"Titanogate" and SPF

The recent scandal with the supply of UMCC products to Russian consumers caused a great public outcry and forced the State Property Fund to quickly look for excuses. Despite an hour-long thematic press conference with the participation of the deputy head of the State Property Fund A. Fedorishin and the member of the board of the UMCC E. Perelygin, the verbosity of the speakers and the abundance of unnecessary bureaucratic details, no comprehensive answers to very specific accusations were provided.

It turned out approximately as follows: the names and names of companies in the journalistic investigation are real; copies of documents - authentic; the facts of supply are indisputable; and all together - “this is not what you thought...”.

The culmination and moment of truth can be considered the beginning of the 29th minute of the press conference, where, in response to a direct question from a journalist, whether the State Property Fund has sufficient grounds to assert as a fact that before the war, thanks to the Sic Lucea company, the products of the OGKhK were not supplied to the territory of the Russian Federation, in particular to enterprises of the Russian defense industry, the deputy head of the Fund responded as follows:

Yesterday (i.e., the day before the press conference and years/months after the completion of the contracts - Ed.), a representative of the Sic Lucea company in Ukraine (whose name the officials refused to give on principle - Ed.) during a conversation gave “assurances” that OGKhK products did not enter the territory of the Russian Federation and promised to send (after the conversation - ed.) some guarantees in this regard. That is, the final quote: “We have official reports and chants from the other side that they didn’t carry the stink, that they didn’t hit the Russian companies, before the war.”

It seems that this is all you need to know about the very strict and bureaucratic, according to Fedorishin himself, control of the State Property Fund over the export of UMCC products.

However, this is not the only thing that left a bad taste in the mouths of the media. Talkative government officials involuntarily made a whole series of unconscious discoveries.

It turns out that decisions to conduct additional reconciliations and inspections under contracts at the UMCC are made based on the results of scandals, and not in advance and in order to avoid the latter. If, in the event of a wide public outcry, officials, in retrospect, are satisfied with verbal assurances of the integrity of their counterparties, then one can only guess how this whole system works as usual.

Also, as follows from the words of the SPF representative, access to contracts with UMCC is overly bureaucratic and depends on a large number of approvals with government agencies, but at the same time, the Fund has its own audit, on the basis of which decisions on cooperation are made if there are no obvious objections . How this works in practice is unclear. But, perhaps, this is precisely what explains the traditional abundance of offshore companies, fly-by-night schemes and other corrupt start-ups among UMCC partners, while system players constantly criticize artificial obstacles in working with the state-owned company’s products.

The general feeling of the absurdity of what was happening was further strengthened by the fact that the position of the defendants was represented by the same E. Perelygin, who already headed the OGKhK in 2021-2022. and who was fired just after the scandal with the shipment of VGMK products to Russian companies through the same Hungarian company Sic Luceat Lux Kft, Estonian Estream and Indian Grover Metalloys. It was during this period that the OGKhK shipped its products at the request of Sic Luceat Lux Kft to Redmetconcentrate LLC (Moscow), Nerudnaya Kompaniya LLC (Belgorod), Minko Rus LLC (Belgorod), etc. It is impossible to deny these facts, since Russian companies were indicated by consignees in the invoices issued by OGKhK, and customs statistics of that time are easily verified using the corresponding HS codes.

Perelygin’s persistent reluctance to say out loud the name of Alexander Lobach, the representative of Sic Luceat Lux Kft in Ukraine, looks strange. In a striking way, the bureaucratic career of E. Perelygin and the commercial paths of A. Lobach have intersected at the UMCC for several years now.

