Uncovering Corruption in Belarusian Energy Sector
11 June, 2018

Last year an investigation by independent Belarusian TV channel Belsat revealed how family ties fuelled corruption within the country’s energy sector.

Belsat TV business reporter Stanislau Ivashkevich, who worked on the investigation, found that the government was overpaying for the work done by Russian firm Belkotloochistka, where relatives of the energy sector’s top management held nominal positions. Belkotloochistka holds the monopoly on cleaning boilers and fuel oil tanks that produce electricity and heat in Belarus.

Since then, energy minister Vladimir Potupchik and general director of state enterprise Belenergo Evgeniy Voronov have been dismissed. But Ivashkevich says family ties played only a small part in the corrupt schemes within the energy sector and despite the dismissals and arrests of officials, corruption remains widespread in the field.

Ivashkevich has recently published a new investigation on crooked tender procurement schemes in the energy sector.

Hromadske sat down with Belsat TV business reporter Stanislau Ivashkevich to discuss corruption in the Belarusian energy sector during the Mezhyhirya Festival last week.

You've just had your investigation published on the Belarus energy monopolies, tell me about that.

Before we get into that it's important to stress one thing about Belarus which is very different from Ukraine. In Belarus, you get very little if any documents published at all. So even companies which are listed on the Belarus stock exchange, they are supposed to publish their financial statements, but they publish very short versions of a profit and loss statement and balance sheet. So the atmosphere is very different from what you have in Ukraine, you basically cannot officially, legally get any data or anything. You cannot get permission to go anywhere and you cannot get interviews.

I'm an economics reporter, so I also have an investigative program. I did a few economics stories on our utility prices going up so I started digging in to why they started going up, so there was this thing where the state said that it was okay, and utility prices were subsidized until now, and we're going to have to bring them to 100 percent recovery, because this is the market, after all, so we're going to have to face the truth. What I found, however, was as the prices were going up, the percentage in the long-term and also in our utility bills it said that the percentage was covered by paying and the rest was paid by the state. So that percentage in the long-run did not change, really. It decreased when the utility prices went up and there are oil price fluctuations and then you find yourself a year later with utility prices 50 percent higher and the percentage of cost-recovery pretty much the same as before. So I started getting into that and talking about sources, and usually investigative stuff you look out for competitors, you ask them about each other, you look out for people who got fired and are angry and concerned citizens, and they started telling me a story and a picture started building up about the fact that was very surprising to me, which is that in Belarus a lot of things are state-owned, 50 percent of the economy is state-owned companies, and it was believed that all Belarus energy systems were state-owned. I found out during this investigation that half of them are private already. In spite of being privatized and being owned by Belarusian and foreign businessmen, and also by offshore companies, we still retain the monopolies that the state has in the Belarus energy sector. So not officially, but they retain this monopoly through the manipulation of tenders through the officials of the Ministry of Energy of Belarus, and sometimes if they can't manipulate it then they give the work to them and then they don't tell any other competitors who took part in the bidding process why.

So basically these companies were enjoying complete practice monopoly and using that monopoly to charge the state three to four times the prices that the market would charge in Belarus. So this was the information we got, then we started getting into documents, how to prove that, so we played a bidding process and pretended we were a company that wants to do that, so these parts of energy and infrastructure you also have in private factories sometimes, they build their own little energy infrastructure so as not to be dependent on the state for energy and because the price of that energy is high. So we pretended to be one of these factories, and we got dozens of price offers, all of them were three to four times lower. So we published that, and we also found that some of the companies are owned by offshore companies in Lithuania and Russia, and we also found that there are links between management of these private companies and officials in the ministry of energy, they're related, father and son and so on. So we published that investigation and we indicated that there might be signs of corruption there. The thing in Belarus is that the law is such that in the judicial practice, you can only say "corruption" if there was a state prosecutor or the court convicting someone of corruption. Otherwise, you cannot say corruption.

Who filed the court case against you?

One of these private monopolies under the ministry of energy. It's called Belkotloochistka. All the heat and electricity is produced by boilers, so they're in charge of each of these boilers, there are thousands of them around the country, and each of these boilers has to be cleaned annually or biannually. It costs $50-100 thousand dollars, so they clean all these boilers and all these power generating things. It was one of these companies that filed a court case against me when I said they were corrupt and they weren't corrupt, and the court surprisingly did not just say "okay," so no ruling, no previous ruling on this, "you're guilty". The court decided to get into that. They decided to actually figure out what's going on. There were four sessions, we were bringing more and more documents and they were bringing more documents so there was this battle going on, and in between one of these sessions I realized also that apart from charging high prices, these companies also sometimes don't even do the work that they get paid for and there's a high likelihood that they bribe the ministry of energy officials. We found that because one of the sources said that part of the work is disposing waste, so when you clean one average sized reservoir, you can get a hundred tonnes of petroleum products waste which are of no use anymore for heating, so you have to dispose of them by taking them to a specialized facility with chemicals put into them and go into this lengthy process of making them clean so they can be disposed or reused.

So for cleaning each of these reservoirs, they get like $50,000 to dispose of that waste, so a source told me that they don't even bother disposing of it, they get into the ground. So the ministry of energy officials who overlook the power generating facilities and asked if that's what happened and they said "no". So it could not have been true as I found out later. So what we did was we went to that power-generating facility and the way they were getting away with it was a closed territory, nobody is allowed to go in. It's covered by two fences with barbed wire so we climbed to find weak spots to climb through, and we realized there was a huge field behind the power generating facility and an office building overlooking it. In between that field, there's a huge fuel-oil swamp, which was according to the source and as we found out later through other documents, it was 100 tonnes of fuel just dug into the ground. So we literally had to run to that swamp hoping that they would not see us through the window, dig it up, film it, and then run back hoping that they won't notice. We were lucky they did not notice, but generally, if you sit in that office the whole day, there's no way you can overlook that. It's black and yellow.

What is now happening within the Energy Ministry?

Yes, the Minister of Energy is being charged with corruption. The head of the ministry. In fact, the charge not been put officially, but he was arrested and his property arrested. There is still the process of an investigation. In fact the courts, I don't think have started yet because this happened a few months ago and they're still in the process of that.

These people have been charged, inspections are happening, but the schemes are still taking place, so those practices are still in place.

Practices are still in place and my personal belief, which I am still looking to prove or disprove is that those were punished first of all because it had public outcry. So those videos from our TV on YouTube had a huge amount of views and were republished as such. In fact, we have a dictator as head of state, so he himself started criticizing the energy sector on TV for corruption, and he announced a few of these loud cases where he orders the arrest of this guy and the arrest of that guy. But my belief is that it's, first of all, they're sacrificial lambs, the few that got charged.

/By Natalie Vikhrov