Belarusian fail, or How have Lukashenko's people surrendered coal smugglers from CADLO

The habit of the National Statistical Committee of Belarus to report on all the trade operations allowed journalists to reveal a large-scale scheme of coal smuggling from the "DNR"-"LNR" to Ukraine.

The reaction of official Kyiv to the media publication shows that the country's leadership, if not "in the mix", then at least knows about this scheme. And does not consider it necessary to prevent it.

That way, setting an example to the governments of European countries – which, seeing this approach in Ukraine itself, allow the Donetsk and Luhansk separatists to sell illegal coal in their markets.

Statistics knows everything

It all started with the fact that in late February, Belarusian journalists drew attention to the incredible rise of coal exports from Belarus to Ukraine for 2018 - in 946(!) times, up to 588.5 thousand tons, compared with 600 tons in 2017. This is despite the fact that Belarus does not extract coal at all!...

What had happened in 2018 so that the demand for coal in Ukraine soared to such fantastic heights?

In general, nothing happened. No new thermal power plant or chemical plant that produces synthetic gasoline from coal was built. The work of Ukrainian mines did not stop, deliveries from other directions did not stop… Nothing happened that could explain Belstat's figures.

Even greater sense of unreality is enhanced if you open the data of the State Statistics Service of Ukraine – they show that coal from Belarus to Ukraine… was not supplied at all.

Indeed, if you go to the website of the Uglex coal marketplace, you can make sure that there are no offers for the supply of coal from Belarus to Ukraine.

However, there are, for example, lots for sale of anthracite consignments from Sverdlovsk. It is offered by OOO Masis-1, registered in Sverdlovsk – on the territory currently seized by the Russians under the guise of "LNR" militants.

The company's profile indicates that it has made deliveries to Ukraine. They are being conducted through the Russian railway station Gukovo on the DAP terms. This means that Masis-1 delivers anthracite to Gukovo through the uncontrolled section of the Ukrainian-Russian border, processing it as export from Ukraine – and all further problems with delivery to Ukraine, including customs clearance, fall on the buyer.

There are also other examples pointing to the traces of coal smuggling from CADLO. So, a certain OOO Resursgroup financial industrial company offers for export anthracite with delivery from Ukraine to the Russian port of Novorossiysk.

As it is known, the export of anthracite from Ukraine is prohibited by resolution of the Cabinet of Ministers due to its shortage – since the main production capacities remained in the territories of Donbass captured by the separatists. Therefore, it is obvious that we are talking about deliveries from CADLO. Even so, there is not a single selling proposal through Belarus among about 200 coal traders.

OstroV made an inquiry to the State Fiscal Service of Ukraine, having asked for clarification on how it could happen that coal supplies from Belarus were not reported about in Ukrainian statistics.

The response received states that deliveries from Belarus to Ukraine actually took place in the reporting period. But since, according to the documents, this coal came to Belarus from the Russian Federation, it was indicated in the data of the State Statistics Service of Ukraine as country of import's origin.

This practice of international trade statistics complies with the UN recommendations, - the SFSU explained.

(Un)Profitable business

Thus technically, there seems to be no sensation. Moreover, Belarusian journalists found some exporters of coal a little later. They were the Gomel companies of OOO Business-Alliance, which supplied 80.26 thousand tons, and OOO Trans-Ugol (46.29 thousand tons), as well as the Minsk OOO EcolineSystems (20.11 thousand tons) and OOO Ekoil Chemical (27.07 thousand tons) registered in the Polotsk district.

It is curious that all these companies have a nominal authorized capital and were founded in 2014-2018 – i.e. after the start of war in the Donbass.

Journalists communicated with people listed as owners and directors of these firms. As expected, they deny the purchase of coal in CADLO.

Allegedly, these are products of the Russian Vostokugol association, obtained at the Kiyzassky coal open pit mine (Kemerovo oblast, Kuzbass).

