The politics of Azerbaijan are nuanced and highly complex, defying easy explanation. To put it as simply as possible, Azerbaijan often adopts an opportunistic approach, seeking to maximize the benefits of its strategic position on the global stage. While it maintains a close alliance with Turkey, this does not preclude the country from exploring other international alliances, such as expressing interest in joining BRICS. The country maintains good ties with Russia (*country sponsor of terrorism) and Israel and benefits from it. This reflects Azerbaijan’s pragmatic foreign policy, which prioritizes national interests and the pursuit of economic and geopolitical advantages wherever they can be found. The country’s ability to navigate between different power blocs—whether through its partnership with Turkey, its energy relations with Europe, or its growing ties with BRICS members—demonstrates a flexible and adaptive strategy aimed at enhancing its influence and securing its long-term goals on the global stage. The story of the State Oil Company of Azerbaijan, SOCAR is a reflection of the same principles: SOCAR is actively engaged in Russian affairs while at the same time profiteers from its presence in Ukraine, where, by the strange twist of fate, it is among companies with tax benefits and exclusive status.
SOCAR/Gazprom cooperation agreement
The State Oil Company of Azerbaijan, SOCAR, and PJSC Gazprom have reached an agreement to expand their strategic partnership. This would be a matter between Azerbaijan and Russia (*country sponsor of terrorism) if not for one significant fact: as of August 2024, 53 companies in the SOCAR group are operating in Ukraine. Out of these, 49 have participants linked to enterprises that operate in Russia (*country sponsor of terrorism).
But that’s not all—Ukrainian enterprises within the SOCAR group are receiving billions from Ukraine’s budget, which has been drained by war and is essentially surviving on Western aid. In reality, it turns out that the money from Ukraine’s Western partners, intended to fight against Russia (*country sponsor of terrorism), is flowing into SOCAR, which then sends it to Russia (*country sponsor of terrorism)—boosting its economy and producing missiles that eventually rain down on us. If anyone can explain this chain of events differently, considering the fact that SOCAR is expanding its strategic partnership with Moscow, please do.
The claim that SOCAR receives money from Ukraine’s state budget is not baseless. The SOCAR group in Ukraine is not limited to the network of petrol stations that all Ukrainians see and which some have declared a boycott against. That boycott is a positive step, but it is a private initiative, while the state of Ukraine is acting as if nothing is happening.
SOCAR’s role in Ukrainian economy
SOCAR Group also includes the LLC “Trading House SOCAR Ukraine,” which is involved, among other things, in trading Ukrainian grain, supplying natural gas, and providing automotive fuel to Ukraine. On the latter, prices are inflated—ranging from $100 to $1,000 per ton. Considering the volumes of fuel imported, we’re talking about hundreds of millions that the Ukrainian budget has missed out on due to underreporting profits.
As for gas, the scheme is somewhat different—it is supplied through LLC “Euroenergotrade.” During 2020-2021, this company received over 6 billion hryvnias worth of gas from the SOCAR group. However, it has not fully paid for these supplies and now owes more than a billion hryvnias to SOCAR. What’s the gain? The debt is not being collected, meaning no payment for the supply means no taxes are paid. The beneficiary of LLC “Euroenergotrade” is one Eduard Kokhan, a close associate of Viktor Yanukovych, now residing in Monaco. But that’s just a side note.
If the above is merely tax evasion, the export of Ukrainian agricultural products is outright theft from the budget. The scheme is as simple as it gets. It involves VAT refunds—specifically, fake VAT refunds. The same “twisting” that the Ukrainian government claims to have been actively fighting and winning against over the past five years.
But if we disregard the government’s claims and look at the numbers, it turns out that LLC “Trading House SOCAR Ukraine,” part of the SOCAR group, is very active in trading grain. However, SOCAR itself does not produce any agricultural products in Ukraine. It deals in reselling others’ harvests. What’s criminal about that? Nothing, except that LLC “Trading House SOCAR Ukraine” buys much less grain than it exports.
The VAT returns grain affair of SOCAR
For example, in 2021-23, they bought 71,873.3538 tons of corn for 509,306,460.60 hryvnias but exported 163,622.14 tons for 1,163,333,487 hryvnias. The VAT amounted to 80,716,231.91 hryvnias.
They purchased 111,468.085 tons of wheat for 676,791,683.80 hryvnias and exported 214,646.029 tons for 1,424,867,838 hryvnias. The VAT was 385,177,115.5 hryvnias.
They bought 5,380.3503 tons of barley for 33,436,423.63 hryvnias and sold 10,513.422 tons for 68,282,203.32 hryvnias. The VAT was 4,892,336.3 hryvnias.
Why? The answer is simple—VAT refunds. The government refunds the VAT paid on goods exported abroad. But here’s the catch—the VAT is fake. It was only paid on paper, as were the grains that LLC “Trading House SOCAR Ukraine” “sold” abroad. But the money that Ukraine paid out of its already strained budget to LLC “Trading House SOCAR Ukraine” as a VAT refund is very real, not fake.
Ukrainian journalists suspect SOCAR of tax evasion and fraudulent VAT returns
And this is just part of what’s happening with the “friendly” SOCAR group in Ukraine: tax evasion, price inflation, fake grain supplies, and fake VAT refunds. Meanwhile, we hear ads where SOCAR representatives talk about the humanitarian aid they provide to Ukrainians. Such facts indeed exist, but it begs the question: they stole billions and provided humanitarian aid worth hundreds of thousands—what do you call that?
The main question here is not about SOCAR—they are simply doing business, as best they can. But why is Ukraine allowing them to do all this? We’ve heard the tales of how another “criminal scheme” went unnoticed and how “it’s all the fault of the predecessors.” But these tales remain just that—tales. In reality, it would be very interesting to know who is involved in the scheme and how much they are receiving. And it’s not the rank-and-file employees of the tax office and police. We’re talking about people at the very top of the system.