INVESTIGATION: Gas Station Owners: Cartel Agreements in an Uncompetitive Market

INVESTIGATION: Gas Station Owners: Cartel Agreements in an Uncompetitive Market
Pumping gas at gas pump. Closeup of man pumping gasoline fuel in car at gas station.
26 July 2021 | 06:21

Over the past two years, the six largest players in the oil market in Moldova have replaced the competitive process with a friendly form of control, have dictated prices, and have sold the same quality of petrol and diesel. Currently, they risk a record fine for cartel agreements.

The trickery of the oil giants, which control about 80 percent of the market, culminated in an explosion in fuel prices, at times gas stations increasing the gasoline and diesel prices three times during one week. The oilmen arranged price raises beginning with December 2020, agreeing that, regardless of the situation, the prices will not change before the presidential elections in November.

Amid the turmoil caused by the oilmen, the parliamentarians decided that the fuel prices should again be established in accordance with the methodology approved by the National Agency for Energy Regulation. As a result, the oil companies retaliated, limiting the sale of fuel to 10 liters per car or stopped sales and complain that they are operating at a loss.

As of December 31, 2020, according to the National Energy Regulatory Agency, 713 oil supply stations were active in Moldova, managed by about 100 companies. Of these, six companies own about 67 percent: Rompetrol Moldova, Lukoil Moldova, Petrom Moldova, Tirex Petrol, Datario (trade name Vento) and Bemol.

According to a report by the Competition Council on the activity of oil companies, over the past two years, six companies have controlled over 82 percent of Moldova’s fuel sales and agreed to set retail prices for gasoline, diesel, and liquefied gas. At least three of these companies are interrelated, buying fuel from each other on a daily basis. Over the past eight months, cartel agreements between the six giants have led to an increase in prices for 95 octane gasoline by almost five lei per liter, and for diesel by almost four lei per liter. ZdG analyzed the profile of the oil market in Moldova and provides details on the owners of gas stations, who monopolized the uncompetitive market.

The Kazakhs, leaders on the Moldovan oil market

Rompetrol Moldova, controlled by KMG International, a group owned by KazMunayGas, the national oil and gas company in Kazakhstan, is the largest supplier of petroleum products in Moldova. The giant has a network of 95 filling stations, which in 2019 generated revenues of over 5,77 billion lei. The KMG International Group entered the Moldovan market in 2002, through the company Rompetrol Moldova, whose general manager at that time was Ion Sturza, businessman and former Prime Minister. Under the management of Askar Zhaparov, the company has become a leader in the oil market in Moldova since 2017, when it registered a turnover of 4,55 billion lei, surpassing Lukoil Moldova, another leader, which in that year reported revenues worth 4,2 billion lei. Although in the 2014-2019 period, Rompetrol Moldova doubled its turnover, from 2,78 billion lei to 5,77 billion lei, the company reports a decrease of over 2.6 percent in net profit, from over 110 million lei in 2015 to about 42 million lei in 2019.

An attempt not to pay customs obligations of over 1 million lei

In April 2012, the Main State Fiscal Inspectorate found that Rompetrol Moldova had been operating without a license for almost two months, for which reason it was fiscally sanctioned with a fine of 69,679 lei, being required to pay into the state budget another 69,679 lei, the gross profit obtained from the activity without a license. The company went to court, but lost the dispute, according to a decision issued on September 25, 2013 by the Supreme Court of Justice.

Rompetrol Moldova sued the South Customs Office, after, the company entered in the records over 164,000 liters of fuel, as “technological losses of petroleum products” in the 2013-2016 period, thus avoiding to pay customs obligations amounting to over 1,14 million lei. The trial lasted for three years, before the Supreme Court of Justice, by a decision of October 23, 2020, obliged the oil company to pay the amount of over 1,14 million lei.

Lukoil Moldova, between the risk of losing the license and the fine, applied for cartel agreements

Lukoil Moldova, the second-largest player in the fuel retail market, is controlled by the Russian oil company Lukoil SA, through the Geneva subsidiary Litasco SA. The company operates three oil bases and a gas terminal, as well as 106 gas stations. The company’s turnover in 2019 amounted to 5,53 billion lei, increasing by over 410 million lei compared to 2018. While Rompetrol Moldova reports a modest profit, Lukoil Moldova increased its profit by more than three times in 2019, ranging from 39 million lei to over 129 million lei. The Russian-controlled company entered the Moldovan oil market in 1995, three years after Moldova declared its independence, and has consistently won tenders with the state. In the first six months of 2021 alone, the oil giant won contracts worth over 78 million lei.

In 2011, seven oil companies, including Lukoil Moldova, were fined 2 million lei on charges of cartel agreements and anti-competitive actions. However, the Supreme Court of Justice saved the oilmen from the penalty. In October 2014, the company was on the verge of being left without a license, after the National Agency for Energy Regulation identified violations in setting prices for liquefied petroleum gas; in the end, however, it only got a warning.

