Sanctions full of holes

Mariusz Sepioło, Konrad Szczygieł (Frontstory.pl)
Šarūnas Černiauskas (Siena.lt/OCCRP)
Alexander Yarashevich (Belarusian Investigative Center)
Inese Liepiņa (Re:Baltica) 2023-04-05

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A year after the introduction of sanctions on Russia and Belarus, companies trading Russian and Belarusian goods are operating in Poland without hindrance

They import, among other things, wood and oil products: plywood, pellets, bituminous pulp

Together with an international team of investigative journalists, we show how companies from the East are escaping sanctions. And how Polish business suffers from it

For the past year, individual businesses and entire industries have been escaping the embargo—and continuing to get rich from trading goods from across Poland’s eastern border. Despite the sanctions imposed by Europe, both companies that have been operating for years and newly established ones are making money on imports from Russia and Belarus. This is happening under the nose of the Polish authorities, often in the very center of Warsaw, near ministries and the Ukrainian embassy.

Counterfeiting? No problem

Despite the sanctions, traders of wooden products from Russia and Belarus are thriving in Poland. 

Before sanctions were imposed (successive packages of sanctions were introduced between February and June 2022), Lukashenko’s country was one of the largest (non-EU) suppliers of wood to Europe. In 2021 alone. Belarus sold €1.37 billion worth of raw material to the EU. 

When Belarusian trading was blocked by sanctions, timber supplies suddenly took off from Kazakhstan and Kyrgyzstan. Imports from Kazakhstan to the EU increased by as much as 8,000 times. Meanwhile, forests account for only 4.5 percent of Kazakhstan’s territory and 5 percent of Kyrgyzstan’s. If one believes official records, timber was arriving in the European Union from countries almost devoid of forests, with landscapes that are often steppe-like.

In the first part of our investigation, we revealed how pellets produced in Belarus, with false documents, were  purchased by the Lithuanian company Vivalsa. Its shareholder is Saulius Girčys, a politician in Lithuania’s Social Democratic Party. We met with Girčys under the pretense that we weret interested in buying pellets. At the meeting, the politician offered to forge documents to hide the origin of the goods. “I will write whatever you want. It makes no difference to me,” he said. “There is no writing on the pellets to say where they were produced. Nor is it in our documents. You buy from me, a Lithuanian seller. If you want, I can write ‘LT wood pellets.’ It’s not a problem,” he assured us.

After publication of the first investigation on December 22, 2022, Girčys attempted to explain his illegal actions in a broadcast on Lithuanian Public Radio (LRT). At the time, he confessed that he had bought the pellets from PLRBL, a Polish company owned by Latvian Sergejs Azubins.

Polish liaison with Kyrgyzstan

According to documents we’ve accessed, PLRBL was an intermediary: it bought the pellets from the Kyrgyz company Admit, and sold them to the Lithuanian company Vivalsa. The goods did not even find their way to Poland. They went directly to Lithuania. 

According to shipping documents, a  truck from  Belarusian company Euro-2006 was loaded with 22 tons of pellets on October 14, 2022 in Bishkek. From there, the cargo traveled to the Belarusian-Lithuanian border and went to a warehouse. Eight days later, Belarusian customs officials recorded the truck crossing the border into Lithuania. The Lithuanian company Versatio carried the shipment from a nearby warehouse, where it was picked up by Vivalsa, a company already owned by Lithuanian politician Saulius Girčys. We also found in the official documentation an invoice dated September 27, 2022 for three more shipments—a total of 66.15 tons of pellets worth €23.1 thousand. 

The problem is that, as we have previously established, Kyrgyz certificates for pellet trade in the EU are forged, and the goods themselves actually come from Belarus. In December 2022,Kyrgyz authorities officially stated that timber exports from the entire Eurasian Economic Union zone, of which Kyrgyzstan (and Belarus) is a part, are exactly zero tons, which means that any timber exports from Kyrgyzstan are actually smuggling and take place outside the state’s institutions. 

Timber? Well, yes, from Belarus

On the last day of January 2023, in a café at the Warsaw East railroad station, a stocky Belarusian, Vitaliy, a proxy for the Polish company PLRBL, sips coffee. He is here on business, traveling from Biała Podlaska via Warsaw to Lublin. The company Vitalij represents is headquartered there and has been  operating on the Polish market since 2019. PLRBL officially deals mainly with construction and obtaining work permits for people from across Poland’s eastern border. In addition, it trades in pellets from the East, which are now illegal in the EU.

To see how this trade works, we arrange a meeting with him. On his business card he is presented as an executive director. He arrives in Warsaw by train. Tall, stocky, he speaks with a distinct Eastern accent.

