Fr, 2.12.2022

The businessman worth Nobel Prize in literature stinks of Russian oil

The businessman worth Nobel Prize in literature stinks of Russian oil
Facebook LinkedIn Twitter
Nord Terminals fuel tanks in Paldiski.
Nord Terminals fuel tanks in Paldiski. Photo: Madis Veltman
  • The Foreign Ministry refused to apologize and quite rightly.
  • One Estonian enterprise has the license to make “Estonian blend” out of Russian oil products.
  • Oil Association head: “This is absolutely unethical at present!”

Postimees has obtained documents revealing, who has been bringing oil products from Russia to Estonia since the last sanctions package came into force – a businessman worth of Nobel Prize in literature, who has an official permission to make an “Estonian blend” of Russian oil products.

“Investigate further who are actually doing business with Russian oil,” an official of the Ministry of Foreign Affairs, who wished to remain anonymous, asked Postimees. The official’s colleagues had been heavily harassed by entrepreneurs for disclosing 28 companies which had reported contracts signed before June 4 regarding the purchase or brokerage of Russian oil products. The corresponding requirement accompanied the European Union (EU) sanctions package adopted on June 3.

Since the officials are not allowed to reveal who, how much and what kind of oil products actually imports from Russia, this caused a lot of trouble.

The journalists became too enthusiastic with the list: the published text could be understood as if a specific company was currently bringing diesel and gasoline from Russia, pumping it directly into Estonian gas stations or ships. Delfi Ärileht had to apologize: “Tallink, one of the most valuable companies in Estonia, has not purchased a single drop of fuel from Russia during the war, and the fuel company Alexela does not sell fuel from the aggressor state at its gas stations.”

As usual, the devil is in the details, and in the confrontation with oil businessmen almost in every word.

The Ministry of Foreign Affairs did not apologize for publishing the list. As the Russian customs declaration data available to Postimees show, there was no reason for an apology. Moreover it was revealed that some businessmen, who have eagerly demanded an apology, kindly offer the service of blending petroleum products at their terminal. If combined correctly, it would become – surprise – gasoline and diesel “produced” in the EU – “Estonian blend”.

Fuel firms wanted to dispel doubts

In order to dispel doubts about Russian fuel reaching the Estonian market (refueling stations), the Estonian Oil Association, which unites Estonian fuel sellers, was the first to demand that the Ministry of Foreign Affairs publish the so-called oil list.

The ministry resisted at first but the press joined the desire for disclosure. The ministry hinted that the last straw in the cup was a column by Postimees editor-in-chief (Priit Hõbemägi “Which Estonian fuel businessmen are still hanging on to Russia's oil teat?” 29 August)

Mart Raamat, the head of the Oil Association, who reviewed the list, did not see any members of the union, that is, operators of Estonian gas station chains. "It was a balm for the Oil Association chairman’s soul,” he said.

But the list included companies belonging to the Alexela group, Alexela Logistics AS and Alexela Bunkering AS.

Alexela worked miracles in the art of wording

The Alexela group demanded an apology from the ministry for causing reputation damage.

The press release of Hans Pajoma, the member of the management board and CEO of the group, containing the denials and explanations, must be read word for word and several times over to grasp the truth – it is a literary masterpiece.

The first and emphatic correction read that Alexela Logistics bears the new name Nord Terminals and is a terminal operator belonging to the international group Puma Energy Infrastructure, which does not trade in oil products itself, but provides customs declaration and warehouse services to cargo owners.

According to him, not a single ton of Russian-origin gasoline, diesel, or other fuels has been declared and brought into free circulation on the Estonian market through Nord Terminals since February 24.

Also, Nord Terminals has not requested an exception from the Ministry of Foreign Affairs to continue importing Russian oil products, nor does it plan to do so, but at the request of the Ministry, it declared the customer contracts which were valid at the time of the imposition of sanctions. “Nord Terminals complies with all Estonian laws and international sanctions, and the company has no Russian clients,” Pajoma emphasized.

According to Nord Terminals board member Aarto Eipre, the contracts for the handling of oil products of Russian origin which were submitted to the Ministry of Foreign Affairs, had been concluded before the beginning of the war and can be kept until February 5, 2023. According to him, the company does not import goods of Russian origin to the Estonian domestic market, but the goods pass through Estonia in transit.

These are carefully combined sentences, none of which are individually and word for word false. However, they create a mass of fog, which obscures the connections between the major owners of the Alexela group and Russian oil.

Data from customs declarations brought a surprise

In short, Alexela has said that Nord Terminals, which appears as a “new” company due to the name change, does not directly buy oil products from Russia, but the company has contracts with other companies which buy them, use the “warehouse services” of Nord Terminals and then resell the products.

According to the Russian customs declarations in the hands of Postimees, Nord Terminals, a third of which is still owned by Alexela's men (see additional story), has not received any oil products from Russia at least in July (there are no later data yet). Namely, despite the name change, Rosneft still forwarded them to the name of Alexela Logistics.

