Belarusian fertiliser company Grodno Azot accused of smuggling sanctioned nitrogen into Europe using a web of shell companies

Belarusian fertiliser company Grodno Azot accused of smuggling sanctioned nitrogen into Europe using a web of shell companies
The big Belarusian fertiliser maker has set up a web of shell companies to allegedly smuggle its goods into Europe via Lithuania and the UAE. / Belta
By bne IntelliNews March 1, 2023

Grodno Azot, a Belarusian company, has found a way to evade European sanctions by using shell companies that are smuggling sanctioned fertiliser exports into Europe via truck and rail, an investigation by the Belarusian Investigative Centre (BIS) reports.

Several of Belarus President Aleksandr Lukashenko's oligarch associates are among the numerous beneficiaries of these schemes, and the government is also complicit in the operation, BIC claims.

The Hrodna District Executive Committee set up one of the shell companies, and ghost companies and structures that were used to siphon money from Belaruskali are also involved.

This chain of companies enables European money to fill the pockets of Belarusian officials and weakens the EU's ability to put pressure on the Belarusian regime. Consequently the EU has less leverage and influence to secure the release of political prisoners in Belarus, including former Grodno Azot workers, BIC says.

By using shell companies, Grodno Azot can continue business as usual while circumventing the sanctions, undermining the EU's efforts to hold the Belarusian regime to account for its human rights abuses and political repression following the falsified presidential election result in 2020 that returned Lukashenko to office and sparked mass demonstrations.

The EU has been imposing sanctions on Belarus since 2004, with the latest round of sanctions coming in response to the fraudulent presidential elections in 2020. The sanctions target individuals and entities involved in the repression of the Belarusian people, including high-ranking officials and state-owned companies such as Grodno Azot.

Grodno Azot fell under EU sanctions in December 2021 for firing and intimidating workers who participated in protests after the 2020 presidential election. In their statement, the European authorities noted that Grodno Azot was “responsible for the repression of civil society”.

After the August 2020 elections, Grodno Azot workers demanded their bosses publicly acknowledge election fraud and threatened to shut down the company. The police arrested 28 activists, but the strikes did not stop. The workers also joined a nationwide strike on October 26, 2020. About a hundred people gathered at the gatehouse, 32 of whom were arrested by riot police.

Grodno Azot activists came under pressure from the company’s management and investigative bodies: some workers were fired, and others were arrested. Six former Grodno Azot workers remain behind bars two years later.

Ambush on the border

On the night of February 13-14, activists from the Rabochy Rukh (Workers' Movement) ambushed Belarusian trucks loaded with sanctioned products at the Lithuanian border. The first truck passed through Lithuanian customs late at night, but the activists blocked it. The driver presented documents showing the truck was transporting fertilisers from the sanctioned Grodno Azot company into Europe, BIS reports.

Stanislau Ivashkevich, the head of the Belarusian Investigative Centre, was present as a correspondent and spoke to the truck driver, who confirmed the truck had been loaded at Grodno Azot. About an hour later, the activists blocked another truck, and its driver also confirmed that he was transporting Grodno Azot fertilisers.

Lithuanian police and border patrol arrived and asked the activists to stop the blockade, but they refused. Customs officers arrived after midnight, and the two intercepted trucks were taken for additional inspection. The next day, Lithuanian customs began an internal check of possible violation of international sanctions.

The same morning, Grodno Azot executives held a meeting that lasted several hours. BIC journalists managed to get the plant's general director, Igor Lyashenko, on the phone, but he refused to discuss the interception of trucks at the border or comment on documents possessed by the journalists that shed light on the schemes used by Grodno Azot to bypass sanctions.

Viktar Rusak, who has worked for Grodno Azot for over 30 years, was appointed as director of Grikom, a company founded the day before in July 2021. Grikom replaced the sanctioned Grodno Azot as a supplier of fertilisers to the West, according to documents seen by BIS.

However, the Rabochy Rukh activists discovered that Grikom was only a front, as they obtained a loading report for one of the intercepted trucks. It was printed on Grodno Azot's official template and clearly stated that the truck had loaded carbamide at the factory. The report also bore the seal of Grodno Azot.

In addition, the activists obtained a carbamide quality certificate that specified Grodno Azot as the fertiliser manufacturer. BIC also had a copy of a contract that showed Grikom undertakes to sell Grodno Azot products. Further, they found a contract between Grikom and the Serbian company Wakler that stipulated that Grikom would supply about €20mn worth of carbamide to Serbia in a year.

Drivers reported that Serbian customers' cars were loaded with fertilisers at Grodno Azot, and drivers signed on the company's official letters. It should be noted that Serbia has joined the EU sanctions against Grodno Azot. The intercepted trucks were carrying carbamide for the Serbian company Wakler. When asked to comment, the director and co-owner of Wakler, Željko Erceg, claimed that he was not aware of it.

The Dubai connection

Dubai, located on the Persian Gulf, is the Middle East's largest commercial and financial centre. Its reputation for Free Economic Zones and simplified taxation has made it one of the world's top re-export centres.

Dubai's port operator, DP World, has its headquarters here, next to the largest port in the Gulf. DP World is part of Dubai World, a holding company owned by the Emirate of Dubai government.

