More than a million euros are paid from European funds to a Riga factory linked to Russian oligarchs / Article

Andrey Bokarev and Iskander Makhmudov, closely linked to the Kremlin, are the most frequently mentioned Russian oligarchs behind RER. However, their other Russian business partners – Dmitrijs Komisarovs and Kirils Lipa – are also at the end of the chain of companies. The LTV program “de facto” knows that in the middle of 2022, the Latvian factory recorded that they together own around 72% of the company. Bokarev and Makhmudov – about 18% each, Komisarov about 20%, Lip – about 16%. The quartet is also related to Transmashholding, a Russian wagon-building company included in US sanctions, which was previously listed as a partner of RER on the RER website and whose factory in Latvia produced parts.

Kirill Lipa, as the general director of “Transmashholding”, reported to Vladimir Putin at the same table last August about how the business was doing, noting, among other things, that there were no losses in the “new situation”. For example, he told Putin how he still cooperates with a Hungarian company in the supply of train cars to Egypt.

“We were forced to withdraw from the capital of the Hungarian company, but all the financial and technological ties have been preserved,” Lipa said during the meeting.

Meanwhile, their business in Latvia, in the person of RER, receives European money to increase the energy efficiency of the factory and improve the production of electrical equipment for trains.

The Central Finance and Contracts Agency (CFLA), which oversees European fund projects, says that the final payment was made for one project in January, and for the other in March.

It was known that the factory implements fund projects in general, and it was also talked about in the “de facto” program of LTV earlier. However, at that time they were not finished yet and another round of European sanctions was taking place. Its outcome could affect the payment of money, if the actual owners of the factory, of which Bokarev and Mahmudov are already under the sanctions of several countries, would also be included in the sanctions of the European Union. But it didn’t happen.

“The agency, of course, uses information about sanctions when evaluating, and if any of the persons or companies were sanctioned, then of course cooperation and payments would not take place. But currently, the regulatory acts do not provide for another way to evaluate companies that have some known connection with Russia. Therefore, the agency operates within the framework of regulatory acts and cannot make any contrary decisions, of course,” explained CFLA deputy director Gundega Šulta.

However, this is not all that the company could receive from European funding. RER also participates in a study co-financed by the Recovery Fund – also European money. In it, RER claims 156,500 euros. Also, unlike previous projects that began before the full-scale Russian invasion of Ukraine, this one began half a year after.

Research participants are selected by the Energy and Transport Competence Center. There, they checked the information about the company and found nothing in the official registers that hinders the cooperation.

Māris Zubachs, a member of the board of the center, added: “We are no longer the judges to understand what surnames and with whom they cooperate in Russia and what is their weight. And thirdly, if there was any harm from all this, then probably would ask those questions, or would the security services or the police and KNAB issue reprimands. Since we are still being checked by the CFLA and the Ministry of Economy, what do you think we should do?”

In the Latvian registers, none of the representatives of Russia can really be seen as the real beneficiaries, because they have to be presented from the 25% ownership limit, which has not been reached individually. Although Bokarevs and Makhmudov are under US sanctions, the influence of which in the financial sector extends beyond the borders of the US, and Latvia publishes companies related to US sanctions, they are not on this list either.

“There you have to look at how many capital shares, how many shares he owns. Similar to the European Union, in the USA this threshold is also 50%. If the subject of sanctions owns 50% or more, then it should be considered a subject of sanctions. Including two minority shareholders, and in total they would be more than 50%, then it would also be subject to sanctions,” said Paulis Ilyenkov, deputy head of the Financial Intelligence Service.

The proposal that there should be some more filters without official sanctions has been updated through the CFLA and discussed with the Ministries of Finance and Economy. In the office of the Minister of Finance, Arvil Asheraden (“Jauna Vienotība”), there was no time for an interview with the minister. It was delegated to answer at the civil servant level, where a specific answer could not be given.

Whether any practical steps can be taken in this direction is a political question – including at the European level.

Armands Eberhardt, Deputy State Secretary of the Ministry of Finance for European Funds, stated: “If decisions are made to go in this direction, then, of course, this regulation and practical implementation will follow.”

The Ministry of Finance also emphasized that the investment principles of European funds cannot be applied to any specific company. Another thing is that selection criteria can be regulated through certain economic goals, sectors of activity, directions of economic activity.

The Ministry of Economy has also failed to act clearly. The minister himself admits that nothing can be changed from what happened.

Economy Minister Viktors Valainis (Union of Greens and Farmers) said: “We can evaluate how we have reached these decisions, but at the moment the legal expectation is that he must be brought to the end. But looking ahead, of course, we must evaluate. “

Prime Minister Evika Siliņa (“New Unity”), commenting on this situation, stated that economic ties with Russia are severable, and she expects that the possible shortcomings of the existing regulation and sanctions policy will be evaluated by the responsible institutions and, if necessary, there will be proposals.

Meanwhile, the export of goods produced by RER to Russia has continued for the last more than two years. A number of goods produced by RER have gradually been subjected to sanctions. For example, from 2024, transformers and other goods may not be brought to Russia at all. In the export data, there is a noticeable trend that RER goods arrive in Russia, for example, also via Turkey.