‘Blood money’: Europe’s secretive trade in Syrian phosphates | Syria

In January, a cargo ship flying the Honduran flag disappeared from international tracking systems off the coast of Cyprus. When it reappeared a week later, the Sea Navigator was heading north to Europe. But the ship had not got lost – it had slipped into a Russian-controlled port in Syria to pick up phosphates, a key ingredient for making fertiliser.

Cheap Syrian phosphate exports to Europe have boomed in recent years. Europe has few phosphate reserves of its own and European farmers were already struggling to afford phosphate fertilisers before the war in Ukraine sent prices soaring even higher.

But this secretive trade comes at a cost. Phosphate exports provide an economic lifeline to the repressive government of Bashar al-Assad, and channel European funds to Syria’s key partner in the phosphates trade: the Russian billionaire Gennady Timchenko, a close friend of Russian President Vladimir Putin.

While EU sanctions on Syria do not explicitly prohibit phosphate imports, they do ban deals with the Syrian minister of oil and mineral resources, who is in charge of phosphates. European companies also risk running afoul of the global reach of US sanctions on the Syrian government. Meanwhile, Timchenko was one of the first oligarchs added to UK and EU sanctions after Russia’s invasion of Ukraine in February.

So European companies are paying a convoluted network of shell companies and middlemen to buy Syrian phosphates, which are surreptitiously shipped on vessels such as the Sea Navigator.

Analysis of dozens of such voyages using ship tracking data reveals a pattern of ships carrying phosphates from Syria disappearing from the International Maritime Organization’s AIS tracking system while heading towards Syria and reappearing en route to Europe a week or two later.

Russian tycoon Gennady Timchenko in 2017.
Russian tycoon Gennady Timchenko in 2017. Photograph: Sergei Karpukhin/Reuters

Timchenko’s employees have also created front companies in Syria to send phosphates to Europe.

“The Syrian phosphates trade shows why the EU sanctions system is not fit for purpose – sanctions evasion works and it’s not even that difficult,” said Ibrahim Olabi, a Syrian legal expert who monitors sanctions evasion. “Russia has learned how to do this in Syria and can now use that experience to avoid sanctions over the Ukraine war.”

An investigation by the Organized Crime and Corruption Reporting Project (OCCRP), Lighthouse Reports, and Syrian Investigative Reporting for Accountability Journalism (SIRAJ), in partnership with girls in seven countries, traced phosphate shipments from the desert mines of Syria to Europe’s fertiliser factories, using open source analysis and financial documents and trade data from dozens of countries.

Official trade records show that Spain, Poland, Italy and Bulgaria all recently began importing Syrian phosphates. Serbia and Ukraine, which also apply EU sanctions on Syria as part of their agreements with the bloc, are also major buyers.

When asked about the imports, companies and government agencies said they did not violate sanctions because Syrian phosphates are not specifically outlawed, and they are not dealing directly with people under sanctions.

“You might be legally in the right. You’re also giving blood money to a sanctioned human-rights violating regime and a sanctioned Russian oligarch,” said Irene Kenyon, a former intelligence officer at the US Treasury.

A Russian oligarch’s Syrian front companies

In the desert surrounding Palmyra, the ancient city vandalised by Islamic State militants, cities workers bussed in from nearby dig phosphate rock from Syria’s dusty mines. Few Syrians still live in the villages scattered through this arid region where Islamic State sleeper cells continue to stage periodic attacks. Russian and Syrian private security contractors guard the phosphates mines and convoys to the coast.

Phosphates are essential for crops and animal feed, and European agriculture is dependent on the approximately $55bn global phosphates industry. Syria was one of the world’s largest exporters of phosphates before war engulfed the country in 2011, with the industry falling apart when IS captured the area around the mines in 2015.

Russia sent forces into Syria that year, eventually helping Assad recapture most of the country. The government returned the favor by handing generous contracts to Russian companies in some of the countries’ most profitable sectors.

In 2018, the Syrian state-run General Company for Phosphates and Mines (Gecopham), owned by the ministry of oil and mineral resources, handed control of Syria’s largest phosphate mines to the Russian company Stroytransgaz.

Stroytransgaz is owned by Timchenko, one of the richest men in Russia. Timchenko and Putin have been friends since at least the early 1990s, when the oligarch was a St Petersburg oil trader. Timchenko denies claims he is one of the fronts for Putin’s personal wealth, saying the pair are just judo partners.

The US placed sanctions on Stroytransgaz in 2014 after Russia annexed Crimea, so Timchenko distanced himself from his company’s operations in Syria, which date back to the early 2000s.

In 2016, senior Stroytransgaz employees took over an obscure Russian logistics company and renamed it Stroytransgaz (STG) Logistic. On paper, STG Logistic is owned by a Moscow-based company that manages businesses for anonymous clients. It runs phosphates exports for the Syrian government in exchange for 70% of the proceeds.

