The Spoils of Russia’s Trash Reforms Go to the Well-Connected

As a teenager during the Second World War, Mikhail Gorelikov joined a partisan detachment that fought the German Wehrmacht in the forests of occupied Belarus. After the war, he worked all over the Soviet Union: in far northern Karelia, in the Siberian city of Krasnoyarsk, and in the gold and uranium mines of Central Asia.

Forty years ago, he settled down to what he thought would be a quiet life in a cozy wooden house near the town of Alexandrov, about two hours northeast of Moscow. The tiny home is furnished with little more than a stove and bed, its walls decorated with icons of saints and holy men.

But last year, private garbage trucks started bringing mountains of trash from Moscow and dumping it in a small nearby landfill, which has ballooned to the size of a multi-story building. An overpowering stench now hangs over the entire city. And 90-year-old Gorelikov, whom locals affectionately call “Grandpa Misha,” is back to a life on the front lines.

After multiple demonstrations proved ineffective, a group of angry locals set up an informal checkpoint at the entrance of the landfill. Drinking hot tea on cold nights and sustaining themselves with supplies brought by supporters, they check the documents of each arriving garbage truck so they can turn back any coming from Moscow. Grandpa Misha comes to stand guard there almost every day. The short, hardy old man has become a celebrated local symbol of resistance.

Members of the “people’s patrol” man their checkpoint. They all named the same grievances: An unbearable stench, fear of growing cancer rates, and the dismissive attitudes of the authorities. At times, they said, emissions from the landfill make it impossible to breathe. Credit: Georgy Malets/IStories

“All the villages around this landfill, the city is nearby, there’s nothing to breathe,” he exclaimed at a recent protest, drawing enthusiastic applause from hundreds of his fellow Alexandrovites. “There’s no air. The water is also poisoned. It used to be beautiful, crystal clear water. And now you can’t drink it. Everyone buys water in bottles … As soon as spring starts, a stream of rats goes into these villages. It’s unbearable.”

Alexandrov is just one hotspot of Russia’s anti-landfill movement, which has flared up across the country in recent years. In 2017, President Vladimir Putin ordered the closure of Moscow’s largest landfill, Kuchino, setting off a surge of private operators trucking trash into nearby regions. The government enacted laws meant to close many of Russia’s old landfills and to introduce modern incineration and recycling technologies.

Each of the country’s regions was divided into “waste management zones,” and companies were invited to bid on tenders to handle waste in each zone. The winning companies received 10- to 15-year contracts, which since 2019 have been paid through a new “waste removal” line item on local citizens’ utility bills. These payments have grown significantly in some regions. The result has been an outbreak of angry protests in a country where public demonstrations that go against Moscow’s wishes are relatively rare.

Mikhail Gorelikov attends the Alexandrov protest. He later spoke from the stage. “Let them breathe the air!” he said of the authorities. “God gave them eyes, and they don’t see. He gave them ears, and they don’t hear. How can we get rid of them?” The crowd shouted and applauded in approval. Credit: Georgy Malets/IStories

Grandpa Misha says he hopes the protests will catch the attention of Putin, whom he has considered sending a strongly worded letter complaining about the landfill near his house.

“It should help, if you write the president!” he said after one particularly well-attended anti-garbage protest. “There were so many people today! Thousands of people! Does he not have any brains at all? I’m not even talking about a conscience.”

But what Grandpa Misha didn’t know is that the landfill that fills his house with fumes, and the company that piles it with mountains of garbage from Moscow, are both owned by a man known to represent the interests of Arkady Rotenberg, an oligarch who has prospered due to his close friendship with Putin.

IStories, OCCRP’s Russian member center, learned this as part of a year-long investigation into the bidding process through which the regional waste operators were selected. In multiple cases, reporters found, these companies’ beneficiaries are connected to the president’s friends and associates. To obscure these connections, the companies belong to offshore structures that can be directly traced only to proxies in faraway countries.

Elsewhere in the Moscow region, a company that operates a controversial incinerator is linked to Sergei Chemezov, another old Putin friend who heads Rostec, a major state technology conglomerate. Other winners of incineration tenders — many of which were competitive only on paper — are also linked to Chemezov’s company.

As a whole, IStories analyzed waste management tenders that, over the next 10-15 years, are worth over 2 trillion rubles ($28 billion). The four largest operators in the country are all associated with Putin or other senior officials:

The IStories investigation has also yielded evidence of dodgy waste contracts that have benefitted regional authorities all across the country, and led to higher waste disposal fees for ordinary citizens. These stories (see box) are available in Russian.

