Belarus Corruption Watch: How one of Lukashenko’s 'wallets' evades sanctions

Belarus Corruption Watch: How one of Lukashenko’s 'wallets' evades sanctions
Alexander Lukashenko (Left) and Alexander Shackutin (Right). /
By bne IntelliNews January 30, 2023

The Belarusian Investigative Centre (BIC) continues to unravel corruption and sanctions avoidance schemes by Belarusian businessmen. In its latest investigation, developed with the support of the, BIC has revealed how Belarusian businessman Alexander Shackutin has managed to avoid sanctions in Germany; they have also detailed his close business relationship with Belarusian strongman Alexander Lukashenko.

Alexander Shackutin vs EU sanctions

Shackutin came under EU sanctions for being one of Lukashenko’s “wallets” already in 2020. After having been included on the EU’s sanctions list, Shackutin’s companies’ activities were supposed to have been terminated in the EU. However, one of his companies, SV Maschinen, has continued to operate and profit in Germany.

SV Maschinen has likely managed to avoid sanctions due to its intricate ownership structure. Before the sanctions against Shackutin, he co-owned the company with his long-time partners Yaroslav Buyalskiy, Igor Subbotin,Vitali Vorotnitski and Valentin Yahorau. But shortly before the sanctions, the ownership structure was changed, so that Yahorau owned 30%, while the rest was owned by the Lithuanian company EM System.

EM System has already come under national Lithuanian sanctions due to being owned by Shackutin and Igor Subbotin. Lithuania has also sanctioned another company, Amkodor Baltic, due to its connection with EM System. This was confirmed in a leaked email sent by Amkodor’s lawyer.

Germany has still not managed to trace SV Maschinen’s connections to EM System and Alexander Shackutin and the company are thus still operating on the EU market. The company supplies agricultural machinery to Eastern Europe and has many partners. Posing as a client, one of BIC’s German colleagues called the company and requested the delivery of combine harvesters to Belarus. SV Maschinen’s German office confirmed that the company did indeed provide such services.

A member of Lukashenko’s business circle

Shackutin is a well-known friend of Belarusian strongman Alexander Lukashenko. In 2020, he participated in Lukashenko’s “secret inauguration”. He’s also participated in family events with the Lukashenko family and accompanied Lukashenko on business trips on the Belarusian Air Force One.

In October 2017, Shackutin and Lukashenko travelled to Abu Dhabi for 12 days on Belarus’ Air Force One. During their stay, Lukashenko met with both the Crown Prince of Abu Dhabi and the then Ukrainian president, Petro Poroshenko.

Shackutin has co-owned the Amkodor holding in Belarus for over 20 years. The holding produces lift trucks, and asphalt paver sand reclamation equipment. Nearly a third of its exports go to Russia. The holding was formed around the Udarnik factory in Minsk, and was a state-owned company from the early Soviet times. However, in the early 2000s Shackutin’s company Prommedinvest bought a controlling stake in the holding together with a Nepalese businessman.

In the early 2010’s, Lukashenko sold a number of factories to Amkodor for a cheap price and the growth of the Holding significantly strengthened Shackutin’s position. In 2013 he was named the second most influential businessman in Belarus after Yuri Chich, who claimed the top spot.

However, after Shackutin’s takeover, Amkodor soon began to operate at a loss. The holding compensated for its losses with loans given by the Belarusian state. By the end of 2021, Amkodor’s long-term debt had reached almost $120mn, with uncovered losses amounting to $42mn.

Also in late 2021, Lukashenko issued a decree “on the stabilisation of the financial situation of enterprises.” Independent analysts largely regarded this decree as a way for the state to both save and in time perhaps take over large companies in the private sector. This is because the decree stipulates that the payback of state loans does not have to be done in cash, but can also be made through mutual settlements and repayment in shares. With the help of this decree, Shackutin acquire a loan of $50mn at half the refinancing rate (approx. 4% per annum).

In 2011, Alexander Lukashenko issued a decree which gave import privileges for re-exports. Like many of Lukashenko’s decrees, this one created a sudden competitive edge for Belarusian businesses, and also helped businessmen close to him grow their wealth.

Thanks to the decree, Belarusian companies became highly competitive on the Russia market, since they could import without having to pay VAT and then re-export to Russia, thus outcompeting Russian companies.

This paved the way for a massive re-export business of flowers from Belarus to Russia. The Shackutin family entered this business in early 2020 through their companies Logex and Beltamozhvilia. Alexander Shackutin’s wife, Maria, acquired a 71.25% stake in Beltamozhvilia together with her father- and son-in-law.

While a resolution by the Belarusian Council of Ministers has conveniently classified the financial statements of Beltamozhvilia, the BIC has managed to estimate the excess profits of the Shackutin family’s flower business. In two years, the company’s revenues amounted to $264mn. Thanks to Lukashenko’s 2011 decree, they didn’t have to pay 20% of it in VAT.

The BIC’s investigations continue to reveal the ways through which Belarusian businessmen manage to avoid EU sanctions. SV Maschinen is one of many Belarusian and Russian companies that fly under the EU sanctions’ radar. Belarusian and Russian officials have themselves hinted that they actively seek to facilitate sanctions evasion. With the number of exposed companies and schemes growing, the EU has all the more reason to create an agency like the US’ OFAC.  

Bne IntelliNews has previously covered other investigations by BIC. The most recent one revealed how companies in Central Asia help Belarus bypass Western sanctions.