The imported stuff is not finished fuel or the exempted petroleum products (again true!): from May to July, Alexela Logistics has brought from Russia “heavy fuel oil” according to the Estonian customs code; according to the description in the customs declaration, more precisely, coal tar distillates – an oil-like substance which can probably be used in the composition of asphalt, but by diluting it with lighter hydrocarbons, it can become fuel for a high-power engine, for example that of a ship.

In June, Alexela Logistics has also imported a “fuel-like product”: petroleum distillate “for other purposes”; among other things, it is also suitable for making fuels.

There is no information yet on whether deliveries from Russia continued in August-September.

One third of Nord Terminals belongs to owners of Alexela

According to the Business Register, a third of the Nord Terminals shares belong to the owners of the Alexela group, and the company's management board remained the same after the name change. In addition to Marti Hääl, the management board includes Nicacio Brusaferro, advisor of the giant Trafigura group, and Carlos Pons, financial manager of Puma Energy, the group's fuel retail branch.

Singapore-based global fuel trader Trafigura bought a stake in Russia's giant Arctic oil project Vostok a couple of years ago. The Financial Times wrote on July 13 that Trafigura, which came under international criticism in light of the war in Ukraine, sold a multi-billion-dollar stake to the company Nord Axis Limited, the real owners of which the journalists could not find out. It remained unclear whether the stake had actually been sold.

However, it was necessary to show the public that business with Russia had been cut off. When Shell bought crude oil from the Urals from Trafigura in March, the Ukrainians asked: “Did it taste like Ukrainian blood?”

Trafigura stated that it no longer buys Rosneft's crude oil, admitting that it still trades in oil products bought from intermediaries.

Turun Sanomat wrote that bitumen from Russia was transported to Finland all summer, with Trafigura as the supplier.

The EU regulation also applied to the brokering of Russian oil

Alexela managers were also upset because Alexela Bunkering AS had been added to the so-called oil list. “Since February 24, Alexela Bunkering has not entered into any transaction with any Russian party to obtain marine fuel necessary for its core business,” assured Pajoma, CEO and member of the management board of the Alexela group.

The companies related to Alexela declared the contracts regarding Russian oil because the EU sanctions regulation also concerns the transportation, brokerage, handling and storage of Russian oil, rather than just direct purchase from Russia.

The state-owned company Operail, which was also disturbed by being on the oil list (because it only transports Russian oil products and does not buy or sell them), confirmed that it is still transporting Russian oil products from the Narva border crossing checkpoint to Estonian companies. “We also do not participate in the process of deciding which goods to import to Estonia,” said Operail's communications manager Madiken Oja. “The government decided already in April that doing oil business with Russia is not allowed; unfortunately it has not been able to enforce it. Operail has evaded this, referring to various contracts,” commented Foreign Minister Urmas Reinsalu (Isamaa).

The Tax and Customs Board (EMTA) emphasized that there were no companies not related to Russian goods on the list. “A firm producing grain in Viljandi County and selling it to Rõngu Pagar bakery had no reason to declare anything either to us or to the Ministry of Foreign Affairs,” said Eerik Heldna, head of the EMTA customs department.

Alexela Bunkering earned a nice profit

Having heard this, Alexela was forced to specify that Alexela Bunkering still has contracts regarding Russian oil, but not with a “Russian party”, but with residents of Estonia or other EU member states.

Postimees does not yet have information about what the company bought from February to April, but according to customs declarations, Alexela Bunkering brought ship fuel from Russia regularly in large quantities at least until the end of January. But not anymore in May. At the same time, the company's turnover from March to May this year was 76 million euros, the average gross salary of three employees was nearly 5,800 euros.

A person familiar with the price of marine fuel told Postimees that it is theoretically possible to buy marine fuel from the Neste or Orlen factory and bunker it, but it is at least 100 euros more expensive per ton than Russian marine fuel. “Probably even more after Putin's announcement about mobilization,” the source said. It is difficult to imagine that it would be possible for anyone other than the companies directly connected to Neste to compete with Russian marine fuel in the Gulf of Finland.

However, customs officials confirmed that no Estonian company currently buys ready-made gasoline and diesel fuel for land and sea vehicles from Russia.

It is not known what Alexela Bunkering is currently buying and selling. Maybe Russian “fuel-like products” are bought from someone and the “Estonian blend” is mixed in the Nord Terminals tank – 49 percent Russian oil products and 51 percent Orlen oil products, for example?

In a legal sense, in this case the origin of the fuel would be the EU and it would be possible to state to the public that Russian fuel is not sold. Nord Terminals publicly advertises a petrochemical tank with a “built-in mixer” on its website, which can hold 28,000 cubic meters of oil products at a time.

The major owner of the Alexela group, Heiti Hääl, categorically denied the making of the “Estonian blend” at Nord Terminals (see interview below).

