How Russia avoids EU economic sanctions

Iskandar Makhmudov and Andrei Bokarev, two Kremlin-connected oligarchs, are aggressively expanding enterprises in Latvia. They have personal influence over companies in Riga as well as through frontmen. Even though Bokarev and Makhmudov supply the Russian army, Latvian authorities do not consider them a danger to national security. Furthermore, the oligarchs continue to get European Union subsidies, which Latvian officials allocate.

The Riga Electromechanical Plant shared the fate of many significant post-Soviet businesses. The facility experienced deterioration and was corporatized in the 1990s. It is now a large enough operation to provide equipment for trains, subway vehicles, and urban public transportation.

According to the Latvian commercial registration, a Russian legal entity, LLC TransComponent Holding, owns 36% of RER’s shares as of 2021. The original location of the Moscow-based corporation on Bolshaya Lubyanka is listed in the Latvian register. However, it relocated to Tver last year.

Through a web of legal organizations, Iskandar Makhmudov and Andrey Bokarev each possess 20% of TransComponent Holding (LLC Violan and LLC Elarium). Their lesser-known partners split the remaining holdings.

Bokarev and Makhmudov have long been Kremlin allies. They have become among Russia’s top state contractors through their enterprises, UGMK, Kuzbassrazrezugol, Transmashholding, and others. The oligarchs also provide goods and services to the Ministry of Defence.

Alexei Krivoruchko, Russia’s Deputy Minister of Defence, was one of their business partners in the Kalashnikov weaponry enterprise. Bokarev and Makhmudov left Kalashnikov but continued to produce diesel engines for Russian warships through their Kolomna facility.

Makhmudov and Bokarev

Makhmudov and Bokarev were implicated in various criminal matters as businesspeople who laundered illegal money. A 2007 German criminal case refers to them as the proprietors of the “Izmailovskaya” criminal group, while a 2008 Spanish criminal case says that money from the UGMK-owned “Tambov-Malyshev” criminal group was also laundered via them.

However, Moscow-based Krona Group controlled the majority of the 46% interest in Latvia’s RER, and Bokarev and Makhmudov are also involved.

As of 2020, the beneficiaries of JSC Krona Group through Cypriot offshore entities were Russian Igor Lozovoy and Lithuanian citizen Sergeyus (or Sergiyus, as it is often written) Grechukas. However, TransComponent Holding purchased 80% of Krona Group JSC. It thereafter took over control of RER. Bokarev and Makhmudov “purchased” the corporation from themselves: they controlled it for years through their nominees.

Lozovoy, works for Bokarev and Makhmudov’s projects. He was a deputy general director of Mosmetrostroy, a corporation controlled by oligarchs, at least from 2012 until 2015. According to the Ministry of Internal Affairs records, Lozovoy was on a criminal case for unlawful conduct in bankruptcy in Khakassia in the late 1990s when he vanished.

Grechukas was the previous head of Transmashholding’s Lithuanian representative office for Bokarev and Makhmudov. Over the years, a criminal oligarch holding firm with close connections to the Russian Defense Ministry has provided Lithuania with locomotive traction passenger cars, freight cars, rail buses, locomotive engines, shunting locomotives, and passenger locomotives.

Krona Group’s connection to Bokarev and Makhmudov is further demonstrated by a phone number that matches MPK’s. The oligarchs own MPK and its assets, which include suburban train carriers.

Putin and Bokarev

Latvia’s RER also has a subsidiary, LATVO, that deals in machinery and equipment wholesale. Its starting capital is 5.5 million euros. The parent RER has significantly more: 8.1 million euros, with an annual turnover of about 33 million euros in 2021.

The Latvian firm is owned by Russian oligarchs and operates throughout Europe. In the Czech Republic, for example, RER launched a new electric engine for trolleybuses and electric buses in May. RER also receives money from the European Union. The company uses EU business assistance subsidies through the Latvian Investment and Development Agency and the Ministry of Economics.

For example, today the European Regional Development Fund is financing the project “Intelligent thermal management of an integrated electric vehicle traction drive with on-board motors, power electronics converters, power sources, and thermal circuits”. 527 000 euros have been granted to Russian oligarchs at the cost of European taxpayers.

Despite requests from the Anti-Corruption Foundation and Alexei Navalny, the European Union has yet to penalize Bokarev and Makhmudov. So yes, they are solely listed on the United Kingdom’s sanctions list.

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