As only one third of sanctions imposed on Russia refers also to Belarus, many of the banned goods get to Russia through Belarus. Photo: Latvian-Belarusian border checkpoint at Kaplava in 2021. LETA.
While the government calls on businesses to “self-cleanse”, Latvia’s export to Russia has shrunk just a little bit after the two years of war. Re:Baltica names the largest exporters for the first time.
A week before the Saeima went on its spring recess, during one of the meetings, politicians, officials and business representatives were discussing for an hour on what to do with a proposal signed by more than 10,000 residents, demanding to impose a 90% tax on payments to Russia. “It should be understood – export pumps the money out of Russia, while import gives it,” said MP and ex-finance minister Janis Reirs (New Unity). “Ukraine also exports its goods to Russia. Then we should also ask them to stop the exports? (…) The Latvian Chamber of Commerce and Industry, why cannot you yourself determine that your members should not deliver goods and services to companies who cooperate with Russia?”
While the discussion was going on, more than 40 trucks crossed Latvia’s eastern border. On a usual workday, there would be more than 300. Apart from goods carried by sea or rail.
Since Russia’s full-scale attack on Ukraine, Latvia’s export in this direction has dropped by just EUR 70.7 million a year. This is richly compensated by the increase of exports to Kazakhstan and Kyrgyzstan, which are commonly used for circumventing sanctions. “Latvia is a road to Moscow for the whole European Union,” said State Revenue Service’s Customs Department head Raimonds Zukuls.
In order to pressure businesses to stop their cooperation with Russia, the Ministry of Economics has resumed publishing the list of exporters which it updates quarterly. The list, however, reflects the situation in just one month – December 2023. There is no clue who is big, who is small, who has been exporting throughout the whole time of the war, and who has been put on the list just due to one fulfilled order.
Using access to Russian customs data, Re:Baltica selected the 20 largest exporters for the first two years of the war. This is the first time such data is published as Latvian law bans it regarding individual enterprises.
We also asked the companies to explain their business choices. Nobody agreed to a face-to-face interview. 9 out of the 20 chose to respond in writing.
What is being exported?
“Food products, whiskey, to be precise. And medicines,” Economics Ministry’s analytical service chief Dace Zile recently characterised Latvia’s export to Russia. “Medicines and bras. I have not heard about anything else,” said former prime minister Maris Kucinskis (United List) at the meeting in parliament.
It is not that simple, though. It is right that while Latvia is providing support to the Ukrainian army and NGOs are raising funds for everything, starting with prosthetics of the lost arms and legs, and ending with winter clothes, Latvian exporters provide Russian residents with a lifestyle that is not disturbed by the war. They are delivering prosecco, wine, whiskey – and wireless headphones. Laced lingerie, knitwear, and zippers. Chocolate. Perfumes. Something for manufacturing. And the popular medicines.
It’s not us
Almost half of Latvia’s export to Russia in January 2024 was alcohol. The main exporter was “Wellman Logistics”, belonging to Estonian investment company. It started operations in Latvia in the 1990s, bringing “L’Oreal” cosmetic products here, but currently it is a logistics company with two large warehouses. The company receives goods, stores them, works with customs procedures, and ships the goods further to Russia (the process is called re-export). “Apolitical and friendly” are listed as values of the parent company. “There is only room for candour and transparency but we believe that anything under the sun can be solved in a friendly, constructive and personal manner,” the description goes.
“Wellman Logistics” is Latvia’s largest exporter to Russia, having delivered goods worth USD 146 million in two years. Customs declarations show that the company provides Russia with French, Spanish and Chilean wines, American whiskey – and also wireless headphones, fridges and dishwashers. In short – whatever the client wants to bring to Russia, “Wellman Logistics” will export it.
The group’s CEO Ivo Tahk said in a written response to Re:Baltica that the company is one of the leading logistics companies in Latvia. Its turnover is about EUR 4 million, and it has been at this level over the past two years. USD 146 million is worth of the goods delivered to Russia. “None of the goods we export belongs to us. None of the goods we export is a subject of sanctions,” he said. “Our job is to offer services to EU-registered companies with whom we have been cooperating of many years. We will not take any new companies or companies registered in Russia as our clients now or in the future.”
