The scale of cigarette smuggling 1

Smuggling to the European Union 3

Smuggling to Russia 4

What does this have to do with Lukashenko’s «wallets»? 5

Lukashenko’s business empire 6

Afghan war veterans with benefits? 11

What is Lukashenko’s business empire built on?The dictator’s contraband

What is the Belarusian economy based on? The first thing that comes to mind is the Russian oil and gas subsidies. Or potash fertilizers export. Yet, many people forget about one of the main and oldest pillars of the Belarusian economic model. Contraband!

In a new joint investigation with Naviny.by and a Russian independent publication Project, we found out how the state covers up giant smuggling flows and who benefits the most. Spoiler: neither the budget nor ordinary citizens. Details are available in the program Let’s Figure It Out.

The scale of cigarette smuggling

We have heard many times about different types of smuggling through Belarus. But few are aware of the scale these schemes have reached under Alexander Lukashenko’s management.

Belarus is a smuggling country, according to the investigation by KMPG, an international auditing company. It is the main supplier of illegal cigarettes to both the European Union and Russia. In 2018, 13 billion units were transported in both directions. According to the data from Nielsen, illegal cigarettes from Belarus take up more than half (54%) of the Russian tobacco black market, and over the past year this share has only grown.

Belarus is the main source of illegal cigarettes turnover both in the Eurasian Economic Union and the European Union.

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The supply volumes of illegal tobacco products to Russia and the EU are comparable to the cigarette consumption volumes in Belarus. Belarusian smuggling in both directions is growing proportionately to the growing price difference in Belarus and the neighboring countries. Belarus has the lowest excise duties on tobacco in the Eurasian Economic Union; they are two times lower than in Russia. Respectively, the prices are twice lower than the eastern neighbour’s. On average - 60 Russian rubles against 120 [approx. €0.66 vs €1.33 - Transl.]

The state intentionally keeps the prices low. In 2019, Lukashenko issued an order to prevent tobacco prices increase in the event of tax legislation unification with Russia.

In addition, huge tobacco overproduction has been set up in Belarus. According to experts, it exceeds domestic consumption two- or threefold. Today, there are three producers operating on the Belarusian tobacco market. These are the state-owned factory Neman based in Hrodna, and the private factories Tabak-invest and Inter Tobacco located in Minsk.

Experts link the growth of cigarette production with the activities of the Belarusian businessman Alexey Aleksin. His company Energo-Oil occupies the lion’s share (40%) of the Belarusian market. In August 2018, it became the exclusive distributor of Neman produce, and in 2020, Aleksin opened the aforementioned Inter Tobacco factory, which also produces Hrodna cigarettes by purchasing the tobacco blend at Neman. By the way, according to Nielsen, cigarettes made in Hrodna, which are now sold only through Energo-Oil, are the most common ones in the illegal tobacco market in Russia. Recently, Alexin reissued his stake in the company to his sons.

From the KMPG investigation

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Smuggling to the European Union

On October 21, 2020, Lithuanian customs officers detained a Belarusian truck carrying cigarettes in cement blocks. 60,000 packs for €180.000 is the cost of just one Belarusian truck. On November 1, perpetrators attempted to smuggle 500,000 packs of cigarettes worth €1.5 million to Lithuania under the guise of firewood.

Belarusian authorities claim that smuggling is exclusively a «people’s business». But our sources in this business and at customs claim that these days «people’s smuggling» does not exceed 5% of the total illicit supply of cigarettes. And the vast majority, according to them, is being continuously transported by the state railway, packed with the cargo of the largest state-owned exporters.

One of the Belarusian Railways internal documents, which we have at our disposal, testifies to the detection of cigarette smuggling at the Benyakoni station in a rail car with Hrodna Azot produce.

Former Hrodna Azot employee Yury Ravavy knows of one such case. On September 22, 2020, several dozen packs of cigarettes worth €30,000 were found in the rail cars.

«The security service of the enterprise employs many former KGB personnel who have contacts with those who can provide protectionto this whole process», - a former employee of the Hrodna enterprise believes.

