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Wednesday 18.07.2018 | Name days: Rozālija, Roze
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Turning Riga into a ticking time bomb – the truth about Uralhim

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This is the second year independent journalists are studying common interests of Russian and Latvian oligarchs and politicians, who want to build a mineral fertilizer terminal in Riga port. This part of the research sheds light on the Russian party involved in the project, says Gregory Zubarev, independent journalist and representative of Image-Case. BNN publishes the whole story.

Recently various political events have overshadowed processes of a much greater national importance for Latvia.

It emerges that a modest 23-employee company, which is providing nothing but some inter-mediation services, last year showed even better financial performance than the public monopoly Latvenergo, which employs 1 307 people. It turns out the company has been even more successful than a number of partly state-owned giants employing a total of 6 000 people – LDz Cargo, Latvian State Forests (LV: Latvijas Valsts meži) and Lattelecom.

Meanwhile, another company (as modest as the first one) has changed hands and is now owned by Norwegians.

The first one is a company registered in Latvia – SIA Uralchem Trading, which is a subsidiary of the Russian petrochemical holding Uralhim.

The other is SIA Piejuras investicijas, the majority shareholder in the biggest company operating in Riga port – SIA Rigas tirdzniecibas osta.

Strangely enough, these were the companies Riga Mayor Nils Usakovs was quick to grant permission to build the biggest ammonium saltpetre warehouse in the world. The terminal is supposed to house huge amounts of the hazardous substance, which is the key component of explosives.

Riga Fertilizer Terminal (RFT) was founded specifically for the needs of the project. 51% of it is owned by the Russian party, while 49% – by Latvians. In order to escape public protests, the Riga City Council has come up with various false stories on the enormous benefits the project would bring to the city and the entire country.

Potential budget revenues generated from the RFT were wrongly reported to total ten times more than they actually would. This lie was refuted in a story published here.

Riga City Council had nothing to say in its defence. Just how much of the project does Latvia own? You are absolutely right – nothing! But what about the European funds – 4,3 million euro – the Latvian government allocated to Rigas tirdzniecibas osta?

Latvia – an offshore for Uralhim?

Let’s look at the Russian party first. We will use data from delfi.lv and Crediweb.lv to make adjustments to the companies’ annual reports. Let’s also add the data about Uralhim, the parent company of the Latvian firm Uralchem Trading.

The data in the table raises numerous questions, but let’s analyse one particular section. Take a look at the financial performance of the Russian parent company and its Latvian subsidiary.

The obvious question is why the subsidiary’s profit/employee is 27-fold the one for the parent company. Neither is the proportion of their turnover and profit proportionate. Uralhim’s earnings seem to be 4.7 times smaller than the turnover, while Uralchem Trading’s profit happens to be as many as 55.6 times smaller.

The scheme seems to be quite clear – profits travel via Latvia, but debts remain in Russia. According to Uralhim, its debts hit $1.183 billion as of early 2012. Independent experts believe the actual debt of Uralhim exceeds $1.5 billion.

Latvian decision makers should finally start considering the following issues:

1. The ammonium saltpetre handling terminal in Kundzinsala island has not even been built yet, but Uralhim exports via Riga already account for 16% (through Uralhim-owned terminal Alpha osta). To compare, the company channels 26% of its exports via St. Petersburg port, 16% via Viborg and 8% via Novorossiysk.

2. Last year Uralhim produced 4.04 million tons of fertilizers, 770 thousand tons of chemical raw materials, 290 thousand tons of raw material – components of explosives. The capacity of the future Ust-Luga Petersburg future fertilizer terminal will total 5 million tons, but Uralhim still needs another terminal in Riga.

Riga Mayor has allowed construction of the terminal, which will handle 2 million tons of ammonium saltpetre and store extra 90 thousand tons.

Back in April 2012, Uralhim Director General Dmitry Konajev revealed to the newspaper Bizness&Baltija that they are actually planning to build a facility that would be able to house 180 tons of the dangerous substance. Who knows, maybe the company intends to export all of its production – 5 million tons – via Riga.

3. Uralhim’s products reach the port of Riga in closed carriages, so no one knows how many of the approximate 300 thousand tons of the chemical (that can detonate easily) must wait until being handled safely.

