Yury Chizh, one of the most powerful entrepreneurs in Belarus with a business empire that grew with his close ties with President Alexander Lukashenko, has been detained by national law enforcement agencies on suspicion of large-scale tax evasion, authorities said on March 13.
Investigations and prosecutions of close associates of senior officials and associates of the authoritarian president are rare, and there was no immediate mention of the detention of the businessman in state media.
However, Lukashenko the next day issued a strong warning about accountability for anyone found cheating the state budget."There are no untouchable people in the country. All people should bear responsibility for what they do," the state-run Belta news agency quoted him as saying.
The KGB state security service only announced in brief that Chizh was detained alongside "a number of other persons" also suspected of wrongdoing. According to the law, the businessman faces up to seven years in jail if found guilty of the charges.
The official statement was published 40 hours after the first media reports appeared, speculating that Chizh had been arrested in Minsk alongside other high-level managers of Triple, a multi-sectoral group of more than 20 companies that he controls. The group's financial and business documents were also seized.
With the state coffers in dire need of replenishment, the proceedings against the businessman could indicate a clamp-down on suspected tax dodgers, even if they are close to Lukashenko, who has ruled the former Soviet republic since 1994 and was re-elected in October.
Law for all
There was no direct acknowledgement of the detention from the presidential administration, although Lukashenko made strong comments about accountability at a March 14 government meeting about wrongly calculated utility rates.
"There are no untouchable people in the country. All people should bear responsibility for what they do," Lukashenko said. "I want to be informed about the fulfillment of my instruction to hold accountable those who falsified figures, used deceitful methods and stole money from the budget. I have given an instruction to open criminal cases and punish the guilty."
Chizh, who will celebrate his 54th birthday in two weeks, has always avoided any involvement in political activities. At the same time, he had good relations with Lukashenko, often accompanying the president at public events, and is regarded as having benefitted from preferential treatment of his businesses.
His interests include construction, the restaurant business, retail and food production. However, the core segment is oil refining and export of petroleum products. Chizh also controls the Dinamo Minsk soccer club.
The extent of Chizh's personal wealth is unknown. But it became clear that his businesses were experiencing financial problems in recent years. Finance Ministry data indicates official net losses by Triple of BYR51,574bn ($2.5mn) in January-September 2015. But the actual figure is thought to be much higher as the ministry gives financial results using national standards.
Oleg Andreyev, a Minsk-based investment expert and former chief M&A specialist at Alfa Bank in Belarus, told bne IntelliNews that Triple's losses will be significantly higher if international standards are applied.
"Specifically, [Chizh's] development projects in Minsk, totalling $120mn-$150mn, were extremely unsuccessful," the expert adds.
The planned construction of a five-star Kempinski hotel in the city centre for an estimated EUR57mn is a good illustration of large projects gone sour, Andreyev said. Despite initial plans to open the hotel in 2013, the project was frozen before completion and its prospects are now unclear.
However, the main cause of Triple's current problems is a raft of difficulties in the oil refining sector, which prevented Chizh from fulfilling obligations under contracts with Russian business partners, a Minsk-based source told bne IntelliNews on condition of anonimity.
Meanwhile, in August 2015, Belarusian law enforcement agencies detained Triple's co-owner and Chizh's close associate Vladimir Yaprintsev, and accused him of fraud. This case is still ongoing. The businessman's son, Kazbek, is also believed to have been detained.
Despite the lack of official information, local media speculate that Yaprintsev was involved in a failure to meet contractual obligations on oil products purchased from foreign companies under Triple's guarantee.
Black-listed by EU
In 2012, the European Union (EU) imposed sanctions against Chizh and his businesses due to alleged "financial support to the Lukashenko regime through his holding company Triple, which is active in numerous sectors of the Belarusian economy, including activities resulting from public awards and concessions from the regime".
The sporting positions he retains, notably being chair of the board of the football club Dinamo Minsk and chair of the Belarusian Federation of wrestling, "confirm his association to the regime", the EU Council's ruling reads.
However, the European Court of Justice in Luxembourg cancelled the sanctions against Chizh, Triple and the soccer club in October 2015. According to a court ruling, the EU Council provided no evidence that Chizh had financially supported the Belarusian authorities in return for business concessions.