We pass ourselves off as the owners of a construction company. We tell him about contracts in the east of the country. We need laborers, drivers, excavator operators. Vitaliy explains that PLRBL has such experts. They will open a bottle of beer for us with the bucket of an excavator, he implies.

He also assures that his company handles the paperwork. What kind? For example, visas for workers. A bribe has to be given to Belarusian officials, but this makes visas faster.

We ask him about pellets. We heard that PLRBL handled such transactions, we explain, and we have a customer for Belarusian pellets. “We can help you,” Vitaliy offers. “And what does it take? We have companies in Kyrgyzstan and Kazakhstan. This is already our combination.” 

❓How companies trading Russian and Belarusian goods are escaping sanctions without hindrance? Read more in the latest investigation by @FRONTSTORY_PL @BelarusFiles @rebaltica @s_cerniauskas: https://t.co/Yb3YWeFbd5 pic.twitter.com/jap9UhoeFi

— VSquare (@VSquare_Project) April 6, 2023

Vitaliy adds that, after the imposition of European sanctions, wood producers left Belarus for Kyrgyzstan and Kazakhstan. As a result, pellets legally cross the border of the European Union.

Does the wood come from Belarus? “Well, yes, yes,” says Vitaliy. He doesn’t know more details, but will try to help. He leaves the number of a Belarusian associate. He’s already taken care of everything for us. 

Oleg will arrange, Sergejs denies

We call the Belarusian associate right after meeting with Vitaly. We claim to be pellet buyers. 

The PLRBL employee confirms pellets are traded, but doesn’t want to talk about details. He suggests a meeting in Belarus. He is suspicious: “I only work with trusted people, I need to know more about your company first.” 

Moments later, we call the owner of PLRBL—Sergejs Azubins—and do so as journalists. We say that our informant told us that PLRBL is hauling wood pellets from Belarus, and not—as the certificate would indicate—from Kyrgyzstan. 

Azubins replies that he would have to ask his managers about this. After all, there are many people working for him, he himself does not know the details of every transaction. Would he deny that the wood came from Belarus? “Anything can happen in this world,” he states philosophically. 

Trading in illegal pellets? Violation of European sanctions? Azubins denies it all: his employees check everything and he has no intention of being blacklisted. According to him, it’s up to customs officials to check whether imported wood is legal. And since the goods cross the border, the documents, prepared by the Kyrgyz contractors, must be in order. 

When we explain that according to Lithuanian customs officials, the certificates for pellets from Kyrgyzstan and Kazakhstan are fake, Azubins gets upset. He asks us to email questions and ends the call. 

He does not respond to the email.

Businessman from “little Russia”

Who is Azubins? The owner of PLRBL is 34 years old and lives in a block of flats in the Latvian city of Daugavpils (pol. Dyneburg.) This is an 80,000-strong city in southern Latvia, on the border with Lithuania and Belarus. It is sometimes referred to as “little Russia” because nearly half of its residents are Russian. Many came here for industrial work back in the days of the Soviet Union.

Azubins owns DSM Meistari and co-owns another company, Betonblock. The former is involved in road and highway construction; the latter, in the manufacture of concrete products. DSM Meistari has won tenders for municipal and state road projects. Most are municipal roads or parking lots. The company also carried out small sewerage orders in Latvia for the Rail Baltica international railroad project and the construction of Latvia’s largest outdoor stage, the “Mezaparks Stage.”

In July 2022, Latvian media reported that Daugavpils city authorities canceled a contract with DSM Meistari. The company, local government officials explained, was unable to meet deadlines. DSM Meistari said it would challenge the decision in court, but so far there is no information on whether it has done so. 

Betonblock specializes in the production of concrete and concrete products. Last year, this particular Azubins’s company generated nearly 784,200 euros in revenue and more than 60,100 euros in profit.

Azubins’s companies officially have nothing to do with wood. However, on online Latvian shopping portals, we found offers to sell pellets published by Sergejs Azubins. 

We went to Lublin, where Azubins’s Polish company, PLRBL, is registered. It is supposed to be headquartered in an industrial district on the outskirts of the city. But we found no one in the office. Another company, dealing with obtaining work permits for foreigners, is now located here. Its board of directors includes Belarusians who live in Poland and work for PLRBL. 

Admit: we will give you a certificate

The company, registered in Lublin, closed in 2020 with a loss of up to PLN 300,000. However, it found a new niche for itself: pellet brokerage. It signed a pellet trading contract with Kyrgyzstan’s Admit in August 2022—the same month that Admit was registered.