🔗Regional Waste Stories

Hiding in Gibraltar

The land under the Alexandrov landfill, which is state property, is being rented by a company called EkoLine-Vladimir. The landfill itself is operated by another company called Ekoresource.

Both belong to EkoLine, a company registered in Moscow that operates a waste sorting facility on a large thoroughfare in the city’s north. This address is also listed as the origin point of the trucks being stopped by the “people’s patrol” volunteers, they said.

Moscow’s official waste management plan confirms that trash from the capital’s northern and central districts must first be sorted at the EkoLine facility and then sent for disposal to “facilities in the Vladimir region.”

🔗Conflicting Plans

When the protests against the Alexandrov landfill first started, the governor of the Vladimir region, Vladimir Sipyagin, did not acknowledge that waste from Moscow was being brought in at all.

Only when the “people’s patrol” began did he decide to protect people’s interests in court. The city’s prosecutors filed a lawsuit against the companies that operate the landfill.

Though the waste management plan for the Moscow region specifically calls for waste from four of the capital’s districts to be sent to the Vladimir region, the local plan does not allow for waste to be brought in from the outside.

On this basis, the local authorities won their lawsuit at the end of May. Meanwhile, the “people’s patrol” is still manning the checkpoint in fear that trucks from Moscow will return.

According to public procurement data, EkoLine has a 15-year contract to transport waste out of Moscow’s northern and central districts. The company’s owners earn money every step of the way a piece of garbage takes from a Moscow trash container to its disposal 500 meters from Grandpa Misha’s house.

The EkoLine group is among the top three beneficiaries of Russia’s waste reforms. Companies in the group have received waste management contracts in several districts in the Moscow region, worth more than 88 billion rubles ($1.2 billion).

EkoLine’s owners are not disclosed in any public records. The company has a complex ownership structure involving several offshore firms that stretch from Russia to Hong Kong, Gibraltar, and New Zealand.

Following these links, reporters found that the majority owner of this entire holding is a U.K. citizen named Mark Omelnitski.

That name won’t mean much to residents of Alexandrov, but it is well known to journalists. In the Panama Papers, an archive of leaked documents from thousands of offshore firms, Omelnitski was listed as the nominal director of at least three offshore companies that once belonged to Arkady Rotenberg and his son Igor.

🔗Why a Nominal Director?

For those seeking to keep their wealth unknown, one of the main advantages of establishing a company in an offshore jurisdiction is the ability to hide behind a proxy — a lawyer, an accountant, or a trusted but little-known associate — as the company’s owner or director. Some people, including professionals in the offshore business services industry, register as owners of hundreds or even thousands of companies. But in other cases, a particular proxy might serve only a few companies linked to a specific business interest or group of people. Reporters who manage to gain access to these internal documents can piece together these secretive networks to expose hidden connections of wealth and power.

Arkady Rotenberg is one of Vladimir Putin’s closest and oldest friends. In the 20 years since his old judo sparring partner ascended to power in Russia, Rotenberg has become one of Russia’s wealthiest men thanks to profitable deals with the government. Companies that belong to him and his son, Igor, collect fees from long-haul truckers, receive lucrative contracts from the state oil giant Gazprom, and made billions building Olympic facilities in Sochi and a new bridge to the occupied peninsula of Crimea.

This March, President Putin awards Arkady Rotenberg a “Russian Hero of Labor” award for his company’s construction of a bridge to occupied Crimea. Credit: Russian Look Ltd. / Alamy Stock Photo

No connection between the Rotenbergs and one of the country’s largest waste disposal conglomerates has ever been reported, and the family has not been known to have any connection to the waste disposal business.

Aside from Omelnitski, there are other facts in support of this connection. Among the chain of offshore firms in EkoLine’s corporate structure is a Gibraltar company called MP Enterprises. A 2016 document from the Gibraltar corporate register listed a man from Moscow named Dmitry Protsenko as this company’s director. The document describes Protsenko as the head of the legal department of NPV Engineering, a company sanctioned by the United States that belongs to Arkady Rotenberg’s son, Igor.

In addition, an official within the Russian government who is in charge of the country’s waste reforms had an immediate answer to the question of who is really behind EkoLine: “The Rotors.” This is a nickname for the Rotenberg family used by well-connected Russians.

The Rotenbergs do not themselves appear in the corporate structure of any EkoLine company, and a representative of Arkady Rotenberg denied that anybody from the family has any connection to EkoLine. The company itself made no response to reporters’ questions.

