Inside the Belarus Networks

Since 1994, Belarussian President Alexander Lukashenko and his close entourage are thought to have illegally misappropriated an estimated $10 billion.
Since you started reading this article, they allegedly embezzled $.

Alexander Lukashenko was elected president of Belarus twenty years ago. He is the longest serving president in Europe. Some say he achieved this feat by a combination of social justice and authoritarianism. Tough but fair. Our investigation into the money flows around the inner circle of the Belarussian elite shows a murkier reality.

Mr Lukashenko and his cronies appear to have established a kleptocracy in Belarus, similar to that thought to operate in Russia, albeit on a smaller scale They rely on a maze of offshore entities to conduct their business, despite European sanctions. And they defraud ordinary Belarussians.

A country as big as Great-Britain and as populous as Belgium, Belarus receives less attention (online at least) than Andorra, a city-state in the Pyrenees mountains. This is changing fast. Minsk worked in August as a peace broker in the ongoing conflict between Russia and Ukraine. The next presidential election is scheduled for 2015 and a number of representatives from the opposition already fear this vote will follow the same pattern of violence and repression that plagued previous elections. European journalists, lawmakers and citizens need to understand Belarus if they are to make sense of Eastern Europe in 2015. This is why we built The Belarus Networks.

This investigation brought together open sources. Many articles have been published about the wrongdoings of Belarussian moneymen over the past twenty years, but no systematic analysis of the data had been done. We put the puzzle together and what it shows sheds new light on Belarus. The complexity of the maze is such that this task will never be complete. To help journalists and observers, we published a database of people and companies at Most links in the article lead back to the database so that you can take a thorough look at our sources. If you want to help, send us an e-mail at

The Minigarchs
Credit: Александр Кузнецов

“I hate Belarus” said the daughter of Vladimir Peftiev in 2011, during a visit to her father's home country. She grew up in Malta, an EU country considered a tax heaven by several international organisations where Mr Peftiev was based in the early 2000's. Then, in 2007, he moved back to Belarus for good, probably at the behest of Mr Lukashenko -- a choice his daughter will likely have regarded with withering resignation (she now lives in the United States). Mr Peftiev was the most powerful of all Belarussian businessmen from the 1990's to the 2000's. He is believed to have amassed over a billion dollars through his various businesses. But unlike Russian oligarchs like Roman Abramovich or the late Boris Berezovsky who were based in London, Mr Peftiev never escaped the orbit of Mr Lukashenko.

His career began in 1993, when he created the joint venture Beltechexport. Its purpose was to export stockpiles of ammunitions from the Soviet era to whomever cared to buy them (Belarus had a major role in the USSR defense industry). After the rise to power of Mr Lukashenko, who campaigned on an anti-corruption platform, Mr Peftiev performed an about-face by switching allegiance from the then-prime minister Vyacheslav Kebich to the Lukashenko camp. In those days, he developed ties to Viktor Bout, the famous arms dealer. Beltechexport supplied weapons and ammunitions to countries such as China and, it is believed, North Korea. It is also linked to the sale of fighter planes to the army of Laurent Gbagbo, then president of Côte d'Ivoire. These very planes were used to bomb a French army base in Bouaké in 2004, killing nine and wounding dozens. As late as 2007, a director of Beltechexport was embroiled in a scandal when parts for Mig-29 fighter jets illegally bound for Bangladesh were discovered in Latvia.

As the stocks of Soviet weapons dried up, Mr Peftiev diversified its portfolio. In 1998, he took part in the creation of Mobile Digital Communications (MDC), a joint-venture that owned Velcom, a mobile phone carrier that grew to become the country's biggest. He also added Aquadiv, a distillery, to Beltech Holding, which he controls. His stroke of genius was to create a betting company, Sport-Pari, together with Dimitri Lukashenko, one of the president's sons. He also hired Lilia Lukashenko, the wife of the president's oldest son as the director of Eastleigh Trading, one of his financial vehicles. With his business intertwined with Mr Lukashenko's direct family, Mr Peftiev ensured that he would not end up in jail. But it did not prevent him from falling out of grace.

Unlike most post-socialist countries, Belarus does not boast an oligarch class that enriched itself through large-scale privatization. There are two main reasons for this. Firstly, Belarus has been reluctant to privatize the state-owned assets left from the Soviet era. Secondly, the idea that the state is the source of everything is still pervasive in Belarus, more than 20 years after the fall of the USSR. Therefore the deeply-ingrained idea amid the population that since Lukashenko controls the state, he can dispose of it as he sees fit and allocate factories and other businesses to his cronies on a whim. This prompted the British scholar Andrew Wilson to craft the term "minigarch" for wealthy Belarussians.

Mr Lukashenko, for instance, recently single-handedly offered a state-owned, 7-million-euro vitamin concentrate plant to the Interservice group, property of Nikolay Vorobey. Now, it should not surprise the reader that Mr Vorobey is a close friend of Mr Lukashenko.

The state takes as much as it gives. Although the details are hard to come by, mostly because many Belarussian deals involve companies based in British tax heavens which do not have to reveal the names of the beneficial owners. These involve several nominally private companies that are widely thought to act for the state. The so-called solvents scheme is a good example.

Under a special agreement, Russia granted Belarus the right to buy its oil free of tax. In exchange, Belarus had to pay any export duty it collected on petroleum products back to Russia. In other words, Russia subsidized the Belarussian oil consumption. Not to lose out from this opportunity, the companies that were dealing with Russian oil started to transform the stuff and exported it as solvent (a different category than petroleum products) so that export taxes didn't have to be transferred to Russia.

