Trafigura says Gupta sought to pass off Russian metal as Indian - court docs

By Polina Devitt and Eric Onstad

LONDON (Reuters) - An Indian businessman accused by Trafigura of fraud told the commodity trader he imported Russian nickel and had it processed before rebranding it as Indian to get around financing restrictions, a former Trafigura executive said in an affidavit to a London court.

The document suggests possible ways Russian metal has continued to flow onto global markets despite a host of companies and banks refusing to deal with Russian commodities following the invasion of Ukraine.

The affidavit forms part of a case Trafigura is bringing against Prateek Gupta in London's High Court, alleging "systematic fraud" by Gupta's companies in substituting other materials for nickel Trafigura had bought.

Trafigura said on Feb. 9 that it had booked a $577 million charge relating to the substitutions. The court imposed a $625 million global freezing order on Gupta and his firms on Feb. 8, which Gupta plans to challenge.

A spokesperson for Gupta said: "We have not yet responded to Trafigura's allegations. We are preparing a robust response and that will be made available soon."

Trafigura's then head of nickel trading Socrates Oikonomou said in the affidavit the firm had been buying nickel from Gupta and several of his companies since 2015, but after the conflict in Ukraine erupted in February last year Citi said it would no longer finance deals with Russian metal.

"Citi stipulated that it would only continue to finance the trades if the nickel which was being traded was not of Russian origin," Oikonomou said in his affidavit. Citi declined to comment.

"Mr Gupta indicated in a telephone call that he intended to comply with this requirement."

Gupta later told Oikonomou that he had got around the restriction by having an unnamed partner process nickel imported from Russia into an alloy, the affidavit said.

"The supposed objective behind this was to change the origin of the metal from Russian origin to an Indian (or at least non-Russian) retreated alloy," Oikonomou said in the affidavit.

This was a time when "Russian origin material was becoming hard to sell in the market and difficult to obtain financing in respect from banks", he added.

Gupta blamed the unnamed partner for substituting nickel alloy for the high-grade nickel in the Trafigura cargoes, Oikonomou said.

The documents do not make clear the volumes of Russian nickel that was being smelted and rebranded as Indian metal.

After Trafigura began to suspect in October last year that around 25,000 tonnes of metal sold by Gupta's firms may not be high-grade nickel, it scrambled to inspect over 1,000 shipping containers, court documents showed.

Cargoes that Trafigura inspected contained other materials, including carbon steel, worth a fraction of the value of nickel, the documents said.

While there have been scant restrictions imposed by Western governments on Russian metal, banks like Citi and some consumers have said they are no longer dealing with Russian metal.

That does not seem to have impeded however the flow of metal from Russia.

The world's biggest refined nickel producer, Russia's Nornickel, increased nickel production last year by 13.5% to 218,970 tonnes, while overall metal sales revenue dipped 6% to $16.1 billion.

Indian imports of unwrought, non-alloyed nickel from Russia fell 11% last year from 2021 levels to 2,617 tonnes, according to Trade Data Monitor, worth about $65 million based on current prices.

(Reporting by Polina Devitt and Eric Onstad; Additional reporting by Pratima Desai and Sam Tobin; Editing by Jan Harvey)