In 2018, Timchenko’s company sold a subsidiary, Stroytransgaz (STG) Engineering, to two Moscow-based shell companies. Shortly after, the company won contracts to run the export port in Tartous and Syria’s state-run fertiliser factories, giving companies using the Stroytransgaz name control over the entire phosphate supply chain in Syria.

Stroytransgaz now denies any connection to these companies. “STG Engineering is a separate legal entity and is not part of our group of companies. Just a similar abbreviation of the company name,” said a spokesperson, Natalia Kalinicheva.

But Syrian and Russian company records show senior Stroytransgaz officials played key roles in the formation of these companies, including the former Stroytransgaz director Igor Kazak and current Timchenko employee Zakhid Shaksuvarof.

Irene Kenyon, a sanctions expert and director of risk intelligence at the consultancy FiveBy Solutions, said the history of these companies gave her “pretty high confidence” that they are owned or controlled by Timchenko’s company. “These are very common methodologies: creating layers and layers of shell companies to help obscure ultimate beneficial ownership by people under sanctions,” she said.

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Putin’s man in Ukraine

Syria is Ukraine’s largest supplier of phosphates, despite Kyiv’s tense relationship with Damascus since Assad backed the invasion of Crimea. Ukrainian fertiliser companies used to buy directly from the Syrian government, but since resumed in 2018 the trade passes through a network of obscure new companies.

The vast majority of Syrian phosphates arrive in Ukraine through Nika Tera port in the south-western city of Mykolaiv, now a frontline in the Russian war in Ukraine. The port is owned by the Ukrainian oligarch Dimitro Firtash, who also controls the largest producer of phosphate fertilisers in Ukraine, Sumykhimprom.

Ukrainian oligarch Dimitro Firtash waiting for the start of his trial at the courts of justice in Vienna, Austria, in February 2017.
The Ukrainian oligarch Dimitro Firtash on trial at the courts of justice in Vienna, Austria, in February 2017. Photograph: Ronald Zak/AP

While Sumykhimprom is technically state-owned, it is run by a close business associate of Firtash and owes the oligarch’s companies millions of dollars, according to an investigation by Radio Free Europe/Radio Liberty. “It’s not uncommon for powerful players in Ukraine to control state-owned companies in this way,” said John Lough, an expert on Russia and Ukraine at the British thinktank Chatham House.

Firtash, one of the richest men in Ukraine, owes his fortune to deals with Kremlin-controlled companies, including an approximately $3bn scheme reselling underpriced Russian natural gas in Ukraine and pocketing the difference. In return, he has bankrolled Russia-friendly politicians in Ukraine. Earlier this year, he denounced Putin’s war in Ukraine, telling NBC: “I was never pro-Russian, but you have to understand that I am a businessman. And my goal is to earn money.”

His influence once extended to the UK, where he owns a mansion in London’s most expensive neighborhood and became a major benefactor to the University of Cambridge. He now runs his vast business empire from Austria, where he has spent the last eight years fighting extradition to the US to stand trial for corruption.

Sumykhimprom was the largest importer of phosphates to Ukraine until 2020, when it vanished from import records. As the company continued to produce phosphate fertiliser, it appeared to be sourcing its materials through third parties. Sumykhimprom did not respond to multiple requests for comment on whether it was buying Syrian phosphates.

The growing European market

More recently, companies in EU countries have also started buying Syrian phosphates again. Italy resumed the trade in 2020, followed by Bulgaria last year and Poland and Spain in January.

The trade is growing fast because of spiraling prices, according to European importers and industry analysts. “Syrian phosphates are very bloody not only because of the conflict in Syria but also what is happening in Ukraine,” said Glen Kurokawa, a phosphate analyst at the commodity research group CRU. “Syria has to sell at a political discount because its goods are so toxic to handle.”

European demand is likely to grow as the war in Ukraine disrupts phosphate and fertiliser markets.

The sanctions expert Julius Seidenader said Syria’s phosphate trade revealed how Europe’s patchy enforcement of sanctions and difficulty closing loopholes could effect its recent sanctions on Russia over Ukraine.

“Whether over oligarchs or private jets, Russians have become masters of layering and hiding assets in shell companies,” he said. “That’s the question haunting sanctions – hiding behind shell companies makes it very difficult to make sanctions work, whether in Syria or Russia.”

This investigation led by Lighthouse Reports, OCCRP and the Syrian Investigative Reporting for Accountability Journalism (SIRAJ) was a partnership between the Mykolaiv Center for Investigative Reporting (Ukraine), the Center for Investigative Journalism of Serbia, Bivol (Bulgaria), RISE (Romania) & Investigative Reporting Project Italy.

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