He said that the company strictly condemns Russia’s war in Ukraine and is working to strengthen Latvia’s economy, Latvia’s defence sector and Ukraine’s abilities to defend itself. Tahk did not specify how exactly it is being done. He left the questions about moral reasons for providing pleasant life for Russian residents during the war unanswered.
Representative of owners of perfume producer LORI Fragrances said that the company’s business relations are confidential. The company sells its products to many Western and East European companies, including to Ukraine, and its business has no restrictions due to the war.
Sergejs Binkovskis, the board chairman of napkin and hygiene goods producer iCotton, said that the company’s products are not subjected to sanction and the company does not conclude new agreements with Russian companies. “Baltic Bearing Company-Riga” (BBCR) informed that the company mentioned in the list is their distributor in Poland. The goods manufactured by BBCR are not subjected to sanctions, and the bearings exported to Russia by the distributed are being used in agriculture.
We are trying
The second and third largest exporters are pharmaceutical companies “Olainfarm” and “Kalceks”, a subsidiary of Grindeks. The latter’s exports to Russia, according to the customs declarations, dropped almost three times (USD 24.1 million).
Meanwhile, “Olainfarm” is doing much better than at the start of the war. In 2023, the company exported goods worth USD 52.6 million to Russia, which is by USD 5 million more than a year ago.
Both companies have added an explanation to the public list of exporters to Russia, saying that medicines are not subjected to sanctions and export is based on humanitarian consumptions about the value of human life. Medicines made in Ukraine also still are available in the Russian market, and sales of Western pharmaceutical companies in Russia are growing significantly, both in terms of volume and money. Both companies are trying to re-focus to the West, but it is not simple, fast and cheap in the pharmaceutical sector.
“Olainfarm” communication manager Daiga Buca told Re:Baltica that the company has reduced its activities in Russia to the minimum and in the past two years, the number of the packages sold in this country has dropped by more than 20 percent. The company does not and will not participate in Russia’s public procurements (LSM portal earlier reported on the company’s ambiguous situation in the wartime). “If other products, for example, food products, timber and the like can be de-oriented to other markets in a short period of time, and possibly sold for a lower price, unfortunately, it is not possible to do it with medicines. Even registration of drugs requires several years in every new market,” she said.
“Grindeks” has a similar response – the company does not participate in any public procurements related to the needs of the army in Russia. It exports only six kinds of medicines to Russia for treatment of chronical illnesses of civilians that are not used in military medicine. Export volumes are declining significantly. The company has established 29 new subsidiaries in the European Union, Australia, Norway, and the US, but the role of the Belarusian and Russian markets will be reduced gradually. “There are still pharmaceutical companies in Latvia which continue their operations in Russia without looking for alternative solutions,” said the company’s press secretary Zane Araja, not naming these companies.
We will not answer
11 out of 20 largest exporters did not respond at all to Re:Baltica’s numerous requests for an interview. Among them there were packaging and label maker IMVLabel, Latvian branch of tyre distributor Bohnenkamp, sugarless chocolate manufacturer Chocolette Confectionary, feed mills, grain storage and transportation equipment maker MillMix.
One of the largest Baltic self-adhesive label makers Tehnoinfom, confectionary and snacks packaging maker Rotoweb, owners of Lauma Lingerie makers in Estonia, conditioning equipment maker Felzer, transport lift maker Rikon did not wish to speak, either. Re:Baltica did not manage to acquire contact information for the Latvian branch of China’s company HT2, while the fields of operation of this company is wholesale of timber, construction materials and plumbing products.
We have stopped
Only three of the largest exporters announced that they were leaving the Russian market. Two of them – due to the sanctions.
Pipelines, tanks and custom equipment manufacturer CW Technics has suspended cooperation with its Russian partner after sanctions were introduced and does not plan to resume cooperation in the future with companies of this country, the company’s lawyer Edgars Birzitis said.
