Former KGB-agent reveals illegal oil smuggling from Belarus

51 min

A Swedish-owned company bought oil products suspected to be smuggled through Belarus with the involvment of the country's government.

A Swedish-owned company is suspected of buying oil products smuggled through Belarus with the suspected involvment of the country's government.
The government of Belarus has knowingly enabled the smuggling of petroleum products through its country. The company that has received the smuggled oil and sold it on, is the Swedish-owned Gunvor International. It is one of the world’s largest oil trading companies, run by Sweden’s honourary consul in Geneva, Torbjörn Törnqvist.

Gunvor is named in a document from the Estonian customs authority. The document is part of a Belarusian investigation into an export firm suspected of smuggling out petroleum products under a false description, in order to avoid paying taxes.

The Estonian document says “According to the report of moving goods the consignee/owner was Gunvor International.”

Swedish Radios News (Ekot) interviewed the majority shareholder in Gunvor, Torbjörn Törnqvist, in 2008. This was at the same time as the secret investigation into oil smuggling was underway, something that Ekot at the time was unaware of.

Gunvor’s rapid progress in the oil trading market had led to speculation in the business press that this success was due to illegal methods. This was something that Torbjörn Törnqvist strongly denied.

We work fully transparently in competition with other companies in Russia. We beat them a lot of the time. We cannot buy oil with some kind of ’discount’. Neither can anyone else. Today oil is sold to the one who makes the highest bid.”

Torbjörn Törnqvist, majority shareholder in Gunvor

But the documents show that Gunvor bought petroleum products which were, according to the Belarusian customs, smuggled out of Belarus with a fake label. The Belarusian documents say that during a few months in 2007 alone, there were 12,000 tons of petroleum products smuggled out of the country under a false description.

The cargo left Belarus as a tariff-free petroleum additive but was re-labeled in Estonia and according to the customs documents sent on to Western Europe as “Russian Unleaded Gasoline.”

It was a simple setup. Belarus was allowed to buy petrol and oil from Russia at a reduced price; but if it wanted to sell the petroleum products on to the EU it had to pay taxes to Russia. In order to avoid the taxes a company relabeled the petroleum products and smuggled them out of the country with a false description.

“There were thousands of tons per year that crossed the border with this label,” says former KGB agent Andrei Molchan, who is now in Sweden seeking political asylum.

The documents that reveal the smuggling come from an investigation carried out by the Belarusian customs authorities in 2007, when Belarus and Russia had agreed on a customs fee for exports of petroleum products from Russian oil.

The documents show that Belarusian customs officers stopped a train carrying petroleum products that they suspected had been re-labeled as tariff-free oil additives in an effort to avoid paying the tax (product code 3811).

Samples of the contents of the goods train were taken by the customs, and sent to laboratories in Belarus and Russia for analysis. In all the labs the result was the same: The cargo had been wrongly labeled, and should instead have been marked as a petroleum product (code 2710) and been subject to fees.

The customs investigation showed that there were at least 19,000 tons of petroleum products being smuggled out of the country.

“This is many millions of dollars lost by the country in tax revenues,” says Andrei Molchan.

According to the investigation, the petroleum products were taken to harbours in Estonia. The investigation carried out by the Estonian customs authority for their Belarusian colleagues concludes the cargo was again given a new label, this time the correct one (2710). And when it was sent onwards it was under the description “Russian Unleaded Gasoline” on its consignment note.

Russia has repeatedly accused Belarus of smuggling out products made with Russian oil. In 2012 Russia claimed that Belarus had cheated it of revenues worth USD 1 billion by re-labelling petroleum products as acetone and other solvents not covered by the tax agreement with Russia.

President Alexander Lukashenko has denied the Russian accusations. And no evidence was presented. But the documents seen by Ekot show that the political leadership of Belarus knowingly connived in the smuggling as early as 2007.

When the goods trains were stopped by the Belarusian customs, and the exporter risked being charged with exporting petroleum products under a false description, President Lukashenko stepped in. After the export company appealed to the president he asked his Deputy Prime Minister, Vladimir Semashko, to look into the issue.

Ekot has read Vladimir Semashko’s exchange of letters with the customs authority. It shows that the customs committee wrote to the deputy prime minister with the proof that smuggling had been committed. The conclusion of the customs authority was crystal clear: Petroleum products have been illegally transported with the wrong description.

But Vladimir Semashko has ignored this conclusion. On the contrary, disregarding the information from Customs, and from several laboratories in different countries, he states that everything is above board. No fees need be paid.

He also writes that it was wrong for the customs authority to send samples to a Russian laboratory. He says they should have conducted the tests in a Belarusian military lab. According to the letter from Vladimir Semashko the military laboratory has concluded these are not petroleum products that need to be taxed.

But Swedish Radio News has seen a report from the same military laboratory. It shows that their conclusion was precisely the same as that reached by all the others – that these are petroleum products that should have been taxed.

The letter, addressed to President Alexander Lukashenko, is signed by Deputy Prime Minister Vladimir Semashko.

“After this they stopped confiscating the goods transported by train, and they were allowed to continue over the border. It is entirely possible that they continue in the same way to this very day.”

