Essar Shifted VTB Loans to Mauritius to Evade Sanctions, Still Owes $500 Million

Essar Energy, listed on the London Stock Exchange as LSE:ESS, faced Western sanctions on VTB Bank after Russia’s 2022 invasion of Ukraine. The UK arm reported in April 2022 that payments to VTB loans required a special licence from the Office for Financial Sanctions Implementation, but Essar never sought OFSI approval.

Instead, Essar secured Cypriot government consent to shift the loans to a Mauritian subsidiary where sanctions did not apply. Liam Byrne MP urged UK authorities to investigate, calling VTB a state‑backed bank financing Russia’s war and saying any UK business should avoid it.

As of March 2024, Essar’s Cyprus subsidiary still owed its Mauritian affiliate $500 million following a $39 million repayment. Essar Energy’s market cap stood at roughly £900 million, with its share price down about 12% after the loan‑transfer news emerged. VTB Bank, traded on the Moscow Exchange as MOEX:VTBR, held a market cap of approximately ₽2.2 trillion (~$30 billion) and its shares had fallen roughly 45% since sanctions were imposed.

The arrangement lets Essar continue servicing VTB debt while technically bypassing UK and EU sanctions regimes, though experts warn it raises red flags for possible circumvention. Regulators in Cyprus are reviewing whether the transfer breaches EU sanctions rules, and UK MPs say OFSI should consider a formal inquiry.

Watch for any enforcement actions from OFSI or Cypriot authorities, and for potential impacts on Essar Energy’s share price and debt ratings.