The EkoLine group, which operates the controversial Alexandrov landfill, is connected to the Rotenberg family though two men known to represent their interests in other companies. Credit: Edin Pasovic/OCCRP

“The Dirtiest Incinerator in Europe”

Vladimir Silin, 79, is the head of the tiny village of Svistyagino, to the southeast of Moscow. Only when the “people’s patrol” began did he decide to protect the interests of his region’s citizens in court.

He’s seen plenty of action elsewhere, too. Now in retirement, he’s sunk his savings into a house on his property.

“I put in 20 monthly salaries after leaving the armed forces,” he says. “I put in all my Chernobyl earnings. I put in my Antarctic money … I was in Antarctica three times. Once I wintered there for a year and a half.”

Vladimir Silin shows reporters his property. Credit: Georgy Malets/IStories

Now, Silin is at a loss. Less than a kilometer from his house, in a village that has no more than two dozen residents, the largest waste incineration plant in Russia is being built. A construction crane and the frame of the future furnace are clearly visible from his property.

Local residents learned about the construction plans in 2016. Initially, the facility, which can process 700,000 tons of garbage a year, was going to be built near the city of Voskresensk. But after a spirited local protest, officials decided to move the plant. Now, the organizer of that protest, Alexei Kholkin, has come to Svistyagino to help locals there fight the construction of the same facility.

The activists have received multiple threats from local police and from unknown men, and Kholkin has been arrested twice. Silin said that one of their associates from a neighboring village had grenades planted on him during a search. A criminal case was launched, but there have been no charges yet.

Aside from holding public protests, the activists have tried to get the developer, a company called AGK-1, to disclose project documentation related to the incinerator, so that they can understand whether it presents a health and safety risk.

The company refused, and it took two years of wrangling in court before they finally received the documents at the end of last year. After having them analyzed by experts, they held a press conference in March to publish the first results.

According to the analysis, the Svistyagino facility will emit about 2,500 tons of pollutants into the atmosphere per year, equivalent to the emissions of about 500 automobiles.

Studies in Italy and Spain have shown that people who live near waste incinerators in those countries have a higher risk of dying of various cancers. But Russian incineration plants are far worse, experts said.

“The emissions of one of our facilities is 30 times greater than the emissions from the most modern Swiss facility [and is] … equivalent to the emissions of all of Switzerland,” said Valery Sosnovtsev, a physicist at the Moscow Engineering Physics Institute who studied the documentation for the Svistyagino incinerator, at a press conference. He predicted that the first cases of cancer caused by the plant would appear within five years.

“In terms of emissions, this turns out to be the dirtiest incinerator in Europe,” said Maxim Porokhov, an environmental specialist for the All-Russia People’s Front, a civic movement led by Putin.

This March, the Russian Academy of Sciences issued its own stark evaluation of Russian waste incinerators: “The condition for burning trash without preliminary sorting … in the circumstances of our country are unacceptable.”

The village of Svistyagino. Credit: Georgy Malets/IStories

“No Other Solution Exists”

A very different evaluation of the performance of Russian incinerators was offered by the head of Rostec, the state technology and defense conglomerate that has helped build and promote them.

Those under construction in Russia are “the highest quality [and] produce minimal emissions. On the level of exhaust from modern automobiles,” Chemezov told Kommersant in a 2017 interview.

In this and other public interviews, Chemezov has stressed the urgency of quickly establishing new incinerators in Russia, especially around Moscow, to end the practice of piling waste in landfills. “Only about 10 percent [of trash] is incinerated and recycled [in Russia],” he said. “The rest is buried — on this metric we’re somewhere on the level of African countries.”

Incinerators, he said, are the only option. “No other solution exists. No one anywhere in the world has thought of anything else.”

But he might have other reasons to tout trash incineration. Reporters found that the beneficiaries of the company behind the Svistyagino incinerator are close to Chemezov.

The future incinerator is visible not far from Silin’s property in Svistyagino. Credit: Georgy Malets/IStories

Though Rostec owns 7.3 percent of AGK-1, a much larger share of the company, 35 percent, is held by two men from Chemezov’s inner circle: Sergei Skvortsov and Andrei Shipelov.

Skvortsov joined Rostec as Managing Director for Investments in 2013 and was later appointed one of the conglomerate’s deputy directors. His wife, Yulia Skvortsova, has been described as a close friend of the Chemezov family.

Three sources within the waste industry — a government official, a former law enforcement officer, and a Chemezov acquaintance — told IStories reporters that Shipelov represents the interests of Chemezov’s wife.