"Like any product, coal has different characteristics. Laboratories give certificates. They will not run to forgery. This is impossible. We are not interested in illegal schemes", - owner of the Business-Alliance company Andrey Baydo stated in particular.

However, the businessman did not provide any certificates to confirm his words.

"Nobody is engaged in grey schemes. Everything is legal. We are working this way now, because it is quite profitable. It is better off for Belarus. Everyone earns money from it. More and more people want to earn money on it with each passing day, so this will stop very soon. There is no politics here", – co-owner and director of EcolineSystems Eduard Bogdanchuk noted.

What is typical: all Belarusian exporters interviewed by journalists for some reason amicably claim that they no longer sell coal to Ukraine or plan to curtail it in the near future.

"We have not been doing this for several months. It was advantageous to transport it through Belarus, so we transported it through Belarus. Now it is not interesting for us. The prices have fallen, and it is difficult to work with Ukrainians. They have something like 90s there now", – A.Baydo said.

Strange thing: Belarusian businessmen were not interested in the supply of coal for many years. And suddenly, in 2018, a certain "lightbulb" came down to them, having ensured an upsurge in exports by 246 times.

But the calendar year ended, a little less than 2 months have passed – and the Belarusians suddenly lost the desire to sell coal to Ukraine again. By a strange coincidence, this happened after the publication of articles about this strange business.

Strange - for a variety of reasons. First of all, it is not entirely clear what means "it is difficult to work with Ukrainians" means. That is, it was easy in 2018 – and now it suddenly became difficult? What has changed?

The thesis "prices have fallen" deserves a separate discussion.

Indeed, the current API2 index (the cost of coal delivered to the ports of Antwerp, Rotterdam and Amsterdam, one of the global indicators), as of March 1, fell to $74.7/ton compared to $83.7/ton as of on January 1.

But even in 2018, it was not all the time high: starting from $96.1/ton on January 4, 2018, the quotations fell to $79.45/ton on March 29, 2018 – i.e. the same seasonal drop in prices was a year earlier. Then they recovered the losses in April-September – and began to decline again in the IV quarter of 2018: from $100.4/ton on October 24 to $87.45/ton on December 28. That is, the prices fell in 2018 as well.

Despite this, for some reason, it was profitable for Belarusians to sell coal to Ukraine, and after a wave of publications in the media on this topic, the whole benefit disappeared.

The Belstat data adds doubts about the benefits, according to which the average selling price of coal to Ukraine in 2017 was $101.5/ton and in 2018 - $85.6/ton.

That is, in the period when the Ukrainian direction became "profitable", the price fell by 15% compared with when it was unprofitable. Belarussian businessmen have strange vision of benefits…

One more puzzle. In 2014, the average selling price of the Russian Vostokugol association, from which, allegedly, coal was brought to Ukraine through Belarus, was $70.3/ton. More recent data could not be found in open sources – however, it is clear that the price could not fall over the past 4 years, given the inevitable increase in the expenses of the coal miner.

According to the calculations of OstroV on the basis of current tariffs of Russian Railways, delivery of a coal consignment of 60 tons in a low-sided car of general use from Belovo station (Kemerovo oblast) to Topoli station (Kharkiv oblast) will cost $33.5/ton.

So, even if the Kuzbass coal goes to Ukraine by direct route (not sideway through Belarus, which will lead to even greater appreciation), the production of Vostokugol would cost $103.6/ton for the trader on the terms DAF border of Ukraine.

At the same time, it is necessary not to forget that the trader should earn money on the resale – therefore, there should be a kickback on this figure. Meanwhile, let us recall that the average selling price of coal from Belarus to Ukraine was about $75-79/ton.

That is, instead of profit, phenomenal Belarusian "businessmen" got $22.5-26 loss on each ton of coal "re-exported from Russia".

Another thing, if it was still coal from CADLO, the extraction of which costs the separatists fantastically cheap. Since, firstly, the salary at the mines in CADLO is 2-3 times less than in the territory controlled by the official Ukrainian authorities. And secondly, electricity expenses are covered by barter supplies of coal (to the Starobesheve TPP) or Russian subsidies.