When we call the company’s headquarters in Kyrgyzstan and claim to be from Belarus, an Admit representative is happy to help sell wood from Belarus to Europe. He eagerly explains, “We send wood to Poland, Lithuania and Latvia. Also to Germany and Italy.

We will simply take your products as if there were no problems.”

An Admit employee suggests that it’s safest to transport wood through Poland or Latvia, because “the fewest questions are asked” in these countries.

“Do you make the wood certified? Do you obtain your own?,” we inquire.

“Of course, this is a certified activity. We, as manufacturers, completely certify the products. The whole set of documents.”

Lithuania controls, Poland notes

In a previous investigation, we inquired at the National Tax Administration and the Ministry of Finance about the growing imports of wood from Kazakhstan and Kyrgyzstan. The Polish authorities admitted that they had noted an increase in imports from exotic destinations, but did not provide details of how many tons were imported, what the value of the imports was, and whether any shipments were confiscated.

When asked again, the KAS press department assures that border controls are being carried out with “consideration of sanctions on Belarus.” He specified that from January 1 2022 to early February 2023, a total of 5,300 tons of firewood, including pellets, were transported to Poland from Kyrgyzstan. By the end of November 2022, Polish customs officials had not once found any irregularities in the documentation of the goods. We also inquired about the November-March 2023 period. At the time the text was published, we had not received an answer. 

In tracking the smuggling, Polish customs officials were far ahead of their Lithuanian colleagues. In mid-November, they announced that they were tightening controls on timber imports from Kazakhstan and Kyrgyzstan to stop the circumvention of sanctions. But according to Vygantas Paigozinas, deputy director of Lithuanian customs officials, smugglers have already learned how to escape the restrictions. 

In Latvia, customs officials confirmed that they had stopped three shipments of wood products with suspicious papers from Kazakhstan and Kyrgyzstan. According to them, it is difficult to prove the true origin of the cargo. 

Plywood forged with Cyrillic lettering

Plywood from Russia and Belarus flows into the European Union just as easily. We have reached documents showing that some of the leading importers of this cargo are Polish companies. 

We know that Russian plywood was imported by at least 23 Polish companies after sanctions were introduced. Poles bought it from two companies registered in Kazakhstan. As in the case of pellets, the goods passed through the border on forged documents or through the intermediary of a company registered in Kazakhstan, but completely dependent on real owners from Belarus.  

As we have established, one of the companies supplying Polish companies with plywood—QazFanCom—buys the goods in Russia and sends them to the European Union on the basis of false documentation. The other—Manufaktura Plus, based in Kazakhstan—is an intermediary through which goods from Belarus can pass through the border of the European Union. 

How do we know this? Manufaktura Plus was founded by people associated with Pinskdrev, a subsidiary of the Lukashenko regime (in 2011, the Belarusian dictator signed a decree under which control of the company was taken over by the state-owned Bellesbumprom, also in the timber industry). Pinskdrev is Belarus’s largest producer of plywood (36.6 percent of the market in 2018) and furniture (47.25 percent in 2018). With companies registered outside Belarus, it can still trade with Europe. 

Risk—no, security—yes

In an apartment building in Warsaw’s Muranów district sits the office of Company R. On its website, it boasts that it is a leading importer of wood-based materials. The door is opened by a man who introduces himself as the company’s chairman. When we ask what his name is, he refuses to reveal it. “I don’t have to tell you that,” he replies with an Eastern accent. On paper, the company’s partners are two Belarusian citizens, as is its chairman. 

We ask about plywood from Kazakhstan. The answer: “I won’t tell you anything about wood from Kazakhstan, because we don’t import anything from Kazakhstan.”

But the chairman is obscuring the truth. According to export data, since the outbreak of the war in Ukraine, R. has bought plywood from QazFanCom a total of 36 times. That is, plywood that is officially from Kazakhstan, but in fact from Russia. 

“How do you know that the plywood you are importing is not from Belarus or Russia?,” we ask. 

The chairman says in broken Polish: “We have procedures. Risk—no, safety—yes.”

The company closed 2021 with a profit of more than PLN 16 million. The report for 2022 has not yet been published. 

Most of the 23 companies we know of boast equally impressive profits. The record holder made a profit of PLN 29.8 million last year alone (on revenue of PLN 346.3 million). 

Mass with a state subsidy 

A house filled with furniture made of Russian plywood can be covered with Russian tar paper in Poland. Take, for example, the case of Technonicol, a Russian giant in the production of roof insulation materials. 

Technonicol produces bituminous compounds, colloquially known as tar paper: a black ooze for sealing roofs. Technonicol mainly uses Russian oil to produce roofing felt, has dozens of plants in Russia, and imports its product to Europe from there. 