In an extensive interview with IStories, Shipelov acknowledged that he knew Chemezov, but denied that the senior official had any hidden interest in RT-Invest, the company that owns AGK-1, other than through his official position as the head of Rostec. He said he himself had invited Skvortsov, the Chemezov family friend, to partner in the company with him.

“When [Skvortsov] had left the state corporation, I invited him to make an investment,” he said. “We needed capital … I asked him not only to invest his own money, but to try to attract additional investors. … Many international investors see Sergei [Skvortsov] as one of [the country’s] most serious professionals.”

Shipelov said that his “philosophy,” and that of his company, was that all of Russia’s landfills would someday be closed and replaced by recycling plants and incinerators. He described the protests against his incinerators as being instigated by people who had vested interests in landfills.

“We know very well who’s behind these protests. Of course, there were people who didn’t trust us. But there were also people who intentionally worked to lengthen the construction time of these complexes, or didn’t build them at all. They generously funded these protests. These are people who own the old landfills.”

Shipelov said his incinerators would pose no health risks, explaining that the opponents of his facilities were incorrectly interpreting the numbers in the official documents. These, he said, indicated the maximum levels of harmful emissions, not the actual levels that the functioning plants would create.

Sergei Chemezov did not respond to requests for comment sent to Rostec. But the company’s press office wrote that the company uses advanced technology that is in use elsewhere in the world, that the project documentation for its five plants “passed all levels of mandatory state expertise,” six studies by public organizations, and that “all projects received positive conclusions.” The company also refuted the assumption that Sergei Skvortsov may represent the interests of the Chemezov family in RT-Invest. A spokesman for the state corporation said that, before moving to Rostec, Skvortsov was involved in attracting investments to the largest Russian companies, and his investments in RT-Invest represented his own money.

At the end of last year, Putin signed a law that raised the priority of incineration as a method of waste disposal in Russia. Thanks in part to this law, people in Sergei Chemezov’s orbit could eventually build waste incinerators not only in Svistyagino, but in other Russian regions. So far five facilities are under construction, four in the Moscow region and one in Tatarstan. But in mid-May, the government corporations Rosatom, Rostec, and VEB.RF signed an agreement to build 25 more such facilities “in Russia’s main tourist centers and agglomerations with populations of over 500,000 people.”

No Competition

The involvement of close Chemezov associates in Russia’s waste processing industry doesn’t end with incinerators.

On April 19, 2018, the environmental ministry of the Moscow region announced the results of a tender to select a waste management operator for an area to the north of the city that includes the historic town of Sergiev Posad.

The winning company, RASTRIM-MO, RASTRIM-MO now goes by the name “Sergiev-Posad Regional Operator” received a 10-year contract worth 45 billion rubles ($650 million) to remove and process waste from several towns in the region.

On first glance, the procedure appeared competitive, since another company called Spetstrans also submitted a bid. But according to publicly available tender documents, Spetstrans did not attach a single piece of legal documentation to its application.

Since this documentation is mandatory, Spetstrans was excluded from the bidding process and RASTRIM-MO won the contract. In fact, it was a “competition” in name only: Andrei Shipelov, the Chemezov associate, was a co-owner of both firms.

In two other cases on that very same day, companies partially owned by Shipelov won waste removal contracts in two other waste management zones in the Moscow region.

Asked about these arrangements, Shipelov said that his goal was not to create a false sense of competition, but to gain more control over the process. “We often put forward two or three companies for the same tender. It depends on which company will receive financing from the bank … When you submit your application, you simultaneously negotiate with the banks … [If there are other competitors] I can instruct one of my companies to lower the price.”

Nevertheless, in three tenders won by Shipelov’s companies in the Moscow region, the final prices were just 0.17 percent lower than the maximum.

And it’s not just the Moscow region. Of 253 regional waste management tenders analyzed by journalists, 210, or 83 percent, took place with no competition at all, according to reporters’ calculations.

Back in Svistyagino, as the giant new incinerator rises not far from the Chernobyl survivor’s modest home, there appears to be little hope that ordinary Russian citizens won’t be the losers.

With their appeals to the president having achieved nothing, they had nothing left to do but reach out to an even higher power: the Almighty.

“You know, the construction has begun,” says Silin, the village head. “Our appeals to the president were pointless. So there, at the edge of the village, we built a three-meter-tall cross. We put it there, lit it up. Maybe God will help us stop the construction.”

The villagers’ cross in Svistyagino. Credit: Georgy Malets/IStories

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