Despite sanctions, Syria profits from secret trade of phosphate to EU – Report

QAMISHLI, Syria (North Press) – An investigative report published on June 30 detailed Syria’s secret export of phosphate to the European countries, and Russia’s share in this scheme, clarifying that trades like this undermine the sanctions placed on the two countries.

The investigation was led by the Organized Crime and Corruption Reporting Project (OCCRP), Lighthouse Reports, and Syrian Investigative Reporting for Accountability Journalism (SIRAJ), in partnership with journalists in seven countries.

It traced phosphate shipments from the desert mines of Syria to Europe’s fertilizer factories, using open source analysis and financial documents and trade data from dozens of countries.

According to the report, Syria’s exports of phosphate, a key ingredient for making fertilizers, have spiked in recent years as European farmers were already struggling to afford phosphate fertilizers before the war in Ukraine sent prices soaring even higher.

These exports work as an economic lifeline to the Syrian government. It also funnels European funds to the Russian billionaire Gennady Timchenko, Syria’s key partner in the phosphates trade and a close friend of Russian President Vladimir Putin.

Despite that EU sanctions on Syria do not explicitly target phosphate imports; they do prohibit deals with the Syrian Minister of Oil and Mineral Resources, who is in charge of phosphates.

Timchenko was one the first oligarchs added to UK and EU sanctions after Russia’s incursion in Ukraine on February 24. Thus, European companies are paying a network of shell companies and middlemen to buy Syrian phosphates, which are stealthily shipped on vessels such as the Sea Navigator.

According to the investigation, the sales to Europe are carried out quietly, with cargo ships disabling their tracking systems while heading towards Syria and reappearing on route to Europe later.

Citing documents and trade data, the investigation said, Serbia and Ukraine are major buyers of Syrian phosphates. Serbia has imported $72 million since 2017, while Ukraine has imported $30 million over the past four years.

According to the report, Italy and Bulgaria resumed trade over the past two years. Spain and Poland started importing Syrian phosphates in January, with Spain purchasing around $900,000 and the Poland $37,000 so far this year.

Timchenko and Stroytransgaz

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, which is owned by Timchenko.

In 2014, the US imposed sanctions on Stroytransgaz after Russia annexed Crimea, so Timchenko distanced himself from his company’s operations in Syria, which had been operating there since the early 2000s.

In 2016, senior Stroytransgaz officials took over an obscure Russian logistics company and renamed it Stroytransgaz (STG) Logistic.

Stroytransgaz (STG) Logistic won a 50-year contract in 2018, giving it rights to %70 of sales revenues from Syria’s largest phosphate mines, near the city of Palmyra in central Syria. The rest goes to Gecopham.

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 Tartus and Syria’s state-run fertilizer factories, giving companies using the Stroytransgaz name control over the entire phosphate supply chain in Syria.

Timchenko’s Stroytransgaz denies any connection to these companies, claiming that they just have similar names, but Syrian and Russian company records show senior Stroytransgaz officials played key roles in the formation of these companies, the report said.

Bloody money and ineffective sanctions

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

“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 learned how to do this in Syria and can now use that experience to avoid sanctions over the Ukraine war.”

European 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 Department of the Treasury.

According to European importers and industry analysts, the soaring prices makes the trade grows fast and European demand is likely to increase as the war in Ukraine disrupts phosphate and fertilizer markets.

Reporting by Farzand Hussein