‘Forged documents’: how Ukrainian grain may be enriching Putin’s circle
Tom Burgis in Kherson and Pjotr Sauer
Tom Burgis in Kherson and Pjotr Sauer
THE GUARDIAN
Mon, 11 December 2023
Photograph: Alexander Ermochenko/Reuters
Russia’s farmers are achieving record grain harvests – according to official figures. But the numbers published by Vladimir Putin’s government appear to conceal the contribution to this bumper crop made by another set of farmers: those in occupied Ukraine.
Ukrainian officials and agriculture experts have claimed that favourable conditions are not enough to explain the giant harvest. They say instead that Ukrainian grain is being exported disguised as Russian produce.
The occupation authorities are “looting” Ukrainian grain, prosecutors alleged in one case against a suspected collaborator, “not for military operations or to meet the needs of the population but for selfish purposes and for motives of personal illegal profit”.
Farms are brought under occupation control through brutal means, according to prosecutors and a witness, while grain production allegedly flows away to Russian companies, including one with connections to Putin’s circle.
In May, the UK announced “a crackdown on the shady individuals and entities connected to the theft and resale of Ukrainian grain”, placing sanctions on those whom it said were shipping grain out of occupied territory “badged as Russian goods”.
But western powers have avoided imposing blanket restrictions on Russian food exports as they have done with other goods such as oil.
“It’s not enough,” said Vladyslav Vlasyuk, an adviser to the Ukrainian presidency and deputy head of Task Force UA, an inter-agency group tracing and confiscating assets of those under sanctions.
The Russians have a simple “business model” in occupied Ukraine, he said: “They just get all the grain they can,” send it mostly overland to Russia, “make forged documents [saying] that it’s not from occupied territory, that it came from Russia, then they export it.” The Middle East and Africa are major markets.
Mike Lee, a consultant on crop production in the former Soviet Union, calculated that more than a fifth of the 29m tonnes of grain expected from Ukraine’s most recent harvest is missing. As much as 5m tonnes may have been stolen by the Russians, he said, with the rest lost to war.
Secrecy
According to accounts from occupied territory, the Russians and their collaborators have used force to confiscate Ukrainians’ farms.
Andrian Khablenko ran a farm in the occupied southern region of Kherson that he said made annual profits of £80,000 before the war. He said he was taken from his home in September 2022 by occupation secret police known as the GSB to a detention centre.
Khablenko said torturers put a bag over his head and beat him for hours. They performed a mock execution, leaving him convinced he was about to die. Khablenko says that he was forced to sign a blank piece of paper that was to be filled in later authorising the transfer of his farm to members of the occupation regime.
The occupation’s grain operations are conducted in secrecy behind a shield of Russian troops, artillery and minefields, and the details of them – including where output from Khablenko’s old farm now ends up – are hard to trace. But legal filings, company records and analysis by YouControl, a Ukrainian data service, provide some indications.
A Ukrainian criminal filing in October said Khablenko’s extortion took place on the orders of the head of the occupation authorities in the Kherson region, Volodymyr Saldo.
A former Ukrainian MP and longstanding Russian sympathiser, Saldo set up a new company to trade Kherson’s grain output, prosecutors stated in criminal filings. They alleged that a Russian grain-trading company, Kuban-Forward, signed a deal to receive grain from this company and elsewhere in occupied Ukraine.
Before the invasion, only one customer for Kuban-Forward’s grain is listed in a Russian database of official tender and procurement records. The buyer is United Grain, one of Russia’s biggest agricultural conglomerates with annual revenue of more than $1bn.
Denys Dmytrovych Guev, Kuban-Forward’s registered sole owner, was one of the few contacts given on United Grain’s website, where he was listed since at least May 2022 as a representative for “grain trans-shipment services” at its vast Black Sea plant in Novorossiysk. In July, United Grain reported record exports from this plant.
Guev said: “We guarantee compliance with all sanctions laws and can confirm that all products are of Russian origin.”
