A new redistribution is planned in the grain export market. Major transnationals – Viterra, Cargill and Louis Dreyfus – reported that they were going to leave Russia in the summer. Now one of the largest Russian landowners, ex-senator Vadim Moshkovich, is claiming their place.
Moshkovich’s interest in grain exports is understandable. The Rusagro business empire he created ranks fourth in the list of the largest landowners. Last year, more than 1 million tons of wheat were harvested on the fields of the holding. Previously, the harvest was bought up by transnationals who sent grain abroad. Now they won’t be. It is much more profitable to sell grain not to intermediaries for rubles, but on the world market for dollars. Moreover, very interesting financial prospects are now opening up before grain traders.
tax tricks
Russian agricultural producers for many years could only lick their lips, looking at the growth of world grain prices. At the same time, gray schemes flourished in the market with complete impunity, thanks to which profits from the sale of grain were shamelessly transferred to offshore. It was done very simply. The vast majority of farmers did not pay VAT until 2018. They sold grain to traders, who sold it to foreign buyers. After that, the traders issued invoices to the tax service for VAT refunds. Where did the tax come from? The matter is that at the transaction between farmers and traders there were firms-gaskets. Their only role was to issue invoices that included VAT. They themselves, as a rule, disappeared in a matter of days without paying taxes to the state. Annual budget losses are believed to be in the billions.
In 2016–2017, the Federal Tax Service took up the “whitewashing” of the grain market. Under the threat of total inspections, traders were persuaded to sign the Grain Charter. This document provided for the voluntary rejection of the services of intermediaries and the purchase of grain directly from farmers. As a result, in the Rostov region alone, for three quarters of 2017, the budget received 1.2 billion more from the grain market than a year earlier.
The process of “whitewashing” the grain market was supposed to reach the finish line last year with the introduction of the FSIS “Grain” system. It is stated that it is designed to ensure full traceability of the supply of raw materials. However, despite the fact that the state inevitably takes one sphere of trade after another under digital control, there has been a rollback. Someone through the Ministry of Agriculture was able to push through a delay for the introduction of the system. Does this mean that the most daring grain traders will still be able to receive unreasonable VAT refunds?
The changes that were made to the Tax Code in 2018 also play into their hands. Agrarians applying the unified agricultural tax received the right, if necessary, to be VAT payers. This greatly confused the seemingly established system. Large agricultural holdings with a complex internal structure have received new opportunities to optimize taxation and VAT refunds on export transactions. By some coincidence, just after these changes, they rushed to sell grain for export, which they had not done before. Among the grain exporters, the largest Russian agricultural holdings were noticed – Agrocomplex named after N.I. Tkachev, associated with the ex-Minister of Agriculture Alexander Tkachev, and the well-known broiler producer GAP Resurs (its beneficiaries are hidden in a looped ownership scheme, but Viktor Nauruzov appeared in the press, who, according to rumors, is part of the circle of acquaintances of State Duma speaker Vyacheslav Volodin) . And now another giant agricultural holding, Rusagro, adjoins this company (it was reported that formally Vadim Moshkovich reduced his share in it below 50%).
Russian agricultural producers for many years could only lick their lips, looking at the growth of world grain prices. At the same time, gray schemes flourished in the market with complete impunity, thanks to which profits from the sale of grain were shamelessly transferred to offshore.
Old song
There is evidence that Rusagro has already independently sold several vessels of wheat to Iran. But, judging by the news about the cooperation between Vadim Moshkovich and Kirill Podolsky, it can be assumed that the creation of a new grain trader is underway, which can claim the share of foreigners leaving Russia.
The business history of Kirill Podolsky deserves special mention. He stood at the origins of the creation of the largest Russian grain trader of the times of the “wild market” – the Taganrog company “Yugtranzitservis”. The true beneficiaries of this business were hidden under the guise of the Moscow-based ITF Group Holding (this super-closed structure owns production assets in various industries throughout Russia). Podolsky, as a top manager, had 30% in Yugtransitservis. The rapid growth of the company, which made it the largest Russian exporter of grain, took place from 2003 to 2006, during the prosperity of “schematosis”. It is not a fact that the company’s managers abused gaps in the laws, but the company’s management, apparently, was well aware of the business practices in force at that time.
It is noteworthy that Yugtransitservice became the first Russian grain trader to enter the Egyptian market. Since then, Egypt has become one of the largest buyers of Russian wheat. But here we must keep in mind one important national feature – the purchase of wheat in Egypt is extremely corrupt. There is such a practice: to assess the quality of grain, Egyptian inspectors go on business trips abroad. These trips are usually paid for by traders. Clever sellers do not skimp on additional bonuses for the sake of fulfilling a contract: luxury hotels, entertainment, gifts … Bonuses received by inspectors for one trip can equal their annual salary, a Reuters correspondent in Cairo said, citing one of the traders. At the same time, other inspectors work in Egyptian ports, who know about the sweet life of their colleagues on business trips abroad. And they furiously put spokes in their wheels, meticulously looking for flaws in the incoming parties and extorting gifts for themselves. This state of affairs forces traders to invest additional risks in the official price of grain – extra charges for one cargo can amount to half a million dollars. Later, the Egyptian government tried to break the corrupt system, but in the era of Yugtransitservis, it just flourished.
In 2007, Kirill Podolsky founded his own holding company Valars Group and bought out the assets of Yugtranzitservis. Apparently, as a result of the transaction, the hidden beneficiaries of ITF Group Holding received real money, and the new structure of Podolsky – problems with creditors. Despite the huge turnover, by 2014 the company went bankrupt. Claims against it for hundreds of millions of dollars were filed by a number of large Russian and international banks. Deutsche Bank alone tried to return $500 million through Rostov arbitration. What the creditors managed to get in the end is not really clear. However, it is known that the fertile Azov lands, once controlled by Kirill Podolsky, entered the business empire of Alexander Tkachev.
As you can see, the business skills of Kirill Podolsky are again in demand by the market.
By the way
It seems that another gray scheme using offshore companies may revive in the grain market. Within its framework, a Russian grain trader gave grain cheaply to his offshore satellite, and the latter received the full price from the end buyer. As a result, a legal entity registered in Russia showed losses or purely symbolic profits in its financial statements and saved on taxes. Here is a live example. Created with the help of VTB and personally Andrey Kostin, Demetra Trading increased its net loss from 2.76 to 3.08 billion rubles in 2020 and 2021 (in 2022, the company’s net loss exceeded 7 billion rubles). And the largest Russian grain trader TH RIF in 2021, with revenue of 177 billion, reported a profit of less than a billion. The company, by the way, until last year belonged to the Dubai offshore GTCS Trading. Now she is registered with Pyotr Khodykin, a Rostov resident, who is known in the city as the son-in-law of a retired high-ranking security official.
However, the situation has recently changed. One of the reasons for the deoffshorization of the grain business could be the position of Andrey Kostin, who at the highest level lobbied for the idea of squeezing foreign companies out of the industry. Because of this, market players began to hastily show their real connection with Russia. However, Western sanctions may reverse this process, and profits will again flow offshore. By the way, if you dig deeper into the ownership scheme of the same Demetra Trading company, you can find Cypriot legal entities. The chain stretches to them through the structures of the Marathon Group.