Bypassing sanctions: Belarusian wood enters the EU on falsified papers

The indirect re-export of Belarusian wood to the EU via Kyrgyzstan and Kazakhstan netted the organizers some 16 million euros, according to a BIC investigation.

The European Union banned the import of Belarusian wood in March 2022. (articles of wood and wood charcoal under code 44). Once the sanctions were imposed, Kazakhstan’s wood shipments to the EU surged 74 times, while Kyrgyzstan’s increased by about 18,000.

Kyrgyz enterprises with a Belarusian track record openly propose to deliver sub-sanctioned goods to the EU using falsified documents. Three similar firms were discovered by the Belarusian Investigation Centre (BIC). One of them intends to transport “trainloads” of pellets to Europe.

Since the enactment of sanctions, BLK Trade, a Polish-registered wood merchant, has continued to send direct payments to its Belarusian state-owned headquarters. As this is happening, the corporation claims to be supplying wood from Kazakhstan.

Indirect re-export of Belarusian timber to the EU via Kyrgyzstan and Kazakhstan

According to the BIC, the indirect re-export of Belarusian timber to the EU via Kyrgyzstan and Kazakhstan netted the organizers some 30 million euros. Former Belarusian authorities are involved in some of this industry.

Wood has become an essential part of Belarus’ exports in recent years. At the same time, the country’s forested acreage has been diminishing. According to Global Forest Watch, Belarus’ forest cover has declined by 11% in the last 11 years. When world oil prices fell in 2016, Alexandr Lukashenka began to explore new ways to restore the country’s finances.

Belarus was rated ninth among the top suppliers of wood and wood products to the EU in 2020. World wood prices surged in 2021, reaching record highs in the spring. Belarus had exported $2.3 billion in wood and wood products by the end of the year.

Customs code 44 was used to transit two-thirds of these shipments to the EU.

Sawn logs, boards, plywood, chipboard, wood pellets, and briquettes are examples. Poland, Lithuania, Latvia, Germany, and the Netherlands were the top European Union importers of Belarusian-made goods.

EU imposed sanctions on Minsk for its role in Russia’s invasion of Ukraine

In March 2022, the EU imposed sanctions on Minsk for its role in Russia’s invasion of Ukraine. The export of code 44 products to Europe was prohibited. 

Suppliers were extended until June 4 to sell the volumes committed before the penalties were imposed.

As a result, according to Eurostat data, Belarus’s wood supplies to the EU have decreased by more than 30 times since June 2022.

Eurostat data show that the EU imports products with code 44 from Belarus.

There is supply where there is demand for wood

The prohibition on Belarusian wood imports has caused a shortage in some EU members. A week after the penalties went into effect, Lithuania’s Deputy Environment Minister announced a severe scarcity of wood in the country. Estonia and Poland experienced a similar issue.

Poland used to purchase some of its wood from the BLK Trading firm, which stood for “Belarusian Forest Company” (Belorusskaya Lesnaya Kompaniya). It is registered as a private firm in Poland, although its owner is the Belarusian state woodworking enterprise Mostovdrev.

According to one of the dealer’s workers, BLK used to supply the products of nine Belarusian wood manufacturers to Poland, with IKEA suppliers among its customers. It’s worth noting that the company only traded under the currently sanctioned code 44. The volume of shipments reached around $34 million in 2021. Still, the volume should have declined drastically this year due to the sanctions.

To verify this, the BIC obtained records relating to mutual settlements between BLK and Mostovdrev in 2022. The dealer handed about $17 million to its owner at the end of September.

That is only half of what it was in the entire year of 2021. Mostovdrev informed BIC that the company does not accept funds from BLK for products subject to EU sanctions. Yet, the Polish company’s website indicates that they only deal in goods with the banned code 44. Mostovdrev declined to answer any further questions.

Newly-founded companies to cover bypassing sanctions

In September, the BLK Trading Sales Director for Europe launched a new company in Poland – 3S Trading. He and his partner own the corporation, registered at the same address as BLK Trading. The company’s profile is similar to BLK Trading’s in that it sells wood and manufactures wood items.

BIC journalists called BLK Trade and attempted to purchase Belarusian wood supplies while posing as a Polish supplier. The sales manager verified that the company indeed had wood from Belarus. Still, it would soon run out since they had been selling the remaining stock. She also mentioned that the company had started working with new suppliers from Ukraine and Kazakhstan.