He did not answer questions about Kuban-Forward’s current relationship with United Grain beyond saying that it was “not a representative” of the company. He said the description of him on United Grain’s website was “outdated”. Shortly after the Guardian contacted him, his name was removed from the site.
Train wagons bearing United Grain’s livery have been seen transporting grain from occupied Ukraine towards Russia, according to a report by international law specialists Global Rights Compliance. United Grain did not respond to a request for comment.
Oligarchs
United Grain’s majority owner is the Russian state. But in 2020 two individuals acquired a quarter of its shares via a holding company.
One, Taimuraz Bolloev, is reportedly a friend of the Russian president, once joining Putin’s old judo teachers and other intimates for a birthday cruise. According to Russian press reports, he worked on Putin’s victorious presidential campaigns in 2000 and 2004, and Putin’s rule has proved profitable for him.
When he branched out into clothing, Bolloev received exclusive contracts to dress the military. He also administered the torrent of public money that was spent with scant oversight on the Sochi Winter Olympics.
More recently he was one of the oligarchs granted control of businesses confiscated from western investors after the invasion of Ukraine.
Alexander Vinokurov, the other oligarch who acquired an interest in United Grain, is the son-in-law of Sergey Lavrov, Putin’s longstanding foreign minister.
A former president of the Russian society at the University of Cambridge, Vinokurov worked at Morgan Stanley and a US private equity fund before taking top jobs in the business empires of leading Russian oligarchs. “I am proud of my relationship with Mr Lavrov,” Vinokurov has said, “and am trying to model myself on him.”
Vinokurov has been placed under sanctions by western states, including the EU. His Marathon Group is reported to have profitably sold at least some of its shares in United Grain in August. Bolloev has been placed under sanctions by Ukraine alone. There have been no reports that he has disposed of his holding in United Grain.
Bolloev’s and Vinokurov’s companies did not respond to requests for comment.
Saldo, the governor of occupied Kherson, did not respond to questions either. He recently visited Moscow to give Putin an update on his new province. According to a Kremlin transcript, Putin congratulated him on a strong grain harvest.
Mon, 11 December 2023
Photograph: Alexander Ermochenko/Reuters
Russia’s farmers are achieving record grain harvests – according to official figures. But the numbers published by Vladimir Putin’s government appear to conceal the contribution to this bumper crop made by another set of farmers: those in occupied Ukraine.
Ukrainian officials and agriculture experts have claimed that favourable conditions are not enough to explain the giant harvest. They say instead that Ukrainian grain is being exported disguised as Russian produce.
The occupation authorities are “looting” Ukrainian grain, prosecutors alleged in one case against a suspected collaborator, “not for military operations or to meet the needs of the population but for selfish purposes and for motives of personal illegal profit”.
Farms are brought under occupation control through brutal means, according to prosecutors and a witness, while grain production allegedly flows away to Russian companies, including one with connections to Putin’s circle.
In May, the UK announced “a crackdown on the shady individuals and entities connected to the theft and resale of Ukrainian grain”, placing sanctions on those whom it said were shipping grain out of occupied territory “badged as Russian goods”.
But western powers have avoided imposing blanket restrictions on Russian food exports as they have done with other goods such as oil.
“It’s not enough,” said Vladyslav Vlasyuk, an adviser to the Ukrainian presidency and deputy head of Task Force UA, an inter-agency group tracing and confiscating assets of those under sanctions.
The Russians have a simple “business model” in occupied Ukraine, he said: “They just get all the grain they can,” send it mostly overland to Russia, “make forged documents [saying] that it’s not from occupied territory, that it came from Russia, then they export it.” The Middle East and Africa are major markets.
Mike Lee, a consultant on crop production in the former Soviet Union, calculated that more than a fifth of the 29m tonnes of grain expected from Ukraine’s most recent harvest is missing. As much as 5m tonnes may have been stolen by the Russians, he said, with the rest lost to war.
