Manual factory: Dagestan Secretary of State suspected of illegal export of petroleum products

Dagestan's Secretary of State Magomed-Sultan Magomedov, who was attacked by security forces on June 25, is suspected of illegally exporting petroleum products abroad, a law enforcement source told Izvestia. According to him, the official's enterprises exported processed raw materials at a zero tax rate, although such raw materials are excisable products. Magomedov may also be charged with the illegal privatization of the largest oil refinery in the republic, Dagnefteprodukt, the source said. What the Secretary of State is accused of and what punishment he faces is in the Izvestia article.

What was the Dagestan Secretary of State detained for?

Magomed-Sultan Magomedov, Dagestan's Secretary of State and founder of the Anzhi football club, who was detained on June 25, is suspected of oil export fraud, a law enforcement source told Izvestia.

The criminal case in which the official was detained is related to the oil refinery of Dagnotech LLC, affiliated with Magomedov. An inspection conducted in 2023 showed that the processed raw materials were exported at a zero tax rate, although they were excisable products.

The beneficiaries of the plant, according to the SPARK database, are the children of the Secretary of State of Dagestan (a son and three daughters): Magomed, Khapisat, Galimat and Savdat. They own the plant through SME Holding LLC and its subsidiary Kaspetrolservice LLC, which were created by their father.

According to the investigation, oil products were exported via the Caspian Sea to Azerbaijan. The damage to the republican budget amounted to about 2 billion rubles.

The plant with the ability to process more than 1 million tons of oil per year was commissioned in 2016 on the territory of JSC Dagnefteprodukt. The company, with an area of 26 hectares, is located on the shores of the Caspian Sea and has more than 70 different facilities to its credit — gas stations, fuel depots, outbuildings.

The claims of the security forces are also related to the illegal privatization of this once-largest state facility in the republic. The privatization of the plant meant that the republic's budget would receive huge tax revenues.

"However, the opposite actually happened," the source noted.

According to the SPARK database, in 2024, the Dagnotech plant lost 162 million rubles in terms of net profit.

How did the searches go?

On the morning of June 25, security forces surrounded Magomedov's mansion on Gogol Street in Makhachkala — the entrance to the official's house was blocked by special equipment, an Izvestia correspondent reported from the scene.

— Magomedov's property is now "under increased control." Security forces are working all over the republic at once — apartments, offices, and land plots have been cordoned off," he said.

According to the source, searches were also conducted at 50 addresses of relatives of the Secretary of State. Investigative measures are being carried out throughout the republic, as well as in other regions of the country where the Magomedov clan has property, including in Moscow and St. Petersburg.

The press service of the head of Dagestan called the actions of the security forces in accordance with the law.

"The republic's leadership is in close cooperation with law enforcement agencies to ensure law and order in the region. The investigative authorities are provided with comprehensive assistance in conducting objective investigations," the local authorities said.

How the scheme worked

The situation with the detention of Dagestan's Secretary of State Magomed-Sultan Magomedov fits into the logic of large-scale anti-corruption campaigns, which are currently being actively implemented in republics with a high share of state ownership and weak transparency of privatization processes, believes Alexey Gavrishev, head of AVG Legal.

— The essence of the situation is as follows: under the guise of processed petroleum products (for example, oils, solvents, secondary products), products were exported that actually fall under the category of excisable goods — that is, gasoline, diesel fuel, kerosene and others, — the lawyer explained. — In this case, the exporter does not pay the excise tax, which can be very significant, and gets the right to export at a zero VAT rate.

This rate, Alexey Gavrishev added, allows you to claim a deduction from the input VAT and even refund VAT from the budget.

— If the investigation finds that excisable products were actually exported as part of the "processing", the unpaid excise tax may be charged, and the participants in the scheme may be prosecuted. This may expand the qualification of illegal privatization to tax and smuggling trains," he added.

If it is proved that the company was withdrawn from state ownership through fictitious transactions involving affiliated structures, front persons or "subsidiaries," lawsuits for the return of property and confiscation of assets can also be expected, the lawyer said.

Denis Sidorenkov, Project Manager of the Taxology Customs Practice, noted that conceptually, the export of oil and petroleum products does not differ from the export of other goods.

"The exporter needs to submit a customs declaration containing reliable information about the exported goods and pay customs duties," he said. — Sometimes there is confusion with the EAEU HS code (Commodity Nomenclature of foreign Economic Activity of the Eurasian Economic Union. — Ed.), on which customs payments depend, occurs even among bona fide exporters, since the rules for determining the code in headings 2709-2710 are quite complex and require the establishment of physico-chemical characteristics of each batch of exported goods.

What threatens the official

The state has strengthened control over strategic assets and is seeking to eliminate the consequences of opaque or illegal transactions in the past, when millions of assets were privatized for pennies, especially in areas such as energy and infrastructure, Irina Fast, adviser to the Federal Chamber of Lawyers, told Izvestia.

— In addition, after the recent decision of the Constitutional Court of the Russian Federation, the limitation periods in cases of privatization are now counted not from the moment of the transaction, but from the moment of completion of the prosecutor's check, — said the lawyer. — This made it possible to open cases even for episodes that occurred decades ago, if violations of the law are detected.

Oil and a number of petroleum products are included in the list of strategically important goods, for the illegal export of which criminal liability is established under Parts 1 and 3 of art. 226.1 of the Criminal Code of the Russian Federation — on the smuggling of raw materials and various materials, Denis Sidorenkov recalled.

"If a sign of an organized group is established, then the possible punishment is imprisonment for a term of seven to 12 years with a fine of up to 2 million rubles," he said.

If Magomed-Sultan Magomedov's guilt is proven, he may face criminal liability under articles on abuse of office, abuse of power, and money laundering.

"The sanctions include imprisonment for up to ten years, heavy fines and confiscation of property," Irina Fast said. — If more serious organized criminal groups are incriminated, the punishment can be up to 20 years.

In addition, she added, civil liability is possible - compensation for damage to the state, as well as a ban on holding certain positions in the future.

The issue of arrest and the choice of a preventive measure will be resolved within 48 hours from the moment of detention.