Many workers are at risk of losing their jobs: are entrepreneurs playing tricks or officials being too tough?

Lifosa, Photo by DELFI

Representatives of factory workers are preparing a protest against the Government and other institutions that are not doing enough to save people’s jobs and incomes, Martynas Žilionis is writing at the news portal.

At the same time, the Mayor of Kėdainiai regrets that there is little the municipality can do about it.

Sanctions target Russian billionaire

“Lifosa is owned by the Swiss-based EuroChem Group AG, the ultimate beneficiary of which is the Russian billionaire Andrey Melnichenko. He is subject to international sanctions for his links to the Kremlin regime, which continues the war in Ukraine.

At the beginning of July, EuroChem announced its intention to initiate a process of temporary conservation of the Lifosa plant in Lithuania, for which the Ministry of Finance has appointed an interim administrator.

According to the announcement, the fertiliser plant will be halted as a result of the failure to find a solution that would allow the company to operate efficiently with access to the supply and distribution chain of the raw materials necessary for production, and the company will be forced to start the process of temporary conservation of the plant from October.

“This puts at risk the loss of most of the jobs created at the plant. This follows more than a year of supply chain disruptions and raw material shortages due to sanctions imposed on Lifosa by the Lithuanian Government and the appointment of an interim administrator,” the factory representatives said.

The sanctions, which cut the company off from its sales and supply chain, created an impossible situation, resulting in a shortage of raw materials, production stoppages and limited access to markets and financial resources.

“Over the last 15 months, we have been in dialogue with the Lithuanian authorities to find a mutually acceptable agreement that would allow Lifosa to continue to operate efficiently while ensuring full compliance with EU sanctions.

Unfortunately, it is impossible to continue operating sustainably in an environment with so many restrictions. As a responsible employer, we need to make some important decisions now,” quoted Samir Brikho, Chairman of the Board of Directors and Chief Executive Officer of EuroChem Group AG, in the statement.

According to data from Sodra, Lifosa currently has 907 employees earning an average of €2.7 thousand before taxes. If they were to be laid off, many people in Kėdainiai would be left without a regular income for a longer or shorter period. If they do not find a job, they will also have to be paid unemployment benefits.

They deny that their activities are restricted

In its financial statements submitted to the Centre of Registers, Lifosa reports revenues of €274 million last year (over €526 million in 2021) and a net profit of over €30 million (over €120 million in 2021).

The company forecasts that this year it will continue to have limited availability of raw materials and sales opportunities and will therefore have minimal production capacity.

However, the Financial Crimes Investigation Service (FICIS), which is in charge of implementing the sanctions, denies that they are limiting the business of the Kėdainiai plant.

“We would like to inform you that Lifosa’s business activities have not been restricted and that the institution of provisional administrator provided for in the Law on International Sanctions allows the company to continue its activities in compliance with and in the implementation of the sanctions,” commented Modesta Zdanauskaitė, spokesperson of the FNTT.

According to her, the administrator ensures that the company’s transactions do not directly or indirectly benefit the sanctioned entities (i.e. the indirect beneficiary A. Melnichenko), as well as the company’s compliance with other international sanctions, by choosing appropriate measures and tools to manage the risk of sanctions violations.

“The company’s governing bodies continue to perform their functions and take decisions, but the relevant decisions of the company’s General Meeting of Shareholders, the Board of Directors and the Chief Executive Officer continue to require the prior written approval of the interim administrator,” explained Ms Zdanauskaitė.

When asked why a similar fertiliser plant belonging to the same group in Belgium is operating but may be shut down in Lithuania, she replied as follows:

“We do not comment on the decisions taken by the Belgian national competent authorities responsible for implementing the sanctions, and we ask you to contact them directly if necessary.”

In Belgium, agreement with the authorities?

According to Indre Mažeikienė, Public Relations Officer at Lifosa, EuroChem Antwerpen NV, a company operating in Belgium and owned by EuroChem, is acting in accordance with an agreement reached with the Belgian competent authorities.

“The Belgian Ministry of Finance has decided that the company will not be subject to any restrictions on its activities, assets or funds, provided that it complies with sanctions compliance laws. The company has undertaken to ensure that no funds or economic resources are allocated or used for the benefit of sanctioned persons. 

