LTV's De Facto looks at Latvia's petroleum gas imports from Russia

According to the information available to LTV, petroleum gas was imported last year worth more than EUR 120 million. Moreover, the volume of imported petroleum gas has increased by more than 65% compared to the first year of the Russian invasion of Ukraine. The situation will change at the end of this year when sanctions are imposed on petroleum gas, but until they exist, Russian petroleum gas is likely to continue to be used even by state-owned companies.

The main source of finance for Russia's war is its mineral resources, especially energy resources. In Latvia's imports from Russia this is still the largest section, even though the volume has dropped significantly due to the ban on natural gas imports. In the first year of the war, Latvia bought more than EUR 800 million worth of fossil resources from Russia; in the first 11 months of 2023 – EUR 176 million. The largest section is LPG – EUR 122 million.

LPG is used for motor gas, cooking, and heating. Gunārs Valdmanis, director of the Energy Market Department of the Ministry of Climate and Energy, says that if canister gas is used for the stove or a car is driving on autogas, it is very likely that the gas originates from Russia because the volume imported from other countries is relatively small.

“It must be said that producers do not specifically highlight this origin here. Lithuania, Poland may also theoretically be the origin but probability is high that it is Russian-sourced petroleum gas,” Valdmanis said.

Data from the Central Statistical Bureau showed that, excluding December, 318 thousand tonnes of liquefied petroleum gas were imported from Russia last year, up 65% from 2022. At the same time, exports have also increased, for example, about one-tenth have been exported to Ukraine. Lithuania imported just over 20 thousand tons of liquefied petroleum gas into Latvia.

Major fuel retailers that also offer autogas include Circle K, Virši and Viada. LTV asked each of them whether the autogas sold originated in Russia.

“Circle K does not offer diesel and petrol originating in Russia on its network and a corresponding provision is included in the supply contracts. Also in relation to gas, a procurement contract has been concluded already in 2022 for the supply of a product originating in the European Union,” replied Gatis Titovs, fuel category manager of Circle K Latvia.

Virši also denied selling Russian-sourced autogas: “We can confirm that products with [Russia as] the country of origin are not sold on the VIrši network, which is in accordance with the terms of the agreements concluded between us and suppliers that impose restrictions and controls on such supplies.”

However, Kaspars Tupiņš, marketing manager of “Viada Baltija”, did not provide a specific answer regarding the country of origin of the sold autogas, stating only that “A/S “VIADA Baltija” purchases liquefied gas products, for sale at service stations, from companies registered in the European Union.”

The largest traders in Latvia focusing directly on petroleum gas are companies “Latvijas propāna gāze” and “INTERGAZ”. Both had ties to Russian billionaires at least at the start of the war.

90% of Latvia's propane gas business was owned by the Cyprus-based firm ARETI International Group by mid-2022. It was created by Russian billionaire Igor Makarov, who previously had various affairs in Latvia, for example, he was chairman of the Council of Itera Latvija, and co-owner of Latvijas Gāze. Because of Russia's invasion of Ukraine, Makarov was sanctioned by Britain and Ukraine, but not by the European Union or the US.

After the departure of “ARETI International Group” from the company, the Latvian citizens Aleksandrs Siņegubovs and Anatolijs Černihsh became the true beneficiaries of “Latvijas propāna gāze”.

Meanwhile, INTERGAZ, registered in Daugavpils, still has ties to another Russian billionaire – the real beneficiary is oil businessman Rashid Sardarov. A few months after the war began, his citizenship was changed from Russia to Bosnia and Herzegovina in the Enterprise Register.

Neither “INTERGAZ” nor “Latvian propane gas” responded to calls for an interview.

Soon, Russian petroleum gas will no longer be imported, as it has been agreed to be included in the sanctions list in the European Union.

The ban will take effect late this year, so nearly three years after Russia invaded Ukraine.

When asked why it has taken so long, Valdmanis, representative of the Ministry of Climate and Energy, replies that petroleum gas is not such a significant resource in other countries, so it has not been paid attention to. It also took time to agree what exact commodity codes to ban, to eliminate the possibility for traders to hide petroleum gas under different names. He also said the transition period would allow traders to find new sources of liquefied petroleum gas. Consequently, the suspension of imports of petroleum gas would have no impact on price or availability.

While there are no sanctions, Russian liquefied petroleum gas can also be bought by state companies and institutions. It is purchased by several municipalities, as well as state-owned enterprises Latvian Railways and Latvian State Forests. Last year, Rashid Sardarov's indirect-owned “INTERGAZ” won the purchases of the two companies for a total of about half a million euros. The companies say there is no legal basis for excluding Russian-sourced petroleum gas from purchases.

Latvian Railways stated in a written reply:

“In public procurement, we also strictly respect the principle of competition neutrality by preventing the deliberate reduction of bidders, in accordance with the requirements laid down by the IUB. […] In view of existing international and national legislation, LDz had no legal basis for limiting the range of countries of origin of the product. As regards the origin of liquefied gas, it should be noted that there is no ban on imports of gas from the Russian Federation into the European Union.'

Māris Druvaskalns, representative of Latvian State Forests, explained that the company uses liquefied petroleum gas for greenhouse heating. He said that officially the company doesn't know at all whether INTERGAZ's supply of oil gas has actually been imported from Russia: “We guess, but we don't have a direct answer. So far, we were not entitled to request information on the country of origin on the basis of this regulatory framework, so we did not ask such a direct question. ”

In the meantime, amendments to the law have passed the first vote in the Saeima, which would prohibit importers and exporters of any Russian goods from participating in public procurement, regardless of whether the goods supplied in the procurement originate in Russia. The authors are members of the opposition National Alliance, which has recently increasingly called for restrictions on economic ties with Russia.

Along with restrictions on public procurement, this week the Saeima started to see a ban on import of Russian agricultural products into Latvia. The government's position is still skeptical of that, though. Economy Minister Viktors Valainis said it is not appropriate to ban anything only at the Latvian level.

“The solutions that are being put forward right now, unfortunately, they would not achieve the goals that we really want. These goods too – if we said that we do not import them more from Russia, they can enter the European single market the next day via Lithuania. So we have to have an effective solution to regulate this one,” Valainis said.