transfers from Petrobras to Aramco between 2014 and 2016
Date
Between 2 Sept 2014 and 3 Nov 2014
dollar icon
from
Petrobras
to
Aramco
6 transactions
$587,165,558.69
Date
Between 2 Sept 2014 and 13 Feb 2015
dollar icon
from
Petrobras
to
Aramco
7 transactions
$382,459,825.34
Date
Between 14 Dec 2015 and 8 Jan 2016
dollar icon
from
Petrobras
to
Aramco
3 transactions
$162,784,147.11
Date
Between 21 June 2016 and 14 Oct 2016
dollar icon
from
Petrobras
to
Aramco
13 transactions
$448,286,675.73
Date
On 13.07.2016
dollar icon
Same-day transfers
4 transactions
$95,307,628.74
Date
On 19.08.2016
dollar icon
Same-day transfers
8 transactions
$88,389,789.11
Total
$1,580,696,206

In guidance issued to financial institutions, FinCEN has previously warned that multiple transactions on one day can be a method through which companies or people try to avoid detection.

So why was Petrobras dealing with Aramco?

Based on our open-source search, it is unclear as to why Petrobras would send such large amounts to their competitor, Aramco. There is little information in Arabic or English about Petrobras importing from Saudi Arabia.

Furthermore, none of the two companies’ annual reports, investor reports, press releases or any of the other various published reports available online and reviewed by ARIJ, seem to specify that any agreement or cooperation was reached between the two companies before, during, or after the suspicious transfers.

Aramco’s response to their business dealings with the Brazilian oil company, and the $1.5 billion sent from 2014-2016, was that “Aramco does have commercial agreements with Petrobras governing the sales of crude oil and refined products to Petrobras but does not, as a matter of policy, comment on the terms and conditions of such commercial agreements.”

Petrobras is not mentioned by Aramco in any of its reports, except by default in its mention of a senior petroleum engineer who joined the company in 2013, after his previous employment at Petrobras Argentina. Several Petrobras employees have made the switch over to their competitors, and vice versa.

To date, Petrobras has not responded to requests for comment.

While Aramco has various branches across the globe , its presence in Brazil is comparatively scarce.

According to their website , Aramco does not have an office in Brazil, but does have a subsidiary, ARLANXEO Brasil S.A, which manufactures synthetic rubber, thermoplastic rubber, liquid polybutadiene, and SBR latex.

Aramco has also operated in Singapore since 1993, and in 2014, it established Aramco Asia-Singapore to provide crude oil marketing information, material sources, supply chain and inspection logistics, and other engineering services. Around the same time, Petrobras Singapore sent Aramco seven transactions worth $382,459,825.34, according to suspicious activity reports.

Is Petrobras the First?

Through these financial transfers, made between two of the biggest competitors in the global oil market, and without clear explanation as to why, Saudi Aramco is involved with one of the largest international oil companies indicted in major corruption cases. But this is not the first or only time the Saudi Oil company has dealt with a Brazilian company involved in bribery and fraud.

Brazilian aircraft manufacturer Embraer was involved in numerous bribery scandals in recent years , the most prominent of which was for a 2010 payment of $1.65 million conducted by one of its former executives Colin Steven to a long-serving Aramco employee, to persuade the oil company to buy three E170 aircrafts. Indeed, Aramco purchased the aircrafts, and after the case gained public attention in 2016, the Saudi company announced in a statement that it had conducted an internal investigation which confirmed the involvement of its employee, leading to his termination from the company, and the end of its current and future dealings with Embraer.

Despite the investigation and the resulting dismissal of the employee, the ex-Aramco employee considers his departure a retirement after serving the company for 35 years, according to one of his social media profiles.

In response to ARIJ’s questions, Aramco and Embraer confirmed that they had officially stopped any dealings between them since the scandal.

Scarce information is available in public records about dealings between the two Brazilian giants Petrobras and Embraer, yet the two companies have previous work agreements, including a memorandum of understanding signed in 2014 to apply the aviation industry’s experience with safety standards to the oil and gas sector.

However, when ARIJ asked Embraer if they had signed any agreements with Petrobras between 2014 and 2016, Embraer responded that they had not.

Given the lack of data and information published by Petrobras, Aramco and Embraer about their dealings, it is difficult to confirm the commercial purposes behind the suspicious transfers, as Deutsche Bank declared, but what is clear is that Aramco has been involved in one way or another with two of Brazil’s largest companies, Petrobras and Embraer, that have a long history of corruption, fraud and bribery. What is also clear, is that Aramco engaged in financial transactions, for reasons unknown, with Petrobras, at a time when the company was implicated in a major international corruption scandal.

What is the Car Wash Scandal?

The scandal began in March 2014 as an investigation into allegations that executives at the state-owned oil company, Petrobras, had accepted bribes from construction companies in exchange for awarding contracts at hefty prices. Later, the Brazilian Workers’ Party found itself involved in this corruption scandal, amid allegations that some of this money had been transferred to buy their votes and help in their political campaigns. Among those accused in the scandal were dozens of businessmen and politicians, including the very popular former president, Lula da Silva. However, the latter, who denied all the charges against him, considered that the investigation and subjecting him to trial "were politically motivated to prevent him from running for presidency again."

Who is Aramco ?

One of the world's largest oil companies, the Saudi company in the field of energy and chemicals production was established in 1933.

Who is Petrobras ?

The Brazilian Oil Company was founded in 1953 and is today considered one of the world’s largest oil companies.

Who is Embraer ?

The Brazilian Air Company, founded in 1969, is considered to be the third largest aircraft manufacturer in the world after Airbus and Boeing, including warplanes.