Thus, according to available information, the Hungarian service company Sic Luceat Lux Kft in recent months has begun to give way to the Polish company TIMR Sp.zoo in the market. At the same time, both companies in Ukraine are represented by the same local businessman Alexander Lobach. If he had previously communicated with representatives of the OGKhK and SPFU on behalf of the Hungarians, now he is already 50% owner of the Polish company TIMR Sp.zoo

Polish TIMR Sp.zoo, in turn, is actively shipping UMCC products to several Turkish companies - POYRAZ HAMMADDELER SANAYİ TİCARET LİMİTED ŞİRKETİ and COLOR PRISMA KIMYA SAN. TIC. AS, which, in fact, are a transshipment base and a licensed warehouse for further shipment to Russia. These are small Turkish trading companies, which in most cases do not even bother replacing the original OGKhK packaging with Ukrainian labeling. COLOR PRISMA KIMYA SAN. TIC. AS supplied 15% of zirconium concentrate to the Russian market of the total imported volume for the permanent counterparty of Sic Luceat Lux Kft - MINKO RUS LLC. In the export of POYRAZ HAMMADDELER products, Russians account for 18.1%.

Either the top management of the OGKhK, as usual, received sworn oral assurances of their integrity from Turkish companies, or Mr. Lobach found some other arguments for the board of the state-owned company, but the fact remains that a full check of the consignees provided by Timr, was not carried out. Whether UMCC was provided with copies of a bill of lading or a certificate of receipt of cargo from the specified consumers, who must guarantee the use of the products only in the specified country without any possibility of re-export, is a rhetorical question.

In general, the investigation by RBC journalists only confirmed the previously voiced forecasts regarding the activities of the new management of the UMCC in the person of Y. Maksimekno and D. Kalandadze. However, some unexpected innovations appeared in their work...

Thus, in recent months, rather strange companies have begun to appear as buyers of UMCC products, which were previously not known on the market and have no experience in working with rare earth minerals.

First of all, we are talking about the Polish company Agroorganika Polska sp zoo which in July-August this year, through the cargo terminal in the Riga port KS Terminal (Latvia), shipped 132 tons of rutile concentrate and 44 tons of zircon concentrate for the declared buyer in India. The final recipient was MSC Agency (India) Ptv. Ltd. (Mumbai Port Trust, INDIA, ocean carrier).

The very fact of shipment to India through the Latvian port raises suspicion, since the cost of logistics through Riga is much higher than through the Polish ports of Gdansk and Gdynia. According to available information, to date this company has not provided a single document confirming the application for shipment. Moreover, both shipments of minerals are still lying at the terminal in Riga without further movement due to the fall in market demand and prices. There is a serious suspicion that the specified goods will never reach India and soon, along a shorter land route, they will end up you know where...

Another new “promising partner” of the UMCC is the Austrian A5 Trading, which has also never worked with titanium raw materials before, but has recently begun to explore a new field of activity. The company was created in July 2022 and is managed by the odious Dnieper businessman Denis Olkhovsky, who, in turn, is a business partner of the scandalous businessmen Gorb and Korban. Where these businessmen are going to sell titanium raw materials is a complete mystery.

If anyone remembers, at the beginning of 2023, the newly appointed acting. Chairman of the Board of the UMCC Y. Maksimenko and Deputy Chairman of the Board D. Kalandadze publicly criticized the previous management of the state-owned company for the lack of direct contracts with large end consumers and vowed to rebuild the sales system. But instead, strange offshore traders with clearly Ukrainian roots again loomed on the export horizon.

All these shortcomings, excesses and abuses could be attributed to the fact that the state’s priority now is privatization, and not the development of the UMCC. Like, the new owner will come and let him restore order himself. However, information scandals and obvious corruption schemes, against the backdrop of poor official economic statistics, are unlikely to increase the attractiveness of this once unique state asset.

In conclusion, we cannot help but say a few words about the very reasons for this information scandal...

The true reason for the latest “titanogate,” oddly enough, was indicated by an interview with the owner of the largest private titanium company Velta, Andrei Brodsky. The key to understanding what was happening was omissions and conscious attempts to avoid uncomfortable topics that relate to the activities of the Czech company Precheza AS, a key consumer of Velta’s products.