Secrecy
According to accounts from occupied territory, the Russians and their collaborators have used force to confiscate Ukrainians’ farms.
Andrian Khablenko ran a farm in the occupied southern region of Kherson that he said made annual profits of £80,000 before the war. He said he was taken from his home in September 2022 by occupation secret police known as the GSB to a detention centre.
Khablenko said torturers put a bag over his head and beat him for hours. They performed a mock execution, leaving him convinced he was about to die. Khablenko says that he was forced to sign a blank piece of paper that was to be filled in later authorising the transfer of his farm to members of the occupation regime.
The occupation’s grain operations are conducted in secrecy behind a shield of Russian troops, artillery and minefields, and the details of them – including where output from Khablenko’s old farm now ends up – are hard to trace. But legal filings, company records and analysis by YouControl, a Ukrainian data service, provide some indications.
A Ukrainian criminal filing in October said Khablenko’s extortion took place on the orders of the head of the occupation authorities in the Kherson region, Volodymyr Saldo.
A former Ukrainian MP and longstanding Russian sympathiser, Saldo set up a new company to trade Kherson’s grain output, prosecutors stated in criminal filings. They alleged that a Russian grain-trading company, Kuban-Forward, signed a deal to receive grain from this company and elsewhere in occupied Ukraine.
Before the invasion, only one customer for Kuban-Forward’s grain is listed in a Russian database of official tender and procurement records. The buyer is United Grain, one of Russia’s biggest agricultural conglomerates with annual revenue of more than $1bn.
Denys Dmytrovych Guev, Kuban-Forward’s registered sole owner, was one of the few contacts given on United Grain’s website, where he was listed since at least May 2022 as a representative for “grain trans-shipment services” at its vast Black Sea plant in Novorossiysk. In July, United Grain reported record exports from this plant.
Guev said: “We guarantee compliance with all sanctions laws and can confirm that all products are of Russian origin.”
He did not answer questions about Kuban-Forward’s current relationship with United Grain beyond saying that it was “not a representative” of the company. He said the description of him on United Grain’s website was “outdated”. Shortly after the Guardian contacted him, his name was removed from the site.
Train wagons bearing United Grain’s livery have been seen transporting grain from occupied Ukraine towards Russia, according to a report by international law specialists Global Rights Compliance. United Grain did not respond to a request for comment.
Oligarchs
United Grain’s majority owner is the Russian state. But in 2020 two individuals acquired a quarter of its shares via a holding company.
One, Taimuraz Bolloev, is reportedly a friend of the Russian president, once joining Putin’s old judo teachers and other intimates for a birthday cruise. According to Russian press reports, he worked on Putin’s victorious presidential campaigns in 2000 and 2004, and Putin’s rule has proved profitable for him.
When he branched out into clothing, Bolloev received exclusive contracts to dress the military. He also administered the torrent of public money that was spent with scant oversight on the Sochi Winter Olympics.
More recently he was one of the oligarchs granted control of businesses confiscated from western investors after the invasion of Ukraine.
Alexander Vinokurov, the other oligarch who acquired an interest in United Grain, is the son-in-law of Sergey Lavrov, Putin’s longstanding foreign minister.
A former president of the Russian society at the University of Cambridge, Vinokurov worked at Morgan Stanley and a US private equity fund before taking top jobs in the business empires of leading Russian oligarchs. “I am proud of my relationship with Mr Lavrov,” Vinokurov has said, “and am trying to model myself on him.”
Vinokurov has been placed under sanctions by western states, including the EU. His Marathon Group is reported to have profitably sold at least some of its shares in United Grain in August. Bolloev has been placed under sanctions by Ukraine alone. There have been no reports that he has disposed of his holding in United Grain.
Bolloev’s and Vinokurov’s companies did not respond to requests for comment.
Saldo, the governor of occupied Kherson, did not respond to questions either. He recently visited Moscow to give Putin an update on his new province. According to a Kremlin transcript, Putin congratulated him on a strong grain harvest.