Nord Terminals is the sole firm in the country to make the „Estonian blend“

“This is a permitted activity at present and EMTA has issued all the necessary permits to the company for it,” commented Külli Kurvits, head of customs formalities at EMTA. "We are dealing with a processing operation (a separate customs procedure), which is the basis for granting non-preferential origin (because the mixing of different goods alone does not give non-preferential origin). In addition to the operation, the proportion of goods from a third country in the final product is also important (must be lower than 50 percent).

According to Kurvits, permits in the customs sphere only concern the blending activities of one company, namely Nord Terminals.

Regarding the products which arrived to Alexela Logistics according to the declarations, Kurvits said that these can be used for blending fuels. "Some examples of products which are allowed to be used when blending fuels: 2706, 2713, 2902, 2905, 2909, 3811, 3814, 3826, 3904, etc.,” she read out.

A few other companies offer the service of blending oil products, but they do not have a license to make the “Estonian blend”.

Mart Raamat, CEO of the Oil Association, said that according to the export numbers of “Estonian origin” fuel, it seems that it is still exported, mainly as marine fuel, and he expressed his belief that fuel made from Russian oil does not reach Estonian gas stations.

“Looking at foreign trade statistics, it is quite exciting to see how much “Estonian” oil products are exported when we have no national opportunity to produce fuel," said Raamat. “I don't know what happens to them in the terminal so that they will receive the Estonian tricolor.” Hearing that it is probably the production of the “Estonian blend”, Raamat said: “It is absolutely unethical now!”

Alexela major owner Heiti Hääl on making “Estonian blend”: “No! No! No! Never ever!”

Heiti Hääl.
Heiti Hääl. Photo: Sander Ilvest

Major owner of Alexela, Heiti Hääl, claims that the business with Russian oil and gas products by companies related to him fully concerns transit, which is currently an activity permitted by law.

I read about the big trouble you had with Eesti Päevaleht journalists who wrote about fuel imports from Russia.

Trouble? What trouble? They were a little imprecise.

I read it and found out that you have stated that your companies no longer trade in fuel from Russia after the start of the [Ukrainian] war. Did I understand correctly?

We have stated that we have not entered into any new agreements since the beginning of the war.

But the import of fuels will therefore continue on the basis of old agreements?

We have not imported to Estonia according to the old agreements either.

So we are talking about car fuel, marine fuel and gas?

We are also talking about black oil. We are talking about transit activities through Sillamäe and Paldiski terminals. And it has nothing to do with the Estonian market.

But transit activity is going on?

Transit activities are naturally going on because the agreements were concluded for this year before the start of the war and are valid and will last until the end of this year, and the [EU's anti-Russia] sanctions allow exactly that.

So, but you are saying that what you import through Sillamäe and Paldiski is not for the Estonian market...

...not a single ton has reached the Estonian market.

LPG gas at Alexela gas station is super cheap, is it?

It comes from Kazakhstan.

According to the customs information, it appears that your company imports [Russian gas], but you say that it all goes through Estonia.

Customs statistics are a bit biased in this regard, let us say. Customs statistics have different processes: when goods from a third country enter a customs warehouse in the territory of the EU, they show it as if the goods entered the EU. That is what it is, but when it leaves the customs warehouse again, it is showed as export, but in fact, the goods never enter this country into free circulation, they are never taxed in this country.

Where do the goods travel from Sillamäe and Paldiski bunkers?

As a general rule, not to Europe.

But can it go to Finland or Latvia?

I actually dare to rule that out. I cannot talk too much about the movement of my customers' goods, but I completely exclude Finland and Latvia. Most shipping documents are actually formed in such a way that even though the ship is sailing towards Amsterdam or Rotterdam, its final destination is mostly unknown to us.

I understand that, and actually the ship can turn back towards Estonia.

I would almost dare to rule that out. Theoretically, of course, it is not possible, but in practical life I have not encountered such things.

Will the LPG which you bring from Russia move out of Estonia then?

Yes, it leaves Paldiski by ship.

Who supplies car fuel to your gas stations in Estonia?

Orlen from the Mažeikiai plant; for the last 10-15 years.

Where does Orlen buy its raw materials?

I cannot answer that question. They openly state that they no longer buy from Russia. But these are internet sources, which is why we cannot state anything definite about it.

What is the "Estonian blend", about which it has been asked whether Nord Terminals produce it?

Estonian blend? What is the Estonian blend?

We have been told that “Estonian blend” means mixing fuel from Russia with EU-certified fuel, resulting in the “Estonian blend” or Estonian-certified fuel.

No! No! No! Never ever. This is the first time I hear about such a thing as “Estonian blend". I have read about “Latvian blend”, but I am hearing about “Estonian blend” for the first time.

If various gases and all kinds of other black oils – the list of products you mediate is long – pass through your terminal, what certificates to they have?

The same which was issued originally. Only shale oil leaves our terminal with the Estonian certificate and that, I think, is all.

So it doesn't happen that you blend fuels and as a result...

No-no! No-no!

But where has the misunderstanding come from?

I cannot say. Changing the origin – forget about it, this is a crime in the age of sanctions.