Indeed, the head of the Hrodna Chemist corporate newspaper is Siarhei Baraukou who retired from the KGB about three years ago and went to work for the publication. A former KGB employee Natalia Miskevich first worked in HR, and after the election became deputy director general for ideology.

Cigarette production at the Neman factory. Photo: grodnonews.by

“For Russia, it’s [cigarette smuggling. - Ed.] a problem. They give it publicity. This is also a problem in the EU. They talk about it. This is not a problem in Belarus. Belarus receives some official income. The state, apparently, is satisfied with everything. Business people as well, ” - said Aliaksandr Zayats, economic columnist at TUT.by.

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Here’s how the scheme itself works. Carbamide is loaded into the wagons, underweight ensured. The underweight is loaded up with cigarettes, and a special seal is put on the wagon. The sealer is stored in a safe, only a few people have access to it.

The European Union notes a growing trend of cigarette smuggling from Belarus. Thus, in 2020, Lithuanians alone seized more than 14 million packs of contraband cigarettes, which is twice as much as in 2019.

Smuggling to Russia

Meanwhile, the transparent border with Russia creates even more favorable conditions for smugglers. One of the most common ways of transporting goods from Belarus to Russia is the so-called interrupted transit. Belarusian companies claim to transport cigarettes to Kyrgyzstan, Kazakhstan or Armenia, however, they never reach the final destination. Truck unloading in Russia.

In order to prevent smuggling, BNGarant, a system for transit traffic monitoring, has been implemented in Belarus. It tracks the integrity of cargo seals all the way to the destination in real time. But guess who the national operator of this system is? The company Belneftegaz, which belongs to the Alexin family. And this system was developed by the company Synesis Stigma, about 75% of which belongs to that same Belneftegaz.

According to British American Tobacco analysts, the annual revenue of all traders in illegal Belarusian cigarettes in Russia could comprise around US$300 million. About 10 billion cigarettes are brought from Belarus to neighbouring Russia. However, measures have been taken in Russia to overcome the cigarette problem.

From the beginning of the year, no more than 200 cigarettes can be brought in for personal use. Previously, there were no such restrictions.

«That means, Russian law enforcement officers have real leverage to counter illegal transportation, including interrupted transit.» - believes Baysolt Khamzatov, First Vice President of the international association Antikontrafakt (Anticounterfeit) .

Cigarettes in cement blocks. Photo: euroby.info

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However, interrupted transit is not the only way for Belarusian cigarettes to enter Russia. Our colleagues from the Russian publication Project found out about it.

Before the New Year, customs officers in the Pskov region stopped a truck for control. According to the documents, the driver was transporting furniture from Belarus to the address of a Moscow-based organization. Belarusian cigarettes were found instead of the furniture during the search.

Often, they smuggle «spare parts», i.e. tobacco, capsules and cardboard sheets go separately, and the stuffing and the pack cutting take place once they are in Russia.

Small-scale general smuggling in Russia is arranged in the manner of drug sales, i.e. through anonymous Telegram channels and groups on «VKontakte». In addition to closed groups, Belarusian cigarettes can be found on many websites in the .ru domain zone, although the sale of tobacco products on the Internet is banned in Russia.

What does this have to do with Lukashenko’s «wallets»?

While in Russia it is mainly small players that are involved in smuggling, in Belarus there are large beneficiaries of the cigarette trade.

When the Inter Tobacco factory was launched in 2020, Alexander Lukashenko changed Minsk city’s borders: almost 1.5 hectares of land were transferred to Minsk district.

The fact is that the owner of this business, the already mentioned Alexei Aleksin, is not a stranger to Lukashenko. For some time, he worked as a chief specialist of the Department of Energy and Petroleum Products of Belvneshtorginvest, a company that was part of the Presidential Affairs Management (PAM). Then, he oversaw the petroleum products trade in the group of companies Triple belonging to the businessman Yuri Chizh. In 2012, the European Union imposed sanctions on Chizh, who was considered Lukashenko’s «wallet.» Two years earlier, all of Chizh’s oil assets had been transferred to Aleksin, who soon became an independent figure.

