Fedcominvest denounces Ukraine's politically motivated attack on its Chairman, Alekszej Fedoricsev

20.03.17 (UKRAINE) - Fedcominvest will strongly contest the politically motivated freezing of the Ukrainian assets of the company's Chairman, Alekszej Fedoricsev. The company is confident that the arbitrary nature of the State of Ukraine's actions will be uncovered in the appropriate courts. 

Fedcominvest would like to make it clear that any accusations of wrongdoing against its Chairman by the controversial and discredited National Anti-Corruption Bureau of Ukraine (NABU) are strenuously denied and are part of an ill-informed and politically motivated attack.

This attempt by the State of Ukraine to seize Mr Fedoricsev's assets has its origins in a series of contracts entered into by the State Food and Grain Corporation of Ukraine, PJSC (SF&G) to export grain from Ukraine to China.

In 2012, SF&G entered into a US$ 3 billion 'loan-for-grains' contract, which the Ukrainian Government agreed with the Chinese government, knowing that the maximum transhipment capacity of their own terminals was just 2.4 million tonnes per year. From more or less the commencement of the loan term, China demanded more grain from Ukraine than could be transhipped through State terminals. In 2013, demand reached such a level that the SF&G was unable to perform its obligations to China.

The SF&G therefore sought use of Ukraine's privately owned terminals to tranship grain. They approached the owner of TIS terminals Mr Fedoricsev, as TIS terminals are the largest deep-water terminals in Ukraine, with transhipment capacities of 27 million tonnes per year.

Unaccustomed to using private terminals and abiding by accepted market practices, SF&G entered into a commercial dispute over a deal made in Mr Fedoricsev's TIS terminals with a separate company (Lirtavis). It is important to note that Mr Fedoricsev has no commercial or other interest in Lirtavis. Despite having no legal interest in the dispute between SF&G and Lirtavis, the Ukrainian anti-corruption authorities have now seized the assets of Mr Fedoricsev as part of a wide-ranging and arbitrary criminal investigation flowing from the dispute.

The ultimate objective of the Ukrainian state's investigations appear to be to appropriate the privately owned TIS terminals in order to service the SF&G's growing need for transhipment capacity and meet the current high demand for grain exports. Only last year, SF&G's Deputy Chairman, Andriy Repko admitted that the Ukrainian Government needed to build a new grain terminal suitable for large vessels in order to meet the demand of grain shipments to China. Their desperation is only exacerbated by the fact that the Chinese Import-Export bank has already brought arbitration proceedings against Ukraine for defaulting on the loan.

Spotting an opportunity to appropriate Mr Fedoricsev's property, the Ukrainian authorities expanded their criminal investigation against SF&G into arbitrary and unlawful criminal investigation into Mr Fedoricsev's companies. They have unjustly pursued key figures at Mr Fedoricsev's TIS terminals and Mr Fedoricsev himself. This has now culminated in the unreasonable freezing of Mr Fedorisev's Ukrainian assets.

Fedcominvest is completely confident that these illogical state actions will be overturned in the appropriate courts. Mr Alekszej Fedoricsev will of course help the authorities in any way he can.    

Mr Fedoricsev says,

"I am disappointed by the lack of due process and malicious lies that have been spread about me and my businesses in Ukraine. It is unfathomable to think that I am being punished by the authorities for giving them the opportunity to meet their obligations under a loan which is hugely important to the Ukrainian state. It is clear to me that those who invest in Ukraine's infrastructure, create employment and improve its economy are rewarded by the State with nothing but contempt. These arbitrary actions are indicative of a desperate State which is willing to go to any length to protect itself, with no regard for its people or economy."

Marco Garzone, Vice President of Fedcominvest, says, "We are confident that these malicious and cruel actions taken by the Ukrainian Anti-Corruption Bureau will be proven to be groundless by the appropriate courts. This absolutely baseless attack by the NABU on our Chairman, who is a well-respected international businessman, will not be accepted by Fedcominvest. We will support him completely throughout this ordeal."


Background information:

1. Fedcominvest Europe SARL

Fedcominvest Europe SARL, is a world-leading export business, specialising in the trading of grain, sulphur and fertilizers.

Founded in 2009 in the Principality of Monaco, the company has expertise in the storage, shipping and distribution of a variety of commodities. Fedcominvest has a significant presence in Western Europe and is a market-leader in the supply of grain from the deep-water ports of Odessa region to countries in the MENA region.

In 2016 Fedcominvest shipped over 5 million tonnes of grain to countries around the world including, Bangladesh, Malaysia, Saudi Arabia and Vietnam.

2. Alekszej Fedoricsev

Alekszej Fedoricsev is a successful Russian-born businessman. He is the founder of Fedcominvest, a global export business, specialising in the trading of sulphur and fertilizers.