Andrei Molchan, former KGB agent

Swedish Radio's reporters have shown several of the documents in question to Wojciech Konończuk, an expert on Belarus at the Centre for Eastern Studies (OSW) in Warsaw, Poland. He has studied oil trading for ten years, with a particular focus on Russia and Belarus:

“I think the documents you showed me are, not only very interesting, but they clearly show that there was a probably illegal scheme of gasoline trading, in which Belarusian authorities was probably engaged.”

And he says that the deputy prime minister was acting on orders from President Lukashenko.

“He asked his subordinate Semashko to do something quickly about this problem”, Konończuk says.

Wojciech Konończuk thinks that the documents show that the political leadership of Belarus were involved in the smuggling:

“There is a clear proof that Deputy Prime Minister Semashko was not interested in continuing the investigation into the scheme. So it could be confirmation that very important officials were engaged in the scheme,” he says.

His conclusion is that Deputy Prime Minister Semashko and other powerful people in Belarus have personally benefitted from the scheme:

“I would say illegal profits. Because from the documents you showed me there is a clear message for me that Deputy Prime Minister Semashko perfectly understands the idea behind the scheme and that according to Belarusian law it is illegal.”

Former KGB agent Andrei Molchan agrees:

“This is quite simply corruption at the highest level of the state, which hurts the country’s economy. It’s about the top people in the government protecting those involved,” says Andrei Molchan, who has worked for the Belarusian secret service, the KGB, for ten years.

It was Gunvor International that bought the petroleum products and transported them to Western Europe marked as “Russian Unleaded Gasoline”, according to the investigation by the Estonian customs authority.

Swedish Radio's Ekot has contacted the majority owner of Gunvor for an interview but Torbjörn Törnqvist has refused.

Seth Thomas Pietras is the spokesperson for the company. He writes that the firm has not committed any wrongdoing. He admits that the company bought a “blendstock for gasoline”, but that the deal was made after the goods had already passed through Belarusian customs.

“The responsibility lies with the exporter in Belarus”, Seth Thomas Pietras writes.

That the products were re-labeled in the harbour in Estonia before they were transported on to Antwerp is a technical detail, not because they were falsely labelled, he adds.

The documents do not say whether Gunvor had known that the petroleum products were being smuggled out of Belarus with a false description. But it is known that Gunvor bought the same products that, according to the customs, had been smuggled.

Former KGB agent Andrei Molchan says that it is unthinkable, even “impossible” that Gunvor can have made this deal without knowing about the smuggling scheme:

“It’s impossible. They would not otherwise have needed to use a middle-man. They only do it in order to not bring down their reputation,” he says.

In the case of Gunvor, this involves several loads of petroleum products, and thousands of tons.

“The petrol is Russian. The custom fee to export from Russia to the EU is the same as to export from Belarus to the EU, so if you wanted to do everything honestly you would not need to go through Belarus at all,” says Andrei Molchan.

If the petroleum products had been exported legally straight from Russia, without taking the detour through Belarus, the exporter would have been forced to pay the full tariff. By selling them via Belarus and falsely labelling the products as a tariff-free additive (an anti-knock additive) the companies and people in positions of power could have been able to share the money that would have been paid in fees.

After looking at the documents, Vojchek Konończuk, the analyst in Warsaw, comes to the conclusion that Gunvor did take part in the trade of the products.

"It seems that Gunvor participated in the very final part of the scheme. It is clear that Gunvor bought the gasoline, which on the Belarusian/Latvian border was not gasoline," says Konończuk.

Both Wojciech Konończuk and ex-KGB agent Andrei Molchan are convinced that Russian interests are also involved in the smuggling affair. This was not previously suspected.

“It is different because now we can think that these illegal profits were shared by representatives of Belarusian political ruling elite and probably with some involvement from Russian companies,” says Wojciech Konończuk.

Such suspicions make the connection to Gunvor even more interesting. In 2007 a very large share of the oil exports from Russian state-owned companies went via Gunvor.

Gunvor has in the past been accused of being close to the Russian ruling elite. This has concerned the former part-owner of Gunvor, the Russian Gennady Timchenko. The most serious accusations came in 2014, when President Barack Obama presented America’s new sanctions against Russia, after the invasion of Ukraine’s Crimea.

There were only four private individuals on the sanctions list. One of them was Gennady Timchenko. The US Treasury Department wrote that “Putin has investments in Gunvor and may have access to Gunvor funds.” Gunvor denied this and called the accusations groundless, but the day before the sanctions came into effect Gennady Timchenko sold all of his holdings in Gunvor to Torbjörn Törnqvist, and Gunvor thus avoided the sanctions.

The business press has also in the past accused Gunvor of having links to Russia’s ruling elite. When Swedish Radio News, Ekot, interviewed Torbjörn Törnqvist in 2008 he denied any such links.

“I can tell you that I have never met Putin. Timchenko has never met Putin privately. If they turn up at the same football arena there’s speculation, despite the fact that they sit on different sides of the stands. If you are a part of society, that’s the way it is. Naturally we have good contacts. A large part of the Russian industry is nationalized again. It’s a given that you build high-level contacts. But that’s as far as our political connections go.”

Reporter: “You and Russia’s leaders do not owe each other any favours?

“Absolutely not. I cannot see what they should be. There have been rumours that Putin could have an ownership stake in Gunvor, I say that’s just completely false.”

Swedish Radio News has asked to speak with Deputy Prime Minister Vladimir Semashko, but he has refused to comment. We have also tried to reach President Alexander Lukashenko, but without success.