The last payment was made as recently as March 2024, and it will no longer be possible to recover these payments. In addition, the company is also applying for funding from the Recovery Fund project, even though its owners' ties with the Kremlin are already public knowledge, De Facto reported.
Andrey Bokarev and Iskander Makhmudov, olgarchs closely linked to the Kremlin and on the U.S. sanctions list, are the most frequently mentioned Russian oligarchs behind RER. However, their other Russian business partners – Dmitry Komisarov and Kiril Lipa – are also at the end of the chain of companies making the ultimate beneficiaries.
According to De Facto's research, in the middle of 2022 – after the start of Russia's war in Ukraine – Bokarev and Makhmudov owned about 18% of RER each, Komisarov about 20%, and Lipa about 16%. The quartet is also related to Transmashholding, a Russian wagon-building company included in U.S. sanctions lists, which was previously listed as a partner of RER on the RER website and whose factory in Latvia produced parts.
Kirill Lipa, as the general director of "Transmashholding", reported to Vladimir Putin at the same table last August about how the business was doing, noting, among other things, that there were no losses in the "new situation". For example, he told Putin how he still cooperates with a Hungarian company in the supply of train cars to Egypt.
"We were forced to withdraw from the capital of the Hungarian company, but all the financial and technological ties have been preserved," Lipa said during the meeting.
Meanwhile, their business in Latvia, in the form of RER, receives European money to increase the energy efficiency of the factory and improve the production of electrical equipment for trains.
The Central Finance and Contracts Agency (CFLA), which oversees European fund projects, says that the final payment was made for one project in January, and for the other in March.
It was known that the factory implements fund projects in general, and it has even been the subject of a De Facto report before. However, at that time the payments were not yet completed and another round of European sanctions was taking place, the outcome of which could affect the payment of money, if the actual owners of the factory would also be included in the sanctions of the European Union. But it didn't happen.
"The agency, of course, uses information about sanctions when evaluating, and if any of the persons or companies were sanctioned [by the EU], then of course cooperation and payments would not take place. But currently, the regulatory acts do not provide for another way to evaluate companies that have some known connection with Russia. Therefore, the agency operates within the framework of regulatory acts and cannot make any contrary decisions, of course," explained CFLA deputy director Gundega Šulca.
However, this is not all that the company could receive from European funding. RER also participates in a study co-financed by the Recovery Fund – also European money. In it, RER claims 156,500 euros. Also, unlike previous projects that began before the full-scale Russian invasion of Ukraine, this one began half a year after.
Participants are selected by the Energy and Transport Competence Center. There, they checked the information about the company and again found nothing in the official registers that hinders the cooperation.
Māris Zubačs, a member of the board of the Center, explained: "We are no longer the judges to understand what names and with whom they cooperate in Russia and what is their weight."
In Latvian registers, none of the representatives of Russia can be clearly seen as the real beneficiaries, because they only need to be declared from a 25% ownership level. Although Bokarev and Makhmudov are under U.S. sanctions, the importance of this fact extends well beyond the borders of the U.S.
De Facto attempted to get comments on the matter from Finance Minister Arvils Ašeradens (New Unity), but he was not available.
Instead, Armands Eberhards, Deputy State Secretary of the Ministry of Finance for European Funds, stated: "If decisions are made to go in this direction [changing ownership declaration requiements], then, of course, regulation and practical implementation will follow."
Prime Minister Evika Siliņa (New Unity), commenting on this situation, stated that economic ties with Russia are severable, and she expects that the possible shortcomings of the existing regulation and sanctions policy will be evaluated by the responsible institutions and, if necessary, there will be proposals for change.
Meanwhile, the export of goods produced by RER to Russia has continued. A number of goods produced by RER have gradually been subject to sanctions. For example, from 2024, transformers and other goods may not be sent to Russia at all. According to De Facto, export data suggest there is a noticeable trend that RER goods destined for Russia are being delivered via Turkey.
At the same time, on its corporate website RER proclaims: "RER presents a series of new projects developed for Ukrainian partners, aimed at modernizing the transport industry," though few further details are provided.
You can see RER's own promotional video below.
