In mid-September, police shut down 11 BRSM-Nafta gas stations in Kharkiv. A few days later, the same fate befell 15 of the company's stations in the Kyiv region. Frankly, something like this was expected in the petroleum products market. And the issue isn't that this "dynamically developing" chain is linked to the fugitive Energy Minister Eduard Stavytsky. Consumers are more interested in the quality of the fuel sold by this company, although its rock-bottom price on the petroleum products market is a good compensation. And here the professional community asks: how does an ordinary local operator manage to outshine international and domestic oil producers and refiners? After all, miracles don't happen in this industry; essentially, everyone gets fuel from the same barrel. Will we ever learn these "secrets" from law enforcement? For now, we'll try to figure it out ourselves.
As far as we know, BRSM-Nafta had also been expecting this development, long before the September events, calling any mention of the company "a special order." The reason for their nervousness is understandable: since its founding, the mysterious and awkward acronym BRSM has been inextricably linked with Eduard Stavitsky. The chain long denied this, journalists argued otherwise, and no one in the market ever doubted it, as the entire history of this business's meteoric growth over the past four years has eloquently demonstrated.
Where is the droushka?
During a search in Kharkiv, law enforcement officers uncovered almost a full array of violations, albeit a somewhat disorganized one. "Information was received that gas station officials have been selling unaccounted-for fuel throughout the current year, failing to make proper payments to the state budget..." states the ruling of Kharkiv's Moskovsky District Court, which authorized searches at BRSM gas stations. The same document notes that the origin and quality of the petroleum products sold at these stations raises doubts. According to documents published by BRSM itself, it was a car breakdown after refueling with diesel fuel at this station that triggered the Kharkiv mayhem. What Kyiv Oblast police found at BRSM gas stations remains unclear at this time.
Suspicions of foul play by BRSM have been lingering. Here are the latest facts and figures. In the first eight months of 2014, this network's oil depots in Pereyaslav-Khmelnytskyi, Vasylkiv, and Kazatin received over 28,7 tons of fuel additives. Customs documents indicate that BRSM-Nafta imports the octane-boosting additive "Oktan-Eko" (MK-4) from Russia. The question arises: why? Furthermore, the company's oil depots received over 10 tons of gas condensate by rail. Again, the question arises: why would an oil depot need raw materials used for further processing if there are no official oil refineries in Pereyaslav-Khmelnytskyi, Vasylkiv, or Kazatin? To give you the full experience, I'll add that tens of thousands of tons of a certain isopentane fraction and gasoline of unknown grades are being shipped to BRSM terminals.
Let's move on. According to the State Statistics Service, from January to August, the BRSM gas station network sold 47,3 tons of A-95 gasoline in cash alone. The company offers two grades of "fifth grade" gasoline at its stations: A-95 and A-95 Euro. As for Euro, customs data shows that in 2014, BRSM-affiliated importer UkrTransOil-2009 did not import a single ton of A-95 gasoline. In other words, there's no trace of Euro gasoline there.
As for the "regular" A-95, BRSM gas stations claim it's from Ukrtatnafta's Kremenchuk refinery. However, Kremenchuk is unaware of this: not a single train car has been sent from there to BRSM depots by rail. It's safe to assume that there's no Kremenchuk gasoline at BRSM, as the Privat Group, which controls Ukrtatnafta, lacks sufficient gasoline for its own needs. This is evident from the fuel shortages at Ukrnafta and ANP stations this spring and summer, as well as the start of gasoline imports, which is generally unusual for Privat.
The question arises: where did BRSM get almost 50 tons of A-95 gasoline? More precisely, what did they sell to consumers under this label?
Another episode. This summer, BRSM began receiving jet fuel at its oil depots. Everything would be fine, except that tankers carrying jet fuel are usually transported directly to the airport, as the process of refueling aircraft is subject to a host of stringent quality and storage requirements. Why does BRSM need it?
Jet fuel is essentially the same as diesel fuel. The excise tax on it is €17/t, while for standard diesel fuel it's €98/t. Experts say that if you mix kerosene and diesel fuel with oil, no one will notice. Whether BRSM follows the advice of such experts is unknown. I can only say that BRSM also regularly receives oil at its oil depots.
It's also unknown whether BRSM pays taxes on the "production" of petroleum products at its oil depots. According to the law, any mixing requires paying the full excise tax, which currently stands at approximately 5 UAH/liter. If this pointless (for BRSM, of course) operation were taking place, the prices at BRSM pumps would be the highest on the market. Instead, they are the lowest. Perhaps because the 5 UAH isn't included in the cost of this fuel? This is all just speculation, and the competent authorities should provide a definitive answer to the question of what actually happens at the depots of BRSM, this mysterious operator in the petroleum products market.
Caution, gas station!
BRSM's rather bizarre product mix didn't emerge today, or even this year. 2013 was a golden year for this network: alongside the aforementioned "production" traditions, all of the refinery's gasoline and diesel fuel came from Gaz Ukraina 2020, the petroleum product supplier for the VETEK holding company (whose owner, the Kharkiv young oligarch Kurchenko, was recently issued a red notice by Interpol). BRSM, or more precisely, its affiliated trader, RosUkrEnergoHolding, became one of the largest recipients of tax-free fuel in 2013—over 200 tons. Tellingly, police are currently harassing Rosneft's sales representative in Ukraine for purchasing 30 tons of gasoline from VETEK, while a more powerful buyer hasn't received the attention they deserve from law enforcement.