Now we are looking at the selling prices of the Ukrainian state-owned enterprises in 2018: Nadia mine - $68.2/ton, Toretskvuhillia - $69.4/ton, Krasnolymanska - $42.8/ton, Yuzhnobobasska No.1 - $54.35/ton, mine named after Surhay - $53.45/ton, Myrnohradvuhillia - $89.3/ton, Selidovuhillia - $91.1/ton, Lvivvuhillia - $84.3/ton, Volynvuhillia - $85/ton, Lysychanskvuhillia - $87.4/ton, Pervomaiskvuhillia - $90.2/ton.

Based on this, it is absolutely incomprehensible how the Belarusians managed to sell products of Vostokugol to Ukrainian consumers, which even in the very first approximation is at least 15% more expensive than the Ukrainian state-owned mines.

According to the media reports, in 2018, coal from Belarus was bought by OOO Tekhnova (Chernihiv CHP) and OOO Euro-Reconstruction (Darnytsia CHP in Kyiv), OOO Podolsky Cement and PAO Donbassenergo for Sloviansk TPP.

There are other data, according to which the cost of coal production in Kuzbass was $16-20/ton in 2015. The cost of transportation to the Far Eastern ports was $23/ton.

Then, if we compare the distances, the indicator should be multiplied by a factor of 1.5 for the approximate cost of transportation to Ukraine. We get $36.2 – almost the same value as in the calculations of Ostroa according to the current tariffs of Russian Railways.

In total, only the cost price + delivery of the Kuzbass coal will be $60/ton. At the same time, it is necessary to understand that the coal-mining company will not sell its products to a trader at the cost price – after all, it needs to earn something.

Hear nothing, see nothing

The reaction of Ukrainian authorities to the publication of investigations into mysterious supplies from Belarus is quite indicative. The authorities in Minsk just chose to keep silent.

At the same time, Minister of Energy and Coal Industry of Ukraine, Ihor Nasalyk hastened to state on February 26 (that is, "only" 5 days after the first publication) that this was not about deliveries from CADLO.

"It could be re-export through Russia, one thing I can say for sure - it is not from the uncontrolled territory of Luhansk and Donetsk oblasts. Back in the day, we had a private meeting where we gathered the ministry and thermal generations. It was said: if someone buys such type of coal, it is easy to check on which mine it was mined - it will be a boycott not only of the ministry, but also of all energy-generating companies", - he said in a media comment.

As follows from the minister's words, no verification of the origin of "Belarusian" coal was carried out – he just confined himself to stating the fact that this could be done.

As for some threats about the "boycott by the ministry" – it is not at all clear what the former athlete-bodybuilder, later the mayor of Kalush, and now the head of the Ministry of Energy and Coal Industry of Ukraine meant.

Indeed – what boycott? Will I.Nasalyk cease to congratulate directors of energy companies on birthday or will he not shake hands with them on meeting?

This leads to a disappointing conclusion: the authorities have no levers of influence on the situation with coal smuggling from the "DNR"-"LNR". To be precise, they do not even bother to search for these levers.

This is confirmed by the fact that, in addition to I.Nasalyk, who, as specialized minister, was unable to keep silent – the rest of the authorities did not respond to publications in the media about the "Belarusian" coal exports to Ukraine at all.

Neither Vice-Premier Volodymir Kistion, who supervises the fuel and energy complex, nor Minister for Temporarily Occupied Territories Vadym Chernysh, Prime Minister Volodymyr Groysman, Prosecutor General Yuriy Lutsenko, or SBU chairman Vasyl Hrytsak said anything.

Is it any wonder that the European countries are willingly buying illegal coal from CADLO – thereby helping to prolong the existence of separatist regimes in Donetsk and Luhansk.

Vitaliy Krymov, OstroV