Generator producer “Rigas Dizelis” also has suspended cooperation with Russia due to sanctions. Even though they were not included in the list of sanctions from the very beginning, the company had already started to reduce cooperation due to ethical reasons. Russia played a significant role in its business – 65 percent of its turnover a year before the war. The company met its last obligations in the first half of 2022, terminated some of the contracts, and nothing has been shipped to Russia after that, said the company’s board member Juris Dzenis, forwarding a table that shows the company’s exports to Russia for the past five years. The company’s export to Russia in 2022 reached EUR 1.9 million. In Russia’s customs declaration database, though, it is five times higher, including deliveries through intermediaries in Hong Kong.
“Your source of information is not reliable (…) It is complete nonsense,” said the company’s board member Juris Dzenis. “Exporting to Russia is practically impossible. We have re-oriented ourselves to other markets. We have sent a large share of our goods to Ukraine as assistance. I hope that I answered the questions and proved our loyalty because the company’s reputation is important to me.”
The third one is zipper and clothing accessories maker “Arta F”. “We are working not with the Russian state, but with private companies, with people who themselves are suffering from the situation and who have nothing to do with politics. These people are not guilty for being born where they are,” the company’s management wrote to Re:Baltica. “This market has developed historically, our company is 170 years old. They know us there. Europe has little sewing business and there is no chance to ensure our capacity. Ukraine gets money from Russia for transit, but we cannot blame it because they have to provide for their people. Europe is buying Russian gas, and we understand that it is doing this in order to keep up its economy. We do not buy anything from Russia and we are not giving them a single cent. We are selling only products allowed by the law to the companies allowed by the law in order to keep up our industry.”
However, trading with Russia has become “objectively impossible”. Therefore, “Arta F” this year has suspended cooperation with the country, but the process will be completed by the end of the year when the company will be reorganised.
We … what?
If the above mentioned cases touch only moral reasons, not the law because the goods are not subjected to sanctions, then the fourth largest exporter, “Rigas Elektromasinbuves Rupnica” (RER) is a different story.
The company that has survived from the Soviet Union is producing equipment for trains and subways, as well as charging stations for electric vehicles.
According to Russian customs data, RER in two years has exported goods worth USD 55 million to Russia.
Re:Baltica compared it export goods codes with the list of “critical components” that can be used in civilian life and military industry alike, or can be found in weapons used against Ukraine (the list is drafted by the Kyiv School of Economics thinktank KSE and it is broader than the list which are banned by the EU sanctions).
The value of such goods in RER export is around USD 23 million. Among them there are transformers, management blocks, relays and other electronic equipment, necessary for “industrial assembling of trains in Russia’s territory”.
The Enterprise Register’s data show that the beneficial owners of RER cannot be traced. At the same time, Russia’s independent publisher Insider reported that the company is indirectly controlled by oligarchs linked with the Kremlin, Iskandar Mahmudov and Andrey Bokarev. Opposition leader Alexei Navalny who died in prison, called on the West to include them both in the lists of sanctions as “real mafiosi who (…) besides deliver diesel and aggregates for warships”.
In November 2023, the US included Mahmudov and Bokarev and related company “Transmasholding” in the list of sanctions, joining the UK, Australia and New Zealand.
“In 2022 Russian officials engaged Transmash in manufacturing parts for infantry battle transport,” said the US Department of the Treasury in its statement. “In addition, Bokarev has personal ties to Russian Defence Minister Sergei Shoigu and other senior Kremlin officials and their families. Bokarev is also linked to organized crime and since 2022 has sought to evade sanctions. Since 2022, Bokarev has worked (…) to create shell companies, behaviour that can be associated with money laundering.”
Due to unknown reasons, they both still have not been included in the list of the EU sanctions. Proposals for the sanctions can be submitted by any country, but the decision is made if all agree. The Latvian Foreign Ministry (MFA) told Re:Baltica that inclusion of a person in the list of sanctions should be based on solid evidence about “the way the person holds responsibility for destroying Ukraine’s territorial integrity, sovereignty and independence”. MFA is currently consulting other countries, explaining information that would strengthen the evidence base. The ministry has no information that RER would export goods of dual use.