Apparently, the former Minister of Energy and Coal Industry also reached an agreement regarding liquefied gas: under the "bloody regime," it was delivered to BRSM without delay at customs, while competitors spent 30-60 days waiting for test results on imported products.
Stavytsky's "in-house production" of petroleum products, tax-free deliveries, and customs preferences for liquefied gas allowed him to accumulate colossal capital, thanks to which the BRSM network began to grow exponentially. Symbolically, during Stavytsky's four years of service in the fugitive Yanukovych Family's ranks, the BRSM network nearly quadrupled to 135 stations. This is a record pace for the market. The cost of such development can be estimated at $100 million.
Despite their overflowing piety, these businessmen had and still have one vice: greed. Their rapid growth, driven by a desire to sell as much cheap gasoline and gas as possible at market prices, came at the expense of safety. On April 22, 2014, a BRSM-Nafta gas station in Pereyaslav-Khmelnytskyi (Kyiv region) exploded, taking the lives of six people. BRSM immediately floated the theory of terrorism, but the nature of the destruction was enough for professionals to immediately diagnose the explosion as a liquefied gas explosion due to gross violations in the design and operation of the gas station. It was later discovered that the station had a basement (strictly prohibited by building codes), where liquefied gas accumulated and subsequently exploded.
"An explosion of this magnitude means the gas had been accumulating for months, meaning the station had no gas analyzers or early warning systems. Most importantly, no one performed routine equipment inspections, otherwise the leak would have been detected immediately," says a gas station construction specialist. This theory was later confirmed by the State Mining and Industrial Supervision Authority, which identified numerous corrosion damages to the underground gas pipeline leading from the liquefied gas storage tank to the gas dispenser, as well as numerous other issues with the design, installation, and equipment of the gas station.
How did it happen that the gas stations were built, and more importantly, accepted by regulatory authorities, with such violations? Perhaps because in recent years, the Ministry of Energy and Coal Industry, which Stavitsky led at the time, placed Gosgorpromnadzor under its direct control? Or because the ministry's influence over the country's regulatory bodies has never been abolished?
"They (BRSM – S.K.) built wherever they wanted, took closed facilities within the 'red lines' and quickly launched them," says a Kharkiv market participant. In Odessa, on Chervonoho Kazachestva Street, a 20-cubic-meter liquefied gas tank was located five meters from the control room (regulations require a minimum distance of 15 meters) and five meters from six gasoline tanks (the standard is at least 20 meters). And all this equipment is located 20 meters from a residential area (regulations require a minimum distance of 60 meters).
And how many such "surprises" has Mr. Stavytsky left for us across the country? "During a recent raid on BRSM, violations were found at ten out of ten gas stations in the Kyiv region, at least regarding liquefied gas," said a representative of the State Mining and Industrial Supervision Service, speaking on condition of anonymity. Perhaps other gas stations in this otherwise renowned chain should be inspected?
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BRSM management is now screaming from the rooftops about the lawlessness and outrageous behavior of the security forces investigating this network's highly unusual activities. They even held a picket outside the Prosecutor General's Office and wrote to all government agencies and media outlets. This is understandable, as we can see, there's much to investigate. And we haven't even touched on the issue of bioethanol, which was allegedly added to alternative fuels in 2013. Recently, tax authorities discovered that Ukrspirt's dehydrated alcohol was only on paper, but in reality, it was ordinary food-grade alcohol used to produce counterfeit vodka. The damage is estimated at 3,5 billion hryvnias.
Wait a minute, if there was no bioethanol, then what was added to the alternative fuel at BRSM and other retailers? And what is being sold under the guise of alternative fuel at BRSM today, now that the tax service has shut down the Ukrspirt scheme? On what basis do these "producers" receive huge excise and other tax breaks from the state?
But there's a chance that answers to numerous questions won't be forthcoming. There have already been at least two cases where local authorities were forced to "lose interest" in BRSM after a call from Kyiv. Now in Pereyaslav-Khmelnytskyi, where six fellow townspeople were buried this spring, construction of a new complex near a residential building will continue. In Odesa, BRSM was fined for cash violations (this is the result of the 60 tax inspectors who raided these gas stations last summer). We'll see how long the Kharkiv and Kyiv police can hold out. Stavytsky may have "forgotten" 42 kg of gold, jewelry, and millions in cash in Ukraine, but everyone understands that this isn't the last of his "honestly earned" wealth.
BRSM believes they were subjected to political persecution. Consequently, they were forced to swallow their pride and announce that the chain recently changed hands, with the Family leaving and an American investor taking over. Whether this is true or not will soon become clear based on the nature of this unconventional chain's operations.
But is it really about the owner? If a business operates by the rules, doesn't dilute its products, pays taxes, and doesn't siphon revenue off the cash register, then who cares who the owner is? Incidentally, questions about this aren't limited to BRSM; it's simply the most prominent example of this type of petroleum product market participant. Another issue is that such a business won't generate significant profits for its owner, and in the current environment, it will only generate losses. BRSM isn't accustomed to this.
Sergey Kuyun, The mirror of the week. Ukraine
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