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Shell firms exploit Ukrainian grain trade, depriving war-torn country of revenue

ukrainian grain, corruption, shell firms
Credit: OCCRP
Shell firms exploit Ukrainian grain trade, depriving war-torn country of revenue

According to an investigation by the Organized Crime and Corruption Reporting Project (OCCRP) and RISE Project, Ukraine is investigating hundreds of firms for allegedly failing to properly document their trading in Ukrainian grain or to pay taxes on it. These firms were created after Russia’s full-scale invasion of Ukraine in 2022, which disrupted the grain market.

The investigation found that some of the European Union companies importing this grain from Ukraine raise serious questions. Several of these companies had been ordered shut down by Hungarian authorities but continued trading. Some of the men listed as their owners and directors were patients in psychiatric hospitals; one is an aspiring TikTok influencer.

The Romanian subsidiaries of major international agribusiness traders — COFCO International, Bunge, Viterra, and Ameropa Holding — also imported grain through Ukrainian companies under investigation.

“We want to help, but not at any price!” chanted Romanian farmers who blocked the Halmeu border crossing with Ukraine in protest of the flood of cheap grain from their war-torn neighbor. The number of grain trucks crossing Halmeu has skyrocketed from just 10 per month in the early days of the war to 1,600 per month last fall.

In response to the farmers’ protests, Romania and other countries temporarily banned Ukrainian grain imports. However, Ukraine’s President Volodymyr Zelensky criticized the European restrictions as a threat to his country’s economy.

The investigation also revealed that Ukraine’s agricultural sector has been damaged by the country’s own corruption. Trade data shows that, in the first seven months of Russia’s full-scale invasion, much of the grain passing through Halmeu and other border crossings was exported by dubious Ukrainian companies accused of tax evasion and other crimes.

These companies are among more than 300 under investigation by the Ukrainian authorities since last September. Prosecutors say they defrauded the state of at least $140 million last year alone.

Multiple high-ranking officials are accused of abusing their positions to help set up the tax evasion mechanism, including senior customs officers working at ports in the Odesa oblast.

The investigation also found that COFCO International Romania, a subsidiary of the Chinese multinational agriculture business COFCO International, was one company that had imported grain through Ukrainian companies under investigation.

COFCO’s Romanian subsidiary imported $2.3 million worth of sunflower seeds into Romania through Talstaktiv, paying just $0.40 a kilogram in May 2022 when the price on international grain exchanges was $0.67 per kilogram.

In total, COFCO International Romania imported over $145 million worth of grain into the country in the seven months between February and September for which data is available. Of this amount, about 145,500 tons of grain, worth nearly $37 million, came through Ukrainian companies now under investigation.

The Romanian subsidiaries of two other major international traders — Viterra (formerly known as Glencore Agriculture) and Ameropa Holding — were also importing grain through dubious Ukrainian firms.

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