In May 2016, Belarus President Lukashenko met with DP World CEO Sultan Ahmed bin Sulayem to discuss implementing joint logistics projects with the UAE. In October 2022, the story took an unexpected turn when the Belarus Ministry of Antimonopoly Regulation and Trade granted a one-time export licence to Technospectreiding, a little-known Belarusian company, to supply carbamide to the Emirati firm DP World Commodities and Logistics FZE. Technospectreiding was planning to supply 30,000 tonnes of carbamide to the Emirates worth €15mn.

The copies of cargo documents in their possession helped colleagues from Siena trace the delivery route of the fertiliser and find evidence of sanctions evasion. Along the way, they found regular subjects of their previous investigations. The carbamide in the deal is manufactured in Belarus only by Grodno Azot. Technospectreiding claims to be both a supplier and producer of carbamide. Such large-scale projects in Belarus are usually announced years in advance, and there was no such public information, BIS reports.

When the investigators visited the Technospectreiding headquarters they found only a cottage in a suburbs of Minsk and no sign of any carbamide production. Hwoever, further investigation found that Technospectreiding and Grodno Azot have many employees in common. With the help of the CyberPartisans hacker group, BIS found out that Technospectreiding logistics specialist Siarhei Pilets and an engineer, Petr Pasikau, both used to work at Grodno Azot as well.  BIS speculated that the UAE is being used a transhipment route to export Belarusian fertilisers on to EU markets.

“As far as I know, the Emirates and the neighbouring countries have enough gas to export carbamide themselves. I think purchasing it from Belarus would be somewhat illogical. Carbamide is exported to countries where ammonium nitrate and calcium ammonium nitrate are not used. These are mainly France and Germany,” fertiliser expert Arminas Kildišis told BIS.

Ghost companies

From the Technospectreiding consignment documents, BIS learned that RuzSpedition acted as a forwarder for the Dubai carbamide shipment. It is registered in Belarus’ Bremino-Orsha special economic zone and is exempt from some taxes.

The firm was previously owned by the Bremino Group logistics company and controlled by three of Belarus’ biggest oligarchs that are close to Lukashenko Aliaksei Aleksin, Mikalai Varabei and Alexander Zaytsev. All of them are under EU sanctions thanks to their asopciation with Lukashenko. RuzSpedition has also been sanctioned. In 2020, the ownership of the company was transferred to Yauheni Krakhotsin, a proxy for Zaytsev, according to BIS.

What also drew BIS’ attention in the carbamide supply chain was the Lithuanian importer of the cargo, a firm called Rogera registered in Kaunas.

Once again BIS relied on the Lithuanian Siena investigations centre, which visited the company’s registration address and found only a garage.

However, Ferteksos Transportas, which handled the Technospectreiding shipment to Dubai, is much more familiar. This company is a part of the scheme to siphon money from Belaruskali, which BIS reported on in a previous investigation, and makes use of a route in both cases that stops at the BKT terminal in the UAE.

BKT representatives assured BIS that all cargo handled at the terminal is checked by Lithuanian state authorities, and the company fully trusts their competence. BKT also claims it has no relations with Grodno Azot, Technospectreiding or Rogera.

But the rail wagons transporting the carbamide belong to the Global Fertilizer Company, registered in Belarus and run by Iryna Fadzeyava. Fadzeyava is another former Belneftekhim employee that owns Grodno Azot. Fadzeyava told BIS that, as a lawyer, she had helped Global Fertilizer Company with registration, but did not know the firm’s dealings.

BIS concluded its investigation by handing the evidence over to Marius Skuodis, the Lithuanian Minister of Transport and Communications, who promised to investigate.

“Judging by the information you’ve provided, it looks like some scheme. Because it’s very clear where the cargo is coming from and who the producer is. I will shortly receive other documents. I am going to petition state agencies – both the prosecutor’s office and the financial crime investigation service – to look into [the situation],” Skuodis told BIS.

The Rabochy Rukh activists hope that sanctions against the company force Belarusian authorities to stop repressions against the plant workers. However, as long as Grodno Azot manages to circumvent the restrictions, the pressure may not be enough.

“Former employees of Grodno Azot are considered as political prisoners. They are deprived of the right to correspond, various punishments are applied to them, they are periodically sent to a punishment cell. The conditions are inhuman. And all their [former employees’ of Grodno Azot] loved ones are under control. They are controlled, monitored and exert psychological pressure. Many of them [former employees of Grodno Azot] have children, wives, parents. All of them have a very hard time,” said Aliaksandr Sakalou, a representative of the Rabochy Rukh initiative.

Meanwhile, Belarusian authorities keep handing down heavy sentences to workers’ movement participants. Andrei Khanevich, a father of three who worked as an equipment operator and led an independent trade union during the protests, received five years of imprisonment. He was convicted for talking to a Belsat TV journalist.

Former Grodno Azot worker Eduard Isayeu got three and a half years in jail for liking a post with an image of Lukashenko. His wife and small children are awaiting his release.

Three other workers, Uladzimir Zhurauka, Siarhei Shelest and Andrei Paheryla, are defendants in the Rabochy Rukh case. They have been kept in the Homel detention facility for over 16 months. Belarusian authorities sentenced them from 14 to 15 years in penal colony. Human rights organisations recognised them as political prisoners.