Belarusian Oligarch Supplies Russian Coal to Ukraine

Quotas for his company accounted for almost 50% of all shipments.

NT Marine, a company registered in Estonia, was authorized to supply over 600,000 tonnes of coking and steam coal from Russia to Ukraine (just under 50% of all shipments) in December 2019. This follows from data on the volume of quotas negotiated by the Ministry of Economic Development and shippers. A copy of the list of quotas is provided by a source close to one of the Russian coal companies and confirmed by another source.

NT Marine did not appear on the November quota list, a copy of which is also available to RBC. Small quotas for coal supplies were distributed among Russian producers, including Kuzbassrazrezugol of Andrey Bokarev and Iskander Mahmudov, Evraz of Roman Abramovich and partners, Magnitogorsk Steel Mill (MSM) of Victor Rashnikov and Novolipetsk Steel Mill (MSM) of Vladimir Lisin.

According to the Estonian registry, NT Marine is owned by Alexei Chulets, who, together with his Russian partner, owned the Northern Port of Paldiski in Estonia. According to the SPARK database, NT Marine has a Russian subsidiary, Yularu. It is engaged in fuel trade. RBC sent a request to these companies.

NT Marine transports oil and coal to Ukraine and is in the interests of Belarusian oligarch Mikalai Varabei. This information provided for RBC by three sources in large Russian coal companies and a coal trader specializing in the CIS countries. The head of the Ukrainian Independent Union of Mineworkers and a member of the Verkhovna Rada of Ukraine from the Fatherland party, Mykhailo Volynets, confirmed this. A source in one of the major Russian coal companies told RBC that it had concluded a contract for the coal supply not with NT Marine, but with another company of Vorobei, Interservice. It is the largest private oil trader in Belarus.

"Russian Railways fulfils orders for coal transportation mainly only from this company - NT Marine AS. It represents the interests of Mikalai Varabei, the Belarusian oligarch," Volynets stated. According to him, Varabei keeps terms with the Ukrainian politician Viktor Medvedchuk.

According to him, NT Marine will supply about 500 thousand tons of coal of different grades, including anthracite, to Ukraine per month. "It will earn as follows: the price per tonne of coal at the consumer's station is plus $10," Volynets explained.

According to the list of quotas for November and December, Russia delivers 1.2-1.3m tonnes of coal to Ukrainian enterprises per month. At the current prices for coal ($85-100 per ton), NT Marine's revenue may amount to $50 million in case of Russian coal supplies during the year. EBITDA's pretax profit may amount to $5-8 million, while the profitability is 10-15%, Maxim Khudalov, head of the group for sustainable development risk assessment in ACRA, estimated.

Representatives of the Ministry of Economic Development and Representatives of the Ministry of Economic Development, the apparatus of Deputy Prime Minister Dmitry Kozak (supervises the fuel and energy sector in the government), the Ministry of Energy and Russian Railways did not answer RBC's requests. Attempts to contact Varabei failed.

Why Kyiv does not purchase coal directly

Volynets reminded that Ukrainian companies cannot purchase Russian coal directly. Since 1 June 2019, coal and oil products have been exported from Russia to Ukraine based on permits issued by the Ministry of Economic Development (quotas). These are countervailing sanctions on Ukraine's decision to limit imports of Russian goods. According to the list of quotas for December viewed by RBC, NT Marine got the right to transport coking coal from Evraz, Taltek (owns Severny Kuzbass), Kuzbassrazrezugol and Severstal to the Avdiivka Coke Plant, part of Metinvest, owned by Rinat Akhmetov, as well as anthracite from Rostov region companies (no final buyer specified in the documents).

According to the Ukrainian State Statistical Service, in 2018 Ukraine imported 15m tonnes of coal from Russia for $1.8bn. Russia, the largest supplier of coal to Ukraine, provided 70% of its imports in 2018.

According to a coal trader operating in the CIS countries, Ukrainian companies do not buy coal from NT Marine yet pending results of the first face-to-face talks between Russian and Ukrainian Presidents Vladimir Putin and Volodymyr Zelensky held in Paris on Monday, 9 December. It was part of the Normandy quartet summit. They hope for the relation normalization, which makes it possible to buy in Russian coal without intermediaries, RBC's interlocutor explained.

Metinvest's representative refused to comment.

How Belarus made it to the supply scheme

About half of the Ukrainian thermal power plants (TPPs) operate mainly on anthracite, which has historically been supplied from mines in eastern Ukraine. However, due to the war in Donbas that began in 2014, these mines came under the control of the self-proclaimed "republics" DPR and LPR.

After Rinat Akhmetov's DTEK announced in March 2017 the loss of control over 11 enterprises in Donetsk and Luhansk People's Republics, Kyiv considered the export of coal produced in those republics illegal. As a result, Ukraine had to seek options in other countries, such as the USA and South Africa, with Russia being another supplier of coal.

In February 2019, RBC sources told that Russian coal entered Ukraine through Belarus. The data of the National Statistical Committee of Belarus (Belstat) show that exports began in late 2018. In January-September 2019, Belarus exported to Ukraine 2.2 million tons, 91% of all imported coal from Belarus. About 3 million tons were imported from Russia, while Minsk uses some of this fuel for its own needs.

Mikalai Varabei owns the largest private oil trader in Belarus. According to local media, his business partner is Ukrainian politician Viktor Medvedchuk, who is the godfather of President Vladimir Putin's children and supports the restoration of economic relations between Russia and Ukraine. In 2016, Interservice supplied Ukraine with Russian diesel fuel. In early 2019, the Interservice Petroleum-bitumen plant acquired a controlling stake of the Ukrainian Prykarpatzapadtrans oil product pipeline previously owned by Transneft. "We intend to provide oil products transportation services from the export resource of Belarusian refineries, primarily Mozyr refinery, which has direct access to the pipeline system to further transmit through the Prykarpatzapadtrans system. It means supplies to Ukraine and the transit possibility to other European countries," Varabei told tut.by.

Last year, the petroleum-bitumen plant participated in the privatization of one of the largest energy generating companies in Ukraine, Centrenergo. It includes three thermal power plants. However, the contest was finally recognized as unsuccessful. Varabei also owns Bremino Group logistics operator, Absolut Bank, real estate and hunting facilities in Belarus. It ranks 17th in the list of the most successful and influential businessmen in Belarus in 2018.

RBC has submitted a request to Interservice.