ON DECEMBER 8, 2023
By EU Reporter Correspondent
Image credit: octave @depositphotos
“War has always been a racket, and it is possibly the oldest, easily the most profitable, and, surely, the most vicious,” said Smedley Butler, once the most decorated US Marine in history before becoming an author and anti-war advocate. Before dying in 1940, Butler said that during his 33-year military career, he was primarily “a high-class muscle man for Big Business, Wall Street, and the bankers".
The war in Ukraine seems to be taking a similar path. War profiteers have already made billions of dollars from death and misery in the country. A report reveals oil companies made nearly $220 billion in profits in 2022, “a windfall of Russia`s invasion of Ukraine”, as President Joe Biden recently critiqued.
When the war ends, rebuilding Ukraine will represent a trillion-dollar opportunity for US and European construction companies, who are already planning how to get their hands on those profits.
Opportunist hedge funds have also emerged as significant war profiteers. According to The Guardian, they raked in nearly $2bn in Q1 2022 alone, but worse yet, their corporate greed has hampered the Black Sea Grain Corridor talks, putting profit before global food security.
In July, Russia refused to renew its participation in the Grain Corridor, ending safety guarantees for Ukrainian ships and thereby essentially cutting the ability of Ukrainian companies to export grain via the Black Sea, although some shipping activity has reportedly continued despite the risks.
The so-called grain corridor was crucial to safely move produce outside of Ukraine, particularly as global food prices have increased. The Black Sea grain deal represents a lifeline for “79 counties and 349 million people on the front line of food insecurity,” the International Rescue Committee said.
Ukraine set up its own trade route in August to move food exports out of its Black Sea ports near Odessa, defying Russian threats. (United Nations/Lisa Kukharska)
Shortly after the start of the war, Ukrainian companies began facing demands from Western creditors for loan repayments and subsequent hostile takeover attempts, once the creditors realized it was more lucrative to try to take over the assets themselves than to agree to debt repayment schedules. Unlike Western governments that have provided unequivocal support to the Ukrainian government, these American creditors have shown limited flexibility in the wake of the war that made businesses unable to operate.
Hostile takeover tactics
Argentem Creek Partners (ACP), an American distressed asset fund, was legally prevented from taking over a grain terminal owned by GNT Group (GNT) in the Odessa Commercial Sea Port. GNT’s shareholders sought and succeeded in getting a Nicosia District Court order against ACP because of its aggressive takeover actions.
Yet, ACP and another US hedge fund, Innovatus Capital Partners (Innovatus), have waged a legal, media, and political battle against GNT in a bid to take over the company after it failed to repay its debt to the hedge fund immediately after ACP abruptly issued a demand.
ACP began pursuing GNT legally in Ukraine, the United Kingdom, Cyprus, and elsewhere and is now seeking to take control of the grain terminal, accusing the Ukrainian owners of the terminal of corporate mismanagement and fraud. ACP has keptpushing to force GNT into bankruptcy in Ukraine, just in November succeeding in getting the Ukrainian Supreme Court to uphold its bankruptcy efforts in Ukraine.
ACP’s extensive legal and lobbying efforts, however, raise questions about its tactics. In Ukraine, ACP is represented by Hillmont Partners, a law firm known for its closeness to the presidential administration of Volodymyr Zelenskyy. At least three Hillmont Partners lawyers were on the list of proposed members of parliament nominated by Zelenskyy’s Servant of the People party after his election in 2019. Denys Monastyrskyi, Zelenskyy’s Minister of Interior until his untimely death in a helicopter accident earlier this year, previously served as a lawyer with Hillmont Partners. In the United States, ACP has spent over a million dollars on lobbying fees related to Ukraine since beginning its enforcement efforts against GNT at the end of last year, using the high-powered American law and lobbyist firm Akin Gump. Based on prior reports, ACP has actively pressured the American Embassy in Kyiv to assist its efforts to take over GNT’s Odessa terminal.