Russia’s friend and Igor Dodon’s instructions

For almost two decades, Lukoil Moldova has been run by Feyruz Isayev, former deputy of the Supreme Soviet of Azerbaijan, with business in the Russian Federation, where he received the Order of Friendship in 2020, for his “great contribution to the development of oil and natural gas industry and many years of conscientious work.” Isayev was part of the Economic Council under the President of Moldova, while Igor Dodon was head of the state and he admitted that the oilmen agreed not to increase fuel prices before the presidential elections last autumn, which they did.

“On February 3, 2021, Feyruz Isayev said during hearings in Parliament that there were agreements on pricing. Moreover, there was an agreement that, starting with July 2020 and until the presidential elections, regardless of the situation, the prices will not change,” the report of the Competition Council runs.

In February 2020, Igor Dodon summoned the leaders of Rompetrol Moldova, Lukoil Moldova, and Petrom Moldova to the Presidency and openly called on them to reduce fuel purchase prices for farmers by 7-8 percent. Later, on the eve of the 2020 presidential election campaign, Dodon boasted on social media of “a working meeting” with the director of Lukoil-Moldova. He promised the farmers 500 million Russian rubles in aid from the Russian Federation to buy diesel from Lukoil Moldova with a “significant reduction of 10-12 percent.” However, the Russians ordered the allocation of only 275 million rubles, money that has not been granted so far.

Petrom Moldova, Vladimir Plahotniuc and Mihai Ghimpu 

Petrom Moldova, the subsidiary of the Austrian group OMV Petrom, completes the ranking of companies that control the oil market. The Romanian citizen Corneliu Cazan Constantinescu has managed the company since February 2018. There is very little information about the man even on the official website of the company. On LinkedIn, a platform for professionals around the world, we learn that Constantinescu began his career in 2003 as a retail coordinator within the OMV Group, and 14 years later he was appointed general manager of Petrom Moldova. Constantinescu also participated in the meeting organized by Igor Dodon at the Presidency in February 2020. Vladimir Plahotniuc, former leader of the Democratic Party of Moldova and a fugitive in the last two years, ran the company in 2001-2010.

Petrom Moldova has a network of 80 gas stations, many of which are leased. Eurosim gas station chain has been one of them managed since 2012 by Mihai Ghimpu, former leader of the Liberal Party. In 2019, the company reported revenues of about 2,10 billion lei, this being the share of 2015-2019. The company’s profit increased from only 5 million lei in 2015 to 36 million lei in 2019, with a decrease of up to about 18 million lei in 2018.

Family business and the boomerang of the “Vento” case

At a great distance from the three oil giants, is Datariu, known under the trade name Vento. The company belongs to the brothers Adrian Borş (60 percent) and Igor Borş (40 percent), who previously held management positions at Tirex Petrol, the latter being the director of the company for 17 years. In March 2018, a criminal case was filed against Igor Borș, the businessman was accused of money laundering, tax evasion, and connections with the controversial businessman Veaceslav Platon. After 12 months of detention, Borș was released because the legislation does not allow a person to be placed in pre-trial detention for more than one year.

Igor Borș previously told ZdG that a raider attack had been attempted on the company and that it was Viorel Morari who linked the case to an alleged connection between Borș and Veaceslav Platon. The businessman said that after he got out of prison he discussed the subject with Vladimir Plahotniuc.

The names of the co-owners of the Vento gas station network can be found in the 38 cases, which the General Prosecutor’s Office announced in June 2020 would be the result of political orders and which led to criminal prosecution and trial of several people. In January 2021, the Prosecutor’s Office charged Viorel Morari, the suspended head of the Anti-Corruption Prosecutor’s Office, in a new case in which he was accused of “abuse of power”, “forgery of public documents”, “illegal detention or arrest” and “knowingly holding an innocent person to criminal responsibility”, actions committed against the co-owners of the Vento gas station network. In July, the criminal investigation was completed, the parties are currently getting acquainted with the evidence accumulated by prosecutors before it is sent to court. Morari denied all charges against him.

Datariu owns a network of 72 gas stations, and in 2019, the company’s profit amounted to 1,12 billion lei, which is almost five times more than in 2015, when it accumulated revenues of about 237 million lei. During this period, the company’s profit increased from 3,000 lei to 12,000 lei.

Alexandru Pînzari’s son, a young businessman in the oil market

Tirex Petrol, founded in 1996 by the Government through a reorganization of the State Production Association for Fuel, closes the top of the largest operators in the oil products market in Moldova. In 2000, the state sold the controlling stake (96 percent) to the German company Mabanaft-Moldova GMBh for 500,000 dollars. At the end of 2019, Tirex Petrol was transferred to the management of Estcon Construct from Ialoveni for about 10 million euros. The only partner of the company was Tatiana Ignat, wife of Alec Ignat, administrator of Tirex Petrol. After the acquisition, Tatiana Ignat got 24.24 percent of the shares of Estcon Construct, while the controlling stake of 75.75 percent belongs to Truck Petrol, where Alec Ignat owns 56 percent of the shares, and the remaining 44 belong to Artiom Pînzari, the son of Alexandru Pînzari, former Minister of Defense.