“Latvian institutions do not consider Bokarev and Mahmudov as threat to national security, despite the fact that they deliver products to the Russian army,” said Insider. “Moreover – the Latvian institutions continue to grant EU funds money to the oligarchs.” Re:Baltica confirmed that reports on the EU-funded projects is the only thing the company informs about on its website. The company did not respond to Re:Baltica’s questions claiming that two working days is insufficient time.
Latvian company during the time of Russia’s war helps to equip its port in Murmansk
Sanita Jemberga, Re:Baltica
Latvian company “LNK Industries” has delivered German-made equipment to Murmansk port for completion of construction of the coal terminal which would become rival to Baltic ports even after Russia’s attack on Ukraine, Russian customs data show.
According to these data, from July to September, 2022, “LNK Industries” has delivered to its Russia’s partner “Lavna Commercial Sea Port LLC” equipment made by German company THYSSENKRUPP INDUSTRIAL SOLUTIONS AG worth USD 64.8 million. The delivery was organised by a subsidiary of Latvian state railways, “LDz Logistics”.
According to publicly available information, “Lavna Commercial Sea Port” is a subsidiary of the Russian state company that has been established for constructions of a coal terminal on the Kola Peninsula in Murmansk region. The terminal that should handle 18 million tons of coal a year has received a construction permit in 2013 and is being developed in a public-private partnership with the Russian government who is funding the project.
The goals mentioned in the project’s description while it was seeking financing are increasing Russia’s coal exports, developing new transport roads, as well as redirecting cargo from the Baltic ports to Russia. Construction of the terminal started in the fall of 2021, but it was delayed. Russian internet sources cite that the Murmansk port has a strategic role in Russia’s plans in Arctics.
“LNK Industries” has never hidden the fact hat it is participating in the construction of the terminal – information about it can be found in the company’s annual report for 2018-2019.
However, “LNK Industries” spokeswoman Inga Domka did not specify what exactly the company has exported to Murmansk after the war. She explained that some of the existing agreements which could not be terminated were fulfilled under the auspices of the sanctions’ experts in Latvian and German state institutions. The company has also dropped potential projects that would not be directly affected by sanctions.
“LNK Industries does not operate in Russia, our branch is in a liquidation process. We would like to underscore that the company does not cooperate with the Russian Federation and absolutely supports the stance of the Latvian Chamber of Commerce and Industry to suspend any kinds of transactions with Russia,” she wrote to Re:Baltica, adding that company is not in position to comment on distribution of duties with the German company.
“Thyssenkrupp AG” told Re:Baltica that the unit that dealt with the Murmansk port project (mining technologies) was sold to Danish company “FLSmidth” in 2022.
The representative of “FLSmidth” Rasmus Winfield said that after the acquisition the company has taken over all contracts, including for the coal terminal on the Kola Peninsula, but due to the war has refused to continue any of them. “We have stopped all pending contracts and projects to Russia and are not delivering on any of them (..) As for the specific project you are asking on, no services or products has been delivered and there will be no future activity on this.”
In their annual report for 2022 “LNK Industries” stated that Russia’s war has brought dramatic changes in every business aspect, therefore it will focus on work in the Baltics.
“LNK Industries” is part of “LNK Group”, one of the leading companies in the construction sector. It was established during the last years of the USSR by engineer Aleksandrs Milovs, but now his son Vadims is the official owner. It’s name appears all over Latvia, starting from residential quarters and ending with universities. In 2021, the Competition Council named “LNK Industries” as one of the ten participants of the cartel which illegally inflated the prices in state procurement. Company was fined 3.7 million euros.
This is one of the articles in the series of articles by Re:Baltica about how, after Russia started a full-scale attack on Ukraine in February 2022, the Latvian state and companies, despite the slogans about support to Ukraine until its victory, continue business with Russia. The next articles will cover importers and participation of the Latvian government companies in business that continues to feed Russia’s war machine.
Author: Sanita Jemberga Re:Baltica
Data processing: Greete Palgi
Graphical and technical support: Madara Eihe
Russian and English translation by news agency LETA
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