The fact is that the Czech manufacturer of pigment titanium dioxide (titanium white) Precheza has been purchasing the main component for its production - ilmenite - from Ukrainian enterprises for many years. In 2022, the total volume of Ukrainian supplies to Precheza amounted to 200 thousand tons, of which 129 thousand tons (64.5%) were shipped by Velta and 72 thousand tons (35.5%) by Mezhdurechensky GOK. UMCC was completely removed from cooperation with Precheza a long time ago. However, after the imposition of sanctions on D. Firtash and his mining and processing plants, a new window of opportunity opened for the OGKhK, which was dying under the leadership of Maksimenko and Kalandadze, allowing it to sell significant volumes of ilmenite via a short and inexpensive logistics route. The only problem turned out to be that Andrei Brodsky had similar plans, who himself was not against increasing his own sales volumes. As you know, no one likes unnecessary competitors, and what happened next is not difficult to guess...

Claiming access to contracts with the Czech Precheza AS, Brodsky showed great caution in discussing the sales market for products from Ukrainian ilmenite, did not discuss in detail the topic of re-export of Ukrainian raw materials to the Russian Federation from Europe, and also did not say anything about the high profitability of such supplies. Quite a strange position for a serious market participant and an extremely knowledgeable expert. Obviously, Velta itself is not interested in introducing restrictions on the supply of ilmenite to the Czech Republic and in losing such an important client. And there are significant reasons for concern in this regard.

Over the 10 months of 2022, Precheza supplied over 1.5 thousand tons of pigment titanium dioxide and iron oxide pigments to the Russian Federation in the amount of approximately 3-4.5 million euros. At the same time, the price for its products in 2022-2023. increased from about 2 thousand euros to almost 3 thousand euros per ton. The Russian share in the current exports of Precheza AS from the Czech Republic is 21%. The Czech company acts as a shipper and officially declares the Russian Federation as the final destination for the delivery of its products. In fact, in this way, processed Ukrainian ilmenite is re-exported to the Russian Federation, and the main consumer of Ukrainian titanium raw materials, Precheza AS, according to a number of criteria, can be classified as a sponsor of the war against Ukraine, with all the ensuing consequences for the Czech company and its Ukrainian partners.

The repeatedly voiced thesis of the owner of Velta that the re-export of Ukrainian titanium raw materials from Europe to the Russian Federation is economically inexpedient and unprofitable does not stand up to any criticism at all.

The prices that Russians are willing to pay are so attractive that individual companies with Ukrainian roots, such as OSTTOR BETELLIGUNGS- UND HANDELSGESELLSCHAFT GMBH and DEFESSA TRANS FZE, supply ilmenite concentrate for Avisma-Spetsremont LLC and ASR LLC even from such countries like Mozambique and Vietnam. In just 10 months of 2022, these companies supplied 49 thousand tons of ilmenite to the structures of the Russian corporation VSMPO-Avisma.

According to customs statistics, the average selling price of ilmenite in the Russian Federation in 2022 and 2023 was approximately $700-750 per ton, which is three times higher than the prices of Ukrainian producers Velta and OGKhK, which are officially declared at $200-250/t FCA. Obviously, even taking into account additional logistics and all associated costs, the price is very favorable.

The market, as well as, probably, Mr. Brodsky himself, is well aware of far from isolated cases of re-export of Ukrainian titanium raw materials for Avisma-Spetsremont LLC through Europe. For example, the company Smartcommodities OU (Estonia, authorized capital 2500 euros, founded in 2019, owner - Russian citizen Igor Smirnov, born 1995) https://smartcommoditiesou.com/, supplied at least two batches of Ukrainian ilmenite. 3669.026 tons - April 19, 2022 and 5276.620 tons - April 25, 2022, respectively. Or, for example, the company Bardeau Ventures Ltd from the UK (specializing in the supply and transportation of coal from Russia), which in April 2022 supplied the Russians with 2128.261 tons of Ukrainian ilmenite. Foreign customs bases confirm that these companies actually exported the indicated volumes of Ukrainian ilmenite to the Russian Federation.

The main result of all these broadcasts and press conferences is that the management of the state-owned company, as well as the private titanium business, are not ready to make a painful fundamental choice between wartime expediency and their own economic benefit. Anesthesia in the form of “oral assurances”, purely formal checks, omissions and half-truths is a temporary measure and only aggravates the situation.