The body of the truck stopped in the Pskov region. Photo: informpskov.ru

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In addition, the businessman helps to develop the biker movement, in which Viktor Lukashenko actively participates. In 2012, together with the son of the former Prosecutor General of Russia, Artem Chaika, Viktor Lukashenko created an elite Iron Birds Chapter motorcycle club, which organizes biker rallies in Russia and Belarus. The co-organizer of the Belarusian events is the Moto Event company, in which Aleksin’s employee Dmitry Pavlovich has a share. He is the director of Energo-Oil. In May 2019, Aleksin was present at the opening of the motorcycle season in Voronezh together with Lukashenko and Chaika.

It is not the passion for motorcycles alone that unites Aleksin and the Lukashenko family. Telegram channels published information about the passengers of a private plane flying to the United Arab Emirates in March 2020. According to the leaked passenger information, Alexei Aleksin and Viktor Lukashenko were flying in that private business jet. Official sources have neither confirmed nor disproved this information.

And so that’s what we found out at this point. Not only did the state hand over most of the tobacco market to Aleksin, a former employee of the Presidential Affairs Management. But it also seems to be helping him to profit from smuggling.

According to former employees of Hrodna Azot, smuggled goods are loaded into wagons with large state-owned enterprises’ cargo, and under their seal. This, according to our sources, cannot happen without the plant’s top management’s assistance.

Lukashenko’s business empire

Tobacco is only part of the big Belarusian smuggling offshore. As we noted in the previous investigation into the re-export of flowers to Russia, some of the largest beneficiaries of the tax evasion scheme worth hundreds of millions of dollars are entities controlled by Bremina Group. This large transport and logistics company is owned by Aleksin, Mikalay Varabey, as well Aliaksandr Zaitsau, Viktor Lukashenko’s former aide.

Alexey Aleksin. Photo: Dmitry Brushko / TUT.by.

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But Russian journalists have found that they are not the only ones who benefit. The correspondent of the Russian publication Project, whom we dealt with on this topic, called the largest wholesale companies under the guise of a buyer: Seven Flowers (Sem tsvetov), Florexim, Euroflor, Flowers from Machelyuk (Tsvety ot Marchelyuka). They all admitted that they bring their goods through Belarus, and there are no other options now. An employee of one of the largest transport companies said that the company receives flowers through the Belarusian Belmytservis and Globalcustom: «No one will change this scheme, and it is three times more expensive to bring in directly from Ecuador.»

Both Globalcustom and Belmytservis have been repeatedly accused of supplying sanctioned goods. Belmytservis is a Belarusian state-owned enterprise controlled by the State Customs Committee. And market players associate the Globalcustom group of companies with the Presidential Affairs Management, headed by Viktor Sheiman.

Globalcustom Management owns 75% of the Belgeopoisk mining company. Another 25% of Belgeopoisk belongs to Belzamezhhandal, which reports to the PАМ. Sheiman personally participated in Globalcustom’s customs clearance point opening in Vyaliki Kamen industrial park.

And the episode that became known to the author of the program Let’s Figure It Out in 2017 demonstrates that Globalcustom is not afraid of trial or investigation. A truck was detained in Russia. According to the documents, it carried fabric, whereas in fact it was branded clothing. But as a result, it was not the cargo owner, i.e. the logistics company Globalcustom, but the truck driver and the vehicle owner who were convicted for smuggling.

Presidential Affairs Management is not subordinate to the Presidential Administration, but exclusively to Alexander Lukashenko. Over 25 years of its existence, this entity has gone from a small unit engaged in logistics and welfare support of the top-level governmental authorities to a large diversified holding. The PAM’s portfolio now includes more than 100 organizations in Belarus and abroad.

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Alexander Lukashenko and Viktor Sheiman. Photo: belaruspartisan.by

The structure of the owners of «Belgeoposhuk». Source: ADR

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Artem Chaika and Alexei Aleksin at the opening of the motorcycle season in Voronezh. Photo: RIA

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Until the spring of 2000, Ivan Tsitsiankou (Titenkov), a man from Lukashenko’s team that brought him to power, managed the organization. Here is what he told Belorusskaya Delovaya Gazeta in 2001: “There was no money in the budget, it had to be earned, and I set myself a goal: to become self-sufficient in 10 years. That’s what I set out to achieve.»

