Sanctions on glass: a harsh scrape

Hrodna glassmakers can achieve remarkable results whenever Aleksandr Lukashenko needs to be impressed. They built a new plant and equipped it with state-of-the-art European machinery in just 2.5 years. The general public was not informed of how this equipment was transported to Belarus despite the sanctions. In collaboration with IrpiMedia and Siena publications, Buro revealed the secrets of a large-scale project that was completed entirely through well-established smuggling schemes.

She claimed that construction was underway during difficult economic times, with the support of Aleksandr Lukashenko.

Prime Minister Raman Halouchanka (second from the left) visits the under-construction glassware production facility in Hrodna. November 2022. Source: belta.by

The Belarusian ruler’s unexpected concern for the environment prompted him to call on his subordinates to phase out plastic packaging gradually. The government developed a special plan that included measures to increase glass container production.

Grodnenskii Steklozavod is the largest bottle producer in Belarus. It already has two production sites. In 2020, they started building a third one on Lukashenko’s orders. The location was chosen for its convenience, as it is situated in the Grodnoinvest Free Economic Zone, which offers extensive tax and customs privileges. The project was estimated at $55 million and received funding from the Bank Razvitiya, which provides loans to state-owned enterprises.

New equipment was needed to set up the production line. Grodnenskii Steklozavod found what they were looking for in Italy. In February 2021, the Belarusian company signed a contract with the EMS Group to supply three new lines for transporting, inspecting, and palletising glass containers, as well as for moving pallets of finished products to the warehouse. The cost of the equipment and spare parts was €1.85 million. Supervised installation, start-up, and commissioning, as well as personnel training, which cost an additional 200,000 euros.

According to the contract, the Italians were supposed to ship the equipment to Belarus in 2022. But their plans were disturbed by Russia’s invasion of Ukraine. In response to the Belarusian regime’s facilitation of military aggression, the European Union imposed economic sanctions. Since June 2022, it has not been possible to bring Italian conveying machines into Belarus. The large-scale project was on the verge of failure.

Then intermediaries from Lithuania appeared on the horizon. They organised the supply of Italian equipment to Grodnenskii Steklozavod, bypassing sanctions. We received details of these schemes from one of the witnesses. We have also obtained data and documents that corroborate his account. So how did it work?

ROUTE RECALCULATED

At 05:40 on 22 July 2022, a DAF truck arrived at the Lithuanian checkpoint in Šalčininkai. The Belarusian driver presented the cargo documents to the customs officers. The car was carrying Italian equipment from the EMS Group for Grodnenskii Steklozavod.

A truck at the Lithuanian border (the photo is for illustrative purposes only). Source: lrmuitine.lt

The Lithuanian customs officers refused to allow the vehicle to proceed after checking the documents. The equipment in the semi-trailer was on the sanctions list, which meant it could not be exported from the EU to Belarus. An administrative violation report was drawn up on the driver, after which the car was denied permission to cross. The attempt to deliver the Italian machines to Hrodna was unsuccessful. Then, cunning schemes were used to get around the sanctions.

According to our source, employees of this company fabricated a contract between the EMS Group and the Almaty-based company Quarry Service Kazakhstan. Rustam Altynov signed the contract with the Italians on behalf of the latter, but he has never led Quarry Service Kazakhstan. The Kazakhstani company did not respond to our inquiry.

Shipping documents were also sloppily prepared. The contract number and date, as well as the invoice numbers and dates, remained the same. The weight and price of the goods were also simply copied and pasted. Six cars with equipment were prepared for shipment. This time, however, the Italian conveyor belts were not taken to Belarus, but to Kazakhstan – on paper.

European equipment can be delivered to this Central Asian republic without any problems, as it is not subject to EU sanctions. However, according to our source, the production lines were not going to be carried to Almaty. He claimed that they were sent straight to Hrodna on the way from Vilnius. The scheme designed to circumvent sanctions is known as “false transit”. We discussed it in one of our previous investigations.

According to our source, the drivers altered their documents right on the neutral border strip. They presented consignment notes to the Lithuanian customs officers showing that the recipient of the Italian equipment was the Almaty-based company Quarry Service Kazakhstan. Before entering Belarus, they hid these documents and produced the consignment notes, which stated that the recipient of the Italian equipment was Grodnenskii Steklozavod. As a result of this scheme, the first batch of Italian equipment, worth over 450,000 euros, arrived in Belarus between July and September 2022.

We noticed another interesting detail in the shipping documents. The goods were assigned an entirely different customs code – a unique identifier for the shipment. It was not the code covered by sanctions, but another one that falls outside European restrictions. Probably, the carriers changed it to be on the safe side.