4. Latvia seems to serve as an offshore for Uralhim, which needs to ship billions of dollars out of Russia. Look what the company itself says in its annual report: “We cannot guarantee that the state, law enforcement agencies or some third-parties will not challenge Uralhim’s compliance with statutory and regulatory requirements.” So what is Uralhim after all?

Uralhim CEO = Dmitry Mazepin

The head of the largest Russian petrochemical holding, Dmitry Mazepin, was born in 1968. He started off working in insurance companies and banks, but later aged 29 he was appointed Vice-President of Tyumen Oil Company and Executive Director of its constituent company Nizhnevartovskneftegaz.

Soon enough, it was clear that also the government sector needed such a bright man and he was chosen as advisor to the head of the Russian Federal Property Fund.

He has also taken the top posts in the Novorossiysk Commercial Sea Port and such companies as Rosneft, Transneft and Gazprom’s subsidiary Sibur.

Once becoming a member of the gas monopoly’s circles, Mazepin quickly realized where to draw funds from. So he started to build his own chemical empire, making use of Gazprom assets.

Soon after Mazepin was dismissed from AK Sibur the Russian Federal Property Fund was auctioning the controlling stock of the Kirovo-Chepeckogo of Chemical Combine. 25% of the company’s shares were controlled by the agrochemical corporation Azot, which was founded by a Gazprom’s subsidiary.

The auction was joined by the almighty Gazprom, whose bid totalled $108.3 million, but the company lost to a little known Mazepin’s firm Konstruktivnoe bjuro, which offered $50k more. It happens. But let’s look at the auction more closely. First, it was led by Vladimir Malin – Mazepin was once his deputy. Second, after Gazprom’s devastating loss at the auction, Aleksander Rjazanov, deputy chairman of the Azot board, was sacked. Reportedly, he was a close associate of Mazepin, when the latter worked at Sibur. Could it be that Mazepin knew the maximum Gazprom’s bid already beforehand? Besides, soon after he got hold of the Kirovo-Chepeckogo of Chemical Combine, Malin was given a 4-year suspended sentence for selling 20% of Apatit stock for mere $15 million.

We shall not go into detail how Konstruktivnoe bjuro got hold of other assets: JSC Minudobrenija and Galogen in Perm, Azot in Berezniki, Himprom in Volgograd and Voskresenskie Mineralnye Udobrenija near Moscow. Mazepin was gradually building his own empire, which lacked only one thing – direct access to the sea and a privately-owned port.

Mazepin hoped to get the port in the French town of Dieppe, but he was turned down. Now it is Riga’s turn. But for now, let’s look at two more things proving that Mazepin is almost a… genius.

How to be successful when you have billions in debts

Here is a story how Mazepin won the affection of the largest Russian bank, Sberbank, but only to defraud it later.

Back in 2008, Uralhim was well off indeed but it did still lack a masterpiece – Voskresenskie Mineralnye Udobrenija, which was owned by three Cyprus offshores, tied to Agroprodmir. By the way, neither can Uralhim be called a true Russian company – 97% of its stock belongs to a Cyprus offshore ACF-Agrochem Finance Limited.

The deal to acquire Voskresenskie Mineralnye Udobrenija could be closed if Uralhim had $380 million, which it didn’t. But it did have the love of Sberbank, which gladly lent Mazepin $700 million. We can see those $380 million in the company’s balance sheet, but where did the remaining $320 million go? Besides, later the loan was prolonged.

Latvians shall not be shocked at money that vanishes like it has never even existed. We have seen plenty of examples, involving ex-politicians and businessmen Aivars Lembergs, Andris Skele and Ainars Slesers, who might be sharing Mazepin’s interest in Riga port.

So, Mazepin bought 74.8% of Voskresenskie Mineralnye Udobrenija from Agroprodmir, although at that time the court had recognized that 14.8% of the company belonged to FosArgo. So Agroprodmir was ordered to hand back those shares. Consequently, it turns out that not only did Sberbank grant Mazepin more money than needed but also backed the sale of an asset that did not belong to the seller. To cut it short, the bank credited purchase of a stolen property.

It becomes worse. Since Uralhim was about to acquire the controlling share, it was obliged to offer the minority shareholders to purchase their shares for the same price it had paid for the controlling stock.