After starting his career as a professional footballer for Moscow club FC Dynamo, Mr Fedoricsev began trading in car parts during the fall of the Soviet Union. He quickly became a specialist in the business of logistics, concentrating on transporting and trading in grain and chemicals including ammonia, phosphates and sulphur. His company, Fedcominvest, is now a global leader in the field.

A values-driven and self-made businessman, Mr Fedoricsev's business ethos is centred on re-investing profits back into his businesses. This has proven to be a hugely successful model, with his business interests now spanning across commodities, sport, media, shipping and property. 

A passionate sportsperson, Mr Fedoricsev is a leading figure in European football. Fedcominvest is a sponsor of Monaco FC and Mr Fedoricsev previously owned a significant stake in FC Dynamo (Moscow). As part of his commitment to make football accessible to all, he bought the rights to show football in Russia and allowed fans to watch the matches for no charge.

3. 2012 Loan-For-Grains Contract between the Governments of China and Ukraine

In 2012, the Ukrainian Government entered into a Loan-For-Grains Contract with the China National Complete Engineering Corporation ("CCEC") under which the Chinese Government agreed to provide Ukraine with access to $3 billion in credit lines in exchange for supplies of corn. It was reported that the Export-Import Bank of China ("Eximbank") agreed to lend this money at six-month LIBOR+4.5% over 15 years with a five-year grace period.

The first $1.5-billion tranche of a loan was sent by China's Eximbank to the State Food and Grain Corporation of Ukraine in 2013.

At the time this agreement was reached the Ukrainian Farm Minister Mykola Prysyazhnyuk was quoted as stating that Ukraine expected to supply between 2.0 million to 2.5 million tonnes of maize to China every year to pay off the $3 billion loan.



4. The dispute between SF&G and Lirtavis

In 2012, SF&G entered into a US$ 3 billion 'loan-for-grains' contract, which the Ukrainian Government agreed with the Chinese government, knowing that the maximum transhipment capacity of their own terminals was just around 2 million tonnes per year.

From more or less the commencement of the loan term, China demanded more grain from Ukraine that could be transhipped through State terminals. In 2013, this demand reached such a level that the SF&G was unable to perform its obligations under the loan. SF&G therefore sought use of Ukraine's privately owned TIS terminals to tranship their grain.

In order to secure the transhipment services at privately owned terminals in Odesa region SF&G had to do two things they were unaccustomed to doing:

  1. Pay for the privately owned terminals to tranship their grain; and
  2. Pay a portion of the transhipment costs to foreign companies in the manner of accepted industry practice.

Due to Ukrainian currency restrictions on foreign companies, SF&G were unable to pay for transhipment directly to the foreign company (which was Mr Fedoricsev's logistics company Grain-Trans, which provides informational and commercial support of the transhipment process) and agreed with TIS terminals' owner, Mr Fedoricsev, that they would pay the part of transhipment costs to the foreign company once the restrictions are lifted.

To facilitate the deal, SF&G secured their obligation to pay for transhipment with the grain to a third company (Lirtavis), which would prepay the transhipment costs to Grain-Trans. It is important to note that Mr Fedoricsev has no commercial or other interest in Lirtavis. He is, however, the owner of the terminals which SF&G desperately required to meet demand for grain exports.

To this day, SF&G has not paid the balance of transhipment costs to Grain-Trans, so Lirtavis has lawfully withheld part-payment of the grain to cover this expense.

5. National Anti-Corruption Bureau of Ukraine (NABU)

The National Anti-Corruption Bureau of Ukraine (NABU) is a Ukrainian law enforcement agency founded in October 2014 which investigates corruption in Ukraine and prepares cases for prosecution. NABU has investigatory powers although it cannot indict suspects directly and must pass any evidence of corruption over to the Prosecutor General of Ukraine.

NABU was created at the request of the International Monetary Fund and the European Commission in return for the relaxation of visa restrictions between Ukraine and the European Union. NABU's funding by the Ukrainian Government is mandated under US and European Union aid programs.

NABU recently received funding from the UK Department for International Development (DFID) as part of the Good Governance Fund for Eastern Europe and the Western Balkans.

The NABU's first 70 detectives only started work on 1 October 2015 and NABU has already been the subject of allegations of corruption and ineffectiveness.

The Ukrainian Prosecutor General's office has strongly criticised the bureau's impartiality and President Poroshenko is currently trying to appoint his choice to be the independent auditor to NABU, despite the Ukrainian Parliament's backing a different candidate.

In February 2017, the Head of the EU Delegation to Ukraine Hugues Mingarelli expressed concern about proposed amendments to the laws governing NABU and noted the EU Delegation was 'alarmed' at the state of anti-corruption efforts in Ukraine.