The code-substitution plan will be further used for new deliveries of Italian equipment to Belarus. However, it will not go through a fake Kazakh intermediary, but will be delivered directly.

THE NUMBER YOU HAVE DIALED NO LONGER EXISTS

Following Russia’s treacherous attack on Ukraine, Western countries decided to punish the Belarusian regime for its involvement in the military aggression. The EU has banned the export of goods that contribute to Belarus’s military and technological development. The sanctions list includes machinery for lifting, moving, loading, and unloading goods, classified under customs tariff code 8428. In other words, belt conveyors. Grodnenskii Steklozavod ordered this equipment from EMS Group in Italy.

A different customs tariff code for the goods – 8438 – was indicated in the documents to circumvent the sanctions. This equipment code is used for industrial food and drink preparation and production. Such machinery can be exported from Europe to Belarus. They are not under sanctions. However, Grodnenskii Steklozavod does not produce food or beverages; the company requires equipment to produce glass containers.

Marjanas Vavilovas, co-owner of the Lithuanian company Didneriai, confirmed to our colleagues in Siena that they were transporting Italian equipment to Hrodna. However, the businessman did not remember that the goods’ customs code had been changed in the documents.

We have several videos taken by hidden cameras in our possession in which Vavilovas admits to supplying Italian equipment to Belarus despite the sanctions.

Thus, in early 2023, 27 trucks carrying Italian equipment worth over €1.8 million entered Belarus. The shipper of the cargo is EMS Group. The consignee is Grodnenskii Steklozavod. The first truck arrived in January and the last one in March. The new glass production was officially launched at the Auls industrial site in June.

Auls glassware production site. Source: grodnoglass.by

Ryhor Furkal, the deputy general director of Grodnenskii Steklozavod, confirmed to Buro that the Auls production site uses three Italian lines made by the EMS Group.

He assured us that he did not know how the equipment ended up at Grodnenskii Steklozavod, as he had only been working as deputy general director for the last six months. Furkal recommended that we address this question to Aliaksandr Astasheuski, the head of new production. When we asked him how the sanctioned equipment had ended up at Grodnenskii Steklozavod, he replied, “I have no idea”. The Italian company EMS Group did not respond to the inquiry of our fellow journalists from IrpiMedia.

Aleksandr Lukashenko inspected the new glass factory in April last year. As he walked around the facility’s workshops, he looked satisfied and dreamed of wonders.

Aleksandr Lukashenko visits the new glass production facility, April 2024. Source: belta.by

But the miracle did not happen. Challenging times lay ahead for Grodnenskii Steklozavod.

NEW HIT

Grodnenskii Steklozavod celebrated grand success in the year of launching the new production site. In 2023, the company saw a 13% revenue increase, reaching 142 million Belarusian rubles. Net profit increased by 30%, reaching 9.9 million rubles. But real problems began in 2024. The new sanctions, which prohibited the supply of glass containers from Belarus to the EU, came into effect in October.

Grodnenskii Steklozavod used to sell most of its bottles to Belarusian food and drink producers. But more than a third of the produced goods were exported, mainly to Poland. The new European sanctions have eliminated this option.

According to the draft government documents that Buro received from the BelPol association, Grodenskii Steklozavod is in a difficult financial situation.

The company rushed to redirect its lost exports to the East, but even there it ran into difficulties. Russia has its own glassware manufacturing industry, which comprises around 30 companies. Their products also fell under the EU sanctions. A surplus of glass containers resulted from production volumes exceeding demand. The Russians began supplying surplus products to Belarus, driving Grodnenskii Steklozavod out of business. Belarusian products were 5-20% more expensive than Russian produce, so they could not compete.

Grodnenskii Steklozavod was losing revenue and needed to pay off its debts. To support the enterprise, the government had to take urgent action. In December last year, the Innovation Fund allocated 6 million rubles to cover the principal and interest payments on the loan for the construction of a new production site – the site built on Lukashenko’s orders, with Italian conveyors imported in circumvention of sanctions.

Only due to this assistance, Grodnenskii Steklozavod made a small profit last year. Government documents state that, if it had not been provided, the enterprise would have suffered losses. Another 16 million rubles should have been allocated to Grodnenskii Steklozavod this year to pay off the loan.

There is another problem: gas debts. At the beginning of this year, they amounted to almost 10 million rubles. Personal intervention from Lukashenko was required. The government has requested a postponement until the end of next year, with instalments continuing until the end of 2030. We do not know whether the Belarusian ruler approved this proposal. But it is his aggressive policy towards his neighbours that has led to such results. Grodnenskii Steklozavod is being saved with public money.