Sberbank guaranteed that it would pay if Mazepin had no money. It would, of course, mean extra debt burden on Uralhim. It turned out Cypriot companies Shades of Cyprus Ltd. and Dornan Property Services Limited were not willing to sell their $130m-worth shares. But why pay the amount anyway if Mazepin could control Voskresenskie Mineralnye Udobrenija without them? So he came up with a brilliant plan – he did not accept documents and forced representatives of notaries and minority shareholders out of the luxurious Moscow-City office.

When they came back with the militia (Russian police), they were simply not let in. The plate with the name of the company had been taken down, but the glass door was covered with a sheet. The attempt to deliver documents via the express company TNT also proved ineffective, as a sudden quarantine had been announced in the office.

Naturally, the minority shareholders approached Sberbank, which had promised to pay instead of Mazepin, but the bank seemed to have forgotten its pledge. It was easier to prolong the loan for extra $150m, so Mazepin’s debt skyrocketed to nearly a billion of dollars, which will most probably never be returned.

Russian media reports that taking into account also the loans from Vneshtorgbank and UniCredit, Mazepin’s debts near $2 billion, while his bank accounts have housed as many as $800 million. In Latvia, this can compare only to the notorious Aivars Lembergs.

Poor or rich?

Mazepin stands out with an amazing skill to get rich while his companies are neck deep in debts. Strangely enough, his fortune has been multiplying along with Uralhim’s debts. The bigger the debts, the highest his rank in the annual Forbes list of the wealthiest people in Russia. In 2009, he was not listed among the 100 richest people. But the situation changed in the blink of an eye – by 2010 he had jumped to the 70th position with $950 million. Last year he ranked the 67th with $1.5 billion. This year he is the 56th richest man in Russia and the 764th in the whole world (wealth – $1.7 billion).

How does it work? All genius things are simple. The Kirovo-Chepeckogo of Chemical Combine has only one shareholder – Uralhim aka Mazepin. Back in 2008, all dividends of 5.4 billion rubles went to the single shareholder. The same in 2009, when he approached Sberbank to get a million-rubles loan, boosting the debt burden even more.

Meanwhile, instead of covering debts, profits go god-knows-where.

An analogous scheme is also used in Uralhim’s constituent company Azot, which has obtained a 2.12-billion-rubles loan from Sberbank.

The same year the $700-million-loan was issued Mazepin was spotted attending the traditional Flower Ball (Bal des Fleurs), a festival of luxury and glamour meant only for the rich. It takes place on the picturesque coastal resort of Saint-Jean-Cap-Ferrat, Villa Ephrussi de Rothschild, Cote d’Azur.

Mazepin owns his own personal villa in Nice, but he has been spotted looking for luxurious properties also at Lake Como in Italy, on the Atlantic coast and the Latvian resort city of Jurmala.

Every year Uralhim’s owner joins other Russian billionaires in kitesurfing festival Mauritius Kite Jam.

There are more things his company’s profits are channeled into.

Russian media reports that he has spent $50-60 million to buy and promote the gay club Pacha Moscow, which is located next to the Russian State Duma. Also, Mazepin has shed $370k on the purchase of one of the best Latvia’s football clubs – Skonto.

Rumour has that he is planning to build a $35.6m hotel in Jurmala, $1.15m hotel in Cesis and $900k hotel in Liepaja. Neither is he neglecting local political forces, including such contradictory powers as the leftist Harmony Center and the national association All for Latvia!-TB/LNNK.

What can we say? Let’s quote Mazepin’s words in an interview to the radio station Eho Moskvi: “One needs to pursue profit at all costs.”

Ammonium nitrate – friends with nature?

Uralhim representatives and senior officials at the Riga City Council keep claiming that ammonium nitrate is environment friendly and cannot harm people in any way.

But independent Russian environmentalists and the national watchdog have discovered quite the opposite.

Kirovo-Chepeckogo of Chemical Combine

The factory has been caught red-handed leaking sewage in the nearby Vyatka River and Kirov district’s source of water. The company was ordered to stop the leak but so far it has not been done. As a result, this spring the city with half a million people was left without drinking water for five days.

The worn-out equipment triggered an explosion of a high pressure steam pipe, killing one worker and causing major injuries to the other. Ammonia leak was detected.

Azot in Perm

A series of technological accidents, fires, leaks of ammonia and sulfur have been recorded.