In Lithuania, the situation is similar. Before the imposition of European sanctions, the country was a significant customer of Belarusian timber. It now imports it in large quantities from Kazakhstan and Kyrgyzstan. The proportion of wooded terrain in Kazakhstan and Kyrgyzstan is 5% and 6%, respectively. According to the Belarus Ministry of Forestry, the country’s forest cover is 40%

The journalists examined Eurostat data on imports of products with the CN code 44. Exports to the EU soared 74 times from Kazakhstan and about 18,000 times from Kyrgyzstan as soon as the sanctions on Belarusian timber went into effect, compared to the same period in 2021.

In terms of money, both countries have spent more than 30 million euros.

However, Kazakhstan’s government prohibited the export of some wood products to strengthen the local wood sector last December. The ban was extended again, once in the summer and once in the winter. Kyrgyz authorities enacted similar steps.

Under the guise of potential clients, BIC journalists spoke with the company’s manager to see if it was possible to reverse the process and re-register Belarusian wood in Kyrgyzstan for distribution to Europe.

After a few days, Quality Standard offered to collaborate with the Certificate KG organization.

This firm assists Belarusian wood product providers in obtaining Kyrgyz documentation for their consignment and passing through EU customs.

The BIC discovered that one of the Certificate KG’s co-founders, Aleh (Oleg) Narchuk, formerly worked for the Gosstandart state standards body.

He was also a co-owner of the Quality Standard company, which provided services to avoid fines.

Aleh Narchuk spoke this autumn at a webinar on “Imports of goods into the Republic of Belarus under sanctions” hosted by the National Centre for Marketing and Pricing Research.

Aleh Narchuk was also involved with several other firms in Kyrgyzstan, including KSK Alliance, KSK Alliance Test Centre, and KSK Trade. Narchuk disputed that these companies are assisting in the circumvention of sanctions.

Wagons loaded with sanctioned goods

Aleh Narchuk was not the only businessman that initiated trade links between Belarus and Kyrgyzstan. The BIC has uncovered three other enterprises that use fake papers to transfer Belarusian items to Europe: Agro KG, SK Grand, and Admit company.

The Admit firm was created in Bishkek on August 2, 2022, five months after the EU banned Belarusian wood imports.

The company, founded five months ago, claims to receive over 40,000 tons of wood debris “yearly” on its website.

The company processes wood waste and makes pellets, briquettes, and other wood fuels. The BIC journalists called Admit as customers and urged them to assist in delivering Belarusian pellets to Europe. The company agreed to do so in Kyrgyzstan, where they had a manufacturing facility and could transport Belarusian products to Europe alongside their own, producing Kyrgyz credentials.

Because shipments were already booked until the end of January, They could only take our order in late January. The company also told us that they had no customs issues but cautioned that transferring goods through Poland and Latvia would be preferable because Lithuanian customs inspectors are more vigilant.

Indeed, Lithuanian customs were the first to identify a significant increase in Central Asian timber shipments. Belarusian and Russian products, according to customs authorities, are presented to customs with statements saying that they were purchased in Kazakhstan or Kyrgyzstan.

When the BIC journalists approached Agro KG and Admit for an official response, the companies began to deny that they smuggled forbidden Belarusian products into the EU using bogus documents. The co-founder of the SK Grand company stated that she was unaware of the sanctions-evading goods and pledged to look into it. 

As our colleagues from the Siena Investigation Center discovered, the Vivalsa company may be involved in trading illegal goods in Lithuania. Previously, this company sold Russian pellets, but after sanctions were imposed, the company began to supply Kyrgyz and Kazakh products. 

In the guise of clients, Siena’s journalists entered the company’s storage and discovered Agro KG items. Saulius Girys, Vivalsa’s director and co-owner, confirmed that the pellets come from Belarus.

Girys ran in local elections on behalf of the Social Democratic Party. In an official commentary for Siena, he mentioned that he just assumed his company’s items came from Belarus. The businessman argued during the conversation that his company had not violated the restrictions.

Undoubtedly, Russian and Belarussian enterprises will continue to avoid sanctions until the EU states hesitate to punish the companies and the countries that enable trade on sham papers to circumvent sanctions.

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