To ensure compliance with the commitments listed above, the company’s activities are regularly audited by an independent auditor licensed in the EU to comply with the sanctions compliance policy,” commented a company spokesperson.

She recalled that both EuroChem Antwerpen NV and Lifosa are manufacturing companies.

“In order to be profitable and uninterrupted, they need to be part of a larger supply chain of raw materials and sales of products. This ensures a stable supply of raw materials and a revenue stream to support uninterrupted production.

As recent years have shown, without access to quality raw materials at competitive prices and cut off from a global network of customers, Lifosa has suffered significant losses and is no longer able to continue its operations in such circumstances,” explained Ms Mažeikienė.

Municipality writes letters to higher-ups

The Mayor of Kėdainiai, Valentinas Tamulis, is sorry that the closure of the company could put many people in the district out of work.

“The wish of the Kėdainiai District Municipality leaders is to see all companies in the district working. In this case, they would like to see the company working and adding value without being sanctioned,” commented the mayor.

He recalled that Lifosa employs close to 1 000 people. At the same time, the population of Kėdainiai itself is slightly more than 23 000 people.

“The suspension of the plant will affect these people, their families and the companies that service the plant. This is not a small part of our local community. It is very unfortunate that the people of Lifosa are living in uncertainty and tension,” said Mr Tamulis regretfully.

The Mayor of Kėdainiai admitted that the municipality does not have a plan of action in case most of the workers at the fertiliser plant are actually laid off.

“The municipality does not have the leverage to influence the operation of the plant, but it has the desire to keep the plant running in compliance with the requirements. Letters have been sent to government leaders and ministries to seek solutions that will allow Lifosa to overcome the challenges and continue its operations,” explained Mr Tamulis.

Workers plan to protest against the Government

On Wednesday, the Lithuanian trade union Solidarumas, together with the Independent Trade Union of Lifosa Workers, is organising a rally in front of the Government. They will inform the public about the “sluggish efforts of the government” to prevent redundancies, job losses and the preservation of budget revenues.

“We are outraged by the Government’s indifference and ineffectiveness in avoiding taking responsibility and assessing the huge losses that Lithuania will suffer if one of the largest Lithuanian companies is shut down. <…>

“We demand that the Ministry of Foreign Affairs, the Ministry of Finance, the Ministry of Economy and Innovation, and the Ministry of Social Security and Labour, within the limits of their competencies, take all diplomatic, political and economic measures to remove the excessive obstacles that have prevented the company from continuing its activities,” says Kristina Krupavičienė, Chairwoman of Solidarity.

The workers’ representatives are demanding that the Government make efforts to find solutions that will allow the company to operate at full capacity and preserve jobs and tax revenues for the national budget.

On Monday, Prime Minister Ingrida Šimonytė met with Lifosa trade union leaders – Kęstutis Šlama, head of the company’s employees’ trade union, and Vitalijus Varnas, chairman of the company’s independent trade union.

According to the Government’s announcement, her interest lies in the successful continuation of the company’s operations and the preservation of jobs. This is why the interim manager was appointed – otherwise, the company would not have been able to continue its operations:

“However, the State or the interim administrator does not manage the company, which is, as before, the responsibility of its direct managers.”

The interim administrator’s function is to verify transactions from a legal point of view to ensure that the beneficiary is not a person with direct links to the company, which is subject to international sanctions, the Prime Minister said.

Following the appointment of the interim administrator, the management of the company and its commercial activities remain the responsibility of Lifosa’s governing bodies, while the company remains responsible for conducting its activities most cost-effectively and in the best interest of its employees. 

“Accordingly, the decision to initiate the process of temporary preservation of the plant, which was announced in early July, was taken solely by the company’s own management bodies,” the Government states.

The situation in the raw material markets and the disruption in the sales chain internationally following the Russian military invasion of Ukraine are also beyond the control of the public authorities or the interim administrator.

According to the Government, Lifosa has submitted proposals for further action to the interim administrator, who is currently analysing them from the point of view of sanctions control.

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