It is estimated that Belarussian coffers gained 1.5 billion dollars from this scheme in 2012 alone, accounting for half of the country's GDP growth that year. The companies involved in the scam all belonged to Yury Chizh, a top minigarch, and to Mr Vorobey. It shows how the line between state revenue - such as customs duty - and private property became blurred under Mr Lukashenko.

By making ownership documents utterly unreliable, Mr Lukashenko made sure that the only path to wealth – and retaining it - was unquestioned obedience to him and his sons. To further deter any disloyalty, he regularly jails his "moneymen" and encourages rivalries. Andrey Shirai, for instance, was once the organizer of a smuggling scheme linked to the administration. He went to prison nevertheless. Among the arms dealers, Belarus' flagship trade, all CEOs but Mr Peftiev were arrested and sentenced in the 2000's. Some claim that even Mr Chizh, who currently has the favors of the regime, was arrested and put in prison for a short period of time in 2010.

Foreign connections
Credit: Bernardo Londoy

Mr Lukashenko is believed in scholarly circles to be looking for a brand of autarky for his countrymen and women. When it comes to private money flows, nothing could be farther from the truth. The sale of the mobile phone carrier Velcom is exemplary of the interactions between Mr Lukashenko's cronies, international moneymen, European interests and tax heavens. In 2007, the company's ownership was transferred to Austria's Mobilkom for a billion euros. A group of Belarussian, Syrian and Austrian nationals profited handsomely from the sale.

The cell phone company was created in 1998 by Mr Peftiev through his Beltechexport company and SBT, a Swiss company belonging to the Samawi brothers, two Syrian nationals. In order to avoid a public tender, Beltechexport sold its shares to SBT for 400 million euros, which, in turn, sold them to Telekom Austria for 690 million euros. Net gain for the people involved: 300 million euros in just a few days.

The very profitable sale did not mark the end of Messrs Samawi's Belarussian activities, quite to the contrary. Through an offshore vehicle in Cyprus, they invested in several property development projects in Minsk. In one of them their son, Khaled Samawi, a well-known gallerist in London, Beirut and Dubai, even opened an art gallery with help from the daughter-in-law of no other than Mr Lukashenko. (Contacted by e-mail, Khaled Samawi denied the information, which was, in turn, confirmed once more by the Belarussian journalist who reported it).

Another key player in the Velcom sale was Martin Schlaff, a businessman from Vienna with ties to both the Austrian establishment and the Eastern European underworld.

The sale of Velcom, which he masterminded, earned him a whopping 1.8 million euro in consulting fees. He was not new to Belarus. In 2002, he contributed to the organization of a winter holidays for Mr Lukashenko in the Austrian Alps. The Austrian Olympic Committee (AOC) invited the dictator, officially as the head of the Belarussian Olympic Committee, though he managed to meet at least the head of Casinos Austria, Leo Wallner, for business purposes – he was the head of the AOC.

We acted in the interest of the Austrian economy
said Mr Wallner.

Europe's duplicity
Credit: European External Action Service

After the 2001 presidential election, the Belarussian government decided not to extend the visas of monitors from the OSCE, an intergovernmental organization, in effect closing down their office. In retaliation, the European Union and the United States implemented an asset freeze and a travel ban for 50 top Belarussian officials, including Mr Lukashenko. The sanctions were lifted once in late 2003 as a token of goodwill, then reenacted after the rigged 2006 presidential election, then lifted again in exchange for the release of political prisoners in 2008. This effective use of sanctions as a means of bartering lead some commentators to say that the sanctions were working.

However, in late 2010, the Belarussian regime cracked down on the political opposition that emerged after another rigged presidential election with a level of violence unseen since the 1990's. In reaction, the EU stepped up its sanctions program, forbidding anyone linked to the repression from traveling West to Europe and freezing their bank accounts there.

While the travel ban is effective – many high-ranking officials have been denied visas – the asset freeze does little to hamper the plundering of national resources in Belarus and the investment of ill-gained profits in Europe. In 2012, Mr Peftiev was still using a company in Malta.

The use of offshore companies, especially in the British Virgin Islands (not part of the EU but ruled by an EU member state), let Belarussians conduct business in the EU with impunity. US diplomats noted that persons on the sanctions list, or fearing to be added to the list, used their children to conduct their business in Europe. The daughter of former prime minister Sergei Sidorsky, for instance, is believed to have conducted a money laundering business in Germany.

European governments push for the interests of certain corporations, further reducing the efficacy of sanctions. Slovenia, for instance, pushed hard in 2012 to keep Mr Chizh out of the list. Companies belonging to Mr Chizh were engaged in business with a Slovenian mogul, Janez Škrabec, head of the Riko construction group. French MPs traveled to Minsk in 2013 to lobby for French corporations, including Bouygues, a construction group. It is believed that the interest of French corporations in Belarus mollify Paris' diplomatic stance toward Mr Lukashenko. We asked the Council of the European Union for the positions of all member states during the negotiation of the sanctions but our request was denied.

Some sanctions do work. Anatoly Ternavsky, a businessman close to the presidency on the EU sanctions list, filed a lawsuit in Cyprus regarding a dispute with a Russian oligarch. One of his companies in the British Virgin Islands owned a company in Cyprus, which owned assets in Russia. In other words, the only link to the EU was the fact that Cyprus was used to register companies. In April 2013, the Cypriot Supreme Court ruled that he had no right to do so as it would have given him access to business in the EU.

Sanctions might estrange a father from his daughter, or prevent a moneyman from appearing before court. Alexander Atroshchankau, a Belarussian journalist and human rights activist, considers such targeted sanctions a very effective means of obtaining results, especially regarding the release of political prisoners. It remains to be seen whether this technique will remain effective now that Mr Lukashenko plays the role of the honest broker in Eastern Europe.