One of the most important business areas that brought money to the presidential fund was the export-import operations management by PAM. Receiving considerable benefits from the authorities for importing goods into Belarus, the companies controlled by PAM freely exported these goods across the transparent border to the Russian market.

On November 22, 1995, Lukashenko issued order No.230 «On tax benefits for the state trade and exhibition enterprise Torgexpo”. It noted: «In order to provide the population of the Republic of Belarus with consumer goods before the New Year’s eve, to exempt the enterprise Torgexpo from paying customs duties, excise taxes and value added tax [...] on the basis of contracts agreed with the Presidential Affairs Management».

However, in reality the goods went not to the population of Belarus, but to Russia. And the goods were mainly alcohol and cigarettes. As a result of this operation, the money was essentially confiscated from the budget (Torgexpo did not pay taxes), and the proceeds from the sales in Russia went to the PAM account.

After Titenkov, Galina Zhuraukova (Zhuravkova) was in charge of PAM. She achieved the dominance of the PAM’s commercial structures in the most important goods markets - coal, fish, tobacco. The main commercial entity, the company Belaya Rus, received the exclusive right to import raw sugar and export beet sugar to Russia. Another entity, Belvneshtorginvest, monopolized the export of Belarusian tractors to Russia.

Zhuraukova also engaged in oil, trying to get her hands on the export of potash fertilizers. This woman implemented a contract with the German concern Daimler-Benz, which provided all the district executive committees chairmen with executive class Mercedes vehicles. Another area of activity of the PAM in the early 2000s was confiscated goods trade. In 2003, US$250 million worth of goods were confiscated.

Today, PAM is headed by Victor Sheiman. He is the only acting official from the team that brought Lukashenko to power. Shortly after the election, Sheiman was appointed State Secretary of the newly

Riga market in Moscow. Photo: Project

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formed Security Council. After that, Sheiman held many high posts: Attorney General, head of the Presidential Administration, and President’s Assistant on special assignments. He was appointed head of the Presidential Affairs in 2013. He recently reported to Lukashenko that last year’s PAM enterprises revenue amounted to 2.6 billion rubles. That’s over one billion dollars.

“Lukashenko used him [Sheiman. - Ed.] as a tool to carry out whatever the president ordered. He completely satisfied him.» - said the political observer Aliaksandr Fyaduta.

Afghan war veterans with benefits?

The charity fund’s Memory of Afghanistan (Pamyac’ Auganu) activity is connected with Viktor Sheiman. The foundation was established in 2002, headed by Aliaksandr Myatla. Like Sheiman, Myatla had served in Afghanistan. They met many times. Euroradio called them friends.

The charity has never published financial reports. One of the messages on the website is about an event that took some seven years ago, when 79 cars and 16 off-road motorcycles were gifted to Afghan war veterans. Fyaduta says that the benefits granted to the fund were used by various businessmen earning them a lot of money. Here is what Aliaksandr Kamarouski, head of another Afghan war foundation, says about Sheiman and Memory of Afghanistan: “He [Sheiman. - Ed.] began to clean up the competition, and, essentially, my organization exists only on paper now. Sheiman may have grandiose connections in Russia. Given his position and the fact that he is familiar with the leadership of the Afghan war movement. Through Franz Klintsevich [member of the Federation Council. - Ed.] he has access all the way to Putin. He can open up any subject».

In the summer of 2020, Myatla became 100% owner of GardService, the first private Belarusian security company in the country, to which Lukashenko personally granted the right to use firearms. Previously, the company was owned by Globalcustom Management. This is another indirect connection between Sheiman and one of the largest logisticians and alleged smugglers in Belarus.

• What we found out. People’s tobacco smuggling accounts for a tiny percentage of the illegal export of Belarusian cigarettes. Based on the insiders’ testimony, the bulk of the volume is exported on an industrial scale with the state’s active support and law enforcement agencies’ purposeful inaction.

• First and foremost, Alexei Aleksin, former Presidential Affairs Management employee, benefits from the scheme most of all. He controls the sales by the state-owned Neman tobacco factory, and also owns a cigarette factory. But indirect ties indicate that the current Presidential Affairs Management headed by Viktor Sheiman may also benefit from the smuggling schemes.