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October 8, 2014

Volume 17 Issue 52

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Lukoil Romania Under Tax Evasion Probe

Lukoil’s refinery, lubricant blending plant and other production facilities in Ploiesti, Romania, were shut down the past few days by authorities probing allegations of massive tax evasion and money laundering.

Subsidiary offices of the Russian oil major, including its Eastern European lube arm and four companies that manage production, logistics and security for the refinery and auxiliary facilities, were raided by Romanian law enforcement officers last week. A team of prosecutors, police and customs inspectors seized the company’s accounting documents, ordered raw materials held against potential penalties and set up guards on the refinery site, according to local media reports.

“The inquiries are conducted over tax evasion and money laundering offenses,” the prosecutors said in an Oct. 2 news release published on the Romanian attorney general’s website. “At this stage of the investigation we believe that estimated loss is €112 million [U.S. $142 million] in tax evasion and €118 million in money laundering.”

On Tuesday some Russian media reported that the refinery restarted operations, but representatives of LLK International and Lukoil did not respond to questions seeking confirmation. LLK is Lukoil’s lube arm and Russia’s largest lube marketer.

Lukoil Lubricants East Europe refused to comment, directing questions to the oil major’s headquarters in Moscow. Lukoil released an Oct. 3 statement saying, “The [law enforcement] agencies were provided with financial documents and other electronic information needed. We are sure that the Romanian agencies will sort everything out and a fair decision will be taken.”

Russia’s ambassador to Romania complained that Romanian authorities were jeopardizing Lukoil’s business in the country. “The fact that production has been suspended amid the ongoing searches, jeopardizing the functioning of the whole Lukoil production chain in Romania, is a particular cause for concern,” Oleg Malginov said in an Oct. 6 statement posted on the embassy’s website.

The European Union imposed sanctions on sectors of the Russian economy, including Lukoil and other oil and energy companies, over Moscow’s annexation of the Crimea Peninsula and its backing of rebels in Eastern Ukraine. As an EU member, Romania is the staunchest supporter of the bloc’s sanctions against Russia.

Lukoil owns 97.1 percent of the Ploiesti refinery and has been present on the Romanian market since 1998. Through its Eastern European subsidiary there, it operates a 40,000 tons per year lubricant production plant and owns 300 filling stations throughout the country.