The company was established in the 1990s, and its founding myth is the story of two students from the Moscow Institute of Physics and Technology who set up a roofing company. The students are Igor Rybakov and Sergey Kolesnikov. In 1995, shortly after the collapse of the Soviet Union, they opened their first roofing paper plant, and today they have dozens of them in Russia alone.

Igor Rybakow is signing his book during a meeting in Moscow in 2019. Source: Dmitry Rozhkov/ Wikimedia Commons, CC 4.0

Rybakov is a multimillionaire on Forbes’s list of the 100 richest Russians. He is an influence with a YouTube channel on which he shares videos telling viewers how to make a fortune. He publishes books; runs a foundation; and, in his spare time, sails and records songs. His business partner is more discreet, looking after the business without making public appearances. Neither of them explicitly supports the war waged by Putin’s Russia. But neither loudly and clearly opposes it. 

In October 2022, Ukrainian authorities placed Rybakov and Kolesnikov on the sanctions list. Despite this, neither Polish and EU authorities are averse to trading in Russian tar paper. 

A Polish house with a Russian roof 

There are three companies in Poland whose beneficial owners are Kolesnikov and Rybakov. They are all part of a group affiliated with Russia’s Technonicol. Technonicol itself has been operating in Poland since 2005. Only a few years later, it began growing in the Polish market. 

“The forcibly operating Russian bitumen business started giving us a hard time in 2010. We were getting more and more signals about Technonicol, which began to penetrate the market and push aggressively,” says Konrad Machula, chairman of the Pap Manufacturers Association, which brings together the largest bitumen producers operating in the market. 

As Machula explains, the conditions under which Russians produce bitumen compounds are behind Technonicol’s success.” In the Russian Federation, bitumen membrane production is subsidized, giving Russian producers an advantage and the tools to aggressively penetrate the European market. In addition, in 2007, the European Union abolished excise taxes on imports of raw materials from Russia for infrastructure construction, including asphalt, with an eye toward products for road and bridge construction,” Machula says. 

Technonicol took advantage of the privilege: although bituminous mass is mainly used for insulating roofs, from a technological point of view it has much in common with asphalt. “Russian lawyers explained that the bitumen membranes they produce are nothing more than asphalt, only that in a roll. This gave them a big advantage and they competed with us on an unequal basis.” Machula does not hide his emotions. And he cites statistics. According to the association’s calculations, Russian products already accounted for 1/5 of the Polish roofing paper market in 2021.

According to data presented by the Papa Producers Association, in the last three years, Polish imports of Russian products was the highest among all European countries.

“Small and large investors buying Technonicol roofing paper are supporting the war! We, on the other hand, are facing the problem of closing production lines or even entire plants. Today we are already halting production in many companies, and we employ more than 3,500 workers,” says Machula. 

Who is paying attention to the oligarchs?

Russia’s aggression against Ukraine has changed the perception of Russian business in Europe. Many companies have been sanctioned; big brands have withdrawn their products from Russia; and the European Union has embargoed raw materials from Russia. But Technonicol, despite the fact that it sells products that are made from Russian oil, operates in Poland unhindered. 

Representatives of the Association submitted an application to the Ministry of Internal Affairs and Administration for Technonicol to be included in the sanctions list, but without results. 

To date, 38 individuals and 42 entities have been placed on the Polish sanction list. Their assets have been frozen and their ability to conduct business restricted. 

What do the businessmen themselves have to say about this? At the time of publication, Technonicol had not responded to our request for comment. 

Are the sanctions sufficient to eliminate entities linked to Russian oligarchs from the Polish market? Justyna Nykiel, legal counsel at the international auditing firm Grant Thornton, believes not: “The regulations should be accompanied by the issuance of binding interpretations of these regulations, which could help entrepreneurs to conduct their business in accordance with the regulations, as well as active actions by the authorities to verify compliance with the regulations.”

Experts believe that the process of inclusion in the sanction list is opaque. “With each person or entity included in the list, there is a brief mention indicating the reasons for their inclusion, while there is no official information and communications indicating how the verification was carried out”, says Justyna Nykiel. 

Dr. Katarzyna Witkowska of the consulting firm Crido says, “There is no clear indication of what determines when someone is put on the sanctions list. These are primarily political, discretionary decisions. We are still moving in a very soft sphere. And we still have no idea how to, on the one hand, protect the values that are important to us, Europeans, and, on the other hand, effectively eliminate individuals and entities that completely disrespect our rights and have no respect for territorial integrity, health, life, sexual freedom. And they do it indirectly, with white gloves, because, after all, these oligarchs do not fight on the front lines, but their money feeds the Russian state.”

Cover photo: Lithuanian Customs Service/Siena

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