Azot security has even used force to get rid of the well-known Russian scientist-ecologist Lev Fyodorov and journalists who wanted to take a look the factory and its territory.

Similarly, the guards beat human rights defender Roman Juskov, who was trying to examine the adjourning territory of the factory. It should be added that Juskov has published various stories on environmental protection issues.

Voskresenskie Mineralnye Udobrenija, Moscow region

Presence of sulfur vapor in the air has been recorded repeatedly.

The fact that Uralhim regularly failed to inform people about technogenic accident forced 1 057 Voskresensk residents to write an open letter to Vladimir Putin.

Finally, the International Socio-Ecological Union filed a lawsuit on the suspension of the company’s activities until it eliminates violations of the Russian laws on nature protection. The claim was supported by the Federal Supervisory Natural Resources Management Service.

Access was denied to investigators who had arrived to check its premises. Finally, the national environment watchdog filed nine claims on violations of laws protecting nature.

Nature hits back

Nature first turned out a stumbling block when Mazepin wanted to build an ammonium saltpetre terminal in Dieppe, France. French ecologists were shocked to learn about the obviously harmful activities of the company. Politicians backed their opinion saying that such behaviour was not acceptable.

Also, Uralhim IPO failed shortly after the company went public. 14 environmental and social organizations from France, Germany, Britain, the Netherlands and Russia came up with a warning. They said the preliminary prospectus offering concealed data on law violations, which could lead to the company being shut down.

Uralhim spares Latvian nature. Really?

We could assume that Uralhim would not harm Latvian nature, because it would not produce anything. Instead it would just use the country as a transshipment base, not putting the environment at any risk.

But still ammonium saltpetre can cause a major ecological catastrophe when joined by its potential “neigbours”. One should remember some recent events when nobody bothered to wake those who were asleep:

– an uncontrolled reaction of chemicals occurred in one of the containers located within the port of Riga in which the extremely toxic substance of acetone cyanohydrin was spilled. Residents of nearby homes were evacuated and the Riga City Council announced the threat of an explosion, prohibiting swimming and fishing in the Daugava River;

– a hurricane struck the acting fertilizer terminal Alpha osta in Vecmilgravis. Metal structures as tall as a ten-storey building were swept away. They fell onto the neighbouring buildings, railroad tracks and a train standing in the immediate vicinity. If at that time there had been cars with ammonia saltpeter, or if tons of metal had fallen onto a nearby warehouse of ammonia saltpeter, then, as Professor of Chemistry of the Riga Technical University, Eriks Bizdens explains, everything would have blown up.

– 17 cars derailed near Daugavpils, including five tanks of fuel oil and technical solvent. The liquidators of the disaster were rushed to hospital.

– when Neste Oil Terminal Riga terminal caught fire in April 2012, as many as 12 units of fire-extinguishers were sent. Three months later gas leaked from Latvian Propane Gas in Bolderaja. People were unable to work due to the awful odour. These terminals are located next to the one Uralhim intends to build.

– we shall also recall that explosives were found at the railroad in Riga (May 2012) and 5 kg of TNT was discovered near Riga port (June 2012).

Riga seems to be stuffed with chemicals and petroleum products that already cause sufficient risks. It does not need extra 5 million tons travelling via the entire country!

As you can see, this is no ordinary investor coming to Riga. At first Mazepin appears to be friendly and collaborative, but deep within he is waiting for a chance to betray. Will Latvians indeed fall for him?

The next part of the investigative research will shed light on the Latvian party in the notorious project. We will also explain how the Riga City Council came up with the unlawful decision that turns the capital into a ticking time bomb.

Ref: 000.105.105.4003


Leave a reply

  1. Albert says:

    Don’t trust him! I’ve seen damage he’s done!

  2. John Christmas says:

    This article is excellent. Hurray for BNN. It is rare to read such a candid article about the criminal attack by the Oligarchs against the Latvian people.

    The Latvian people should not surrender to the Oligarchs. The Latvian people should fight to defend themselves. A good way to start: demand criminal prosecution in London for the EBRD/Parex bailout fraud explained in the Youtube video “Latvian Financial Crisis.”

    The Oligarchs carry a lot of kompromat against each other. Sending a couple key Oligarchs to prison could bring down the other Oligarchs, plus the corrupt people in the Latvian Justice Department who are protecting the Oligarchs.

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