Profiting from the war
“Despite Innovatus’ and ACP’s continued support for GNT, including the offer to postpone loan payments following Russia’s invasion, investigations revealed that the company liquidated all grain pledged to Innovatus without notice or consent,” the hedge fund group stated the time.
John Patton, ACP’s Head of EMEA & Asia, accused GNT of stealing or pilfering $130 million of inventory. “So, we decided to enforce, which was not an easy decision because obviously, we recognize there’s a war on, at the same time, they’ve had 22 attempts at injunctions.”
Ukrainian companies have described ACP’s efforts as war profiteering, while ACP and other Western creditors insist that they merely continue their business and accuse those companies of corruption.
GNT states the US fund is opportunistically profiting from the war by trying to take over the company at a massive discount. The Ukrainian company, according to sources, is still open to settling and repaying its debt while the dispute is disrupting the operations of the grain terminal to the detriment of global food security.
Crucially, the grain terminal in Odessa was one of the few key players involved in the now-suspended grain corridor initiative between Ukraine and Russia.
Media bias?
On the legal side of this takeover attempt, the London Court of International Arbitration (LCIA) is the main dispute venue. The LCIA is hearing a case about GNT, the critical Ukrainian operator at the Odessa Port Terminal, which has been consistently bombed by Russia.
GNT is also a key player in the widely covered, and for now suspended, Black Sea Grain Corridor, and while the US plaintiff, ACP, has been successful in getting massive coverage of its dubious allegations, no serious Western journalists have covered the position of the Ukrainian parties.
ACP obtained a Worldwide Freezing Order in the UK’s High Court in January 2023, which the hedge fund continues to tout in an apparently complicit Western media.
Meanwhile, even RT, the Russian-state owned news network that has served as a mouthpiece for official Russian state positions globally, has used the dispute for its own purposes, making comparisons between ACP’s allegations against GNT and unfounded claims that Western weaponry supplied to Ukraine has ended up in the hands of Mexican drug cartels, undoubtedly contributing to Russia’s justification of its refusal to renew its participation in the grain corridor.
Unanswered emails
As exclusively revealed to this news organisation, two prominent Ukrainian companies, Brooklyn-Kyiv and Kadorr Group, have tabled offers to buy out the loans. Curiously, despite constantly and repeatedly looking for a response, the US hedge funds do not reply.
ACP and Innovatus received separate and independent offers from the Kadorr Group, owned by Syrian-Ukrainian businessman Adnan Kivan, with interests from grain to construction to media, and then from Brooklyn-Kyiv, a major stevedoring company in Odessa owned by Yuriy Gubankov.
The offers were made back in August of this year, but ACP and Innovatus have not followed up and ignored further enquiries and calls.
Why is this?
Gubankov of Brooklyn-Kyiv, which has more than the $70m in reserves needed to buy out ACP’s claim to the GNT Group to ensure it remains in Ukrainian interests, has a theory:
“I have called, emailed, sent numerous SMS’s to John Patton and he always promises to call me back, but he never does. It seems to me that they don’t want to sell, as this terminal can make them more money in the long term,” he says on a phone call. “It is a very complicated and complex situation,” Gubankov continues. “Nobody really knows what state the terminal is in. There is a war going on and access is limited. But it is a great pity that nothing is operational now because of this stand-off.
Kadorr Group has also revealed documents exclusively to this news organisation intending to offer the US Hedge funds 85 percent of GNT’’s current market value.
“It is no surprise that these requests have gone unanswered,” concluded Gubankov. “The US Hedge funds are doing all they can to ensure they can liquidate GNT for their own long-term gain.”
Representatives of ACP and Innovatus were approached for comment but did not respond.
Ana Firmato, Managing Director at Innovatus, has previously stated: “ACP and Innovatus remain committed to their mission of promoting private investment activism as a means to combat corruption in Ukraine and will continue to invest in projects that align with these objectives.”
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