Romanian diesel, distributed by the company associated with the former minister

In the spring of 2021, the company of Pînzari’s son obtained, following simulated direct negotiations, the contract for storage and distribution of diesel donated by Romania, the company thus earning almost 3 million lei.

Tirex Petrol owns a network of 77 gas stations, and in 2019 its revenues amounted to 1,11 billion lei. The quota of one billion lei has been maintained since 2015. The operator also increased its profit, from 24,000 lei in 2015 to 36,000 lei, with a decrease of up to 10,000 lei in 2017.

The Bemol run by the Azerbaijani has increased the profit by 10 times

Azerbaijani businessman Rafig Aliyev manages Bemol Retail, the sixth oil company that has gambled in the market over the past two years, by setting agreed fuel prices. It was founded by Easeur Holding BV group from the Netherlands, which includes Bemol Refinery, managed by Arcadie Lopotenco, and Bemol Trading, liquidated in November 2019. These two companies, together with Danube Logistics were part of the group that in December 2004, during the communist period, signed with the Government an Investment Agreement regarding the Giurgiulesti Free International Port. In the spring of 2021, after bypassing several companies, the European Bank for Reconstruction and Development bought the Port of Giurgiulești, Moldova’s only access to the sea.

Bemol Retail has a network of 40 gas stations, and in 2019 it had a turnover of 1,27 billion lei. In 2015 alone, the company’s revenues exceeded 1 billion lei, following a decrease of up to 730 million lei in 2017. Bemol Retail reports a 10-fold increase in profit in 2019, from 31 million lei in 2018 to 310 million lei.

Bemol employees – Maia Sandu’s generous sponsors

In the election campaign for the 2020 presidential elections, the budget of Maia Sandu, the candidate of the Action and Solidarity Party, received significant sums from several Bemol employees, including accountants, managers, people from Bemol management, such as Arcadie Lopotenco – executive director and Mariana Solomon – financial director, who transferred 23,800 lei each to the candidate’s budget. Mariana Solomon then told ZdG that she donated as an individual because she supported Maia Sandu.

Oil giants – friends in the market who risk a record fine

Last year, Petrom Moldova provided about 35.6 percent of gasoline imports, and together with Rompetrol Moldova and Lukoil Moldova they provided 97,2 percent of the total amount of imported gasoline, respectively all companies buy fuel from these companies, because Romania is the main and only source of imported gasoline. At the same time, Rompetrol Moldova and Lukoil Moldova provided 75 percent of the total amount of imported diesel, mainly from Romania. In these conditions, the Competition Council found that each of the verified companies had interconnections with the three oil giants during the 2019-2021 period. Thus, the companies bought fuels from each other almost every day or even twice a day, the total cost of transactions amounting to hundreds of millions of lei annually.

The Council also established that the six oil companies communicate with each other and coordinate the periods in which they make price changes and reproach when a gas station does not honor the 2-3 penny agreement. These companies have also set up re-sellers, who own gas stations and then rent them out as well. In this context, the members of the Council propose to fine Rompetrol Moldova, Lukoil Moldova, Petrom Moldova, Tirex Petrol, Datario, and Bemol by two-four percent of turnover.

On April 9, 2021, the Parliament approved the project through which the National Agency for Energy Regulation got back to the experience of 2016-2018 when it set cap prices for fuels every two weeks. Dissatisfied with the decision, the oilmen retaliated by limiting the sale of fuel to 10 liters per car or stopped selling them and complain that they are operating at a loss.

Victor Parlicov: The suspicion of cartel agreements has been in the oil market for decades

Victor Parlicov, an energy expert at the Institute for Development and Social Initiatives Viitorul and former director of the National Agency for Energy Regulation, argues that, although the Competition Council has not yet definitely established the existence of a cartel agreement, this suspicion has been in the oil market for decades. He also says that fuel prices will continue to fluctuate daily.

“This suspicion has been in the air not for a day or two, and some statements of the oilmen, indirectly almost come to confirm this suspicion. The Competition Council is a key institution of a market economy, and if there is no functional institution for this, you write in vain in the Constitution that you will build a market economy. All attempts to remove this market from the Council’s responsibility were nothing more than the perpetuation and aggravation of the situation. Every time intervention was made, the situation became sadder than it used to be. As long as there is the latest methodology approved by the National Agency for Energy Regulation, prices will fluctuate daily depending on Platts quotes and the exchange rate. Whether someone likes it or not or whether the price will go down or increase depends on the evolution of these indicators. However, I am sure that those from the National Agency for Energy Regulation will not risk making mistakes in calculations,” says Victor Parlicov.

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