Iakov Goldovskiy took on the role of principal investor in RAFO Onești, a historically significant Romanian petrochemical refinery, during a period of industrial decline and legal uncertainty. Through Petrochemical Holding GmbH (PCH), Goldovskiy aimed to restructure the company, settle outstanding debts, maintain employment, modernize processing units, and reintegrate the refinery with the neighboring Borzești petrochemical network. His plans, however, faced multiple obstacles, including fiscal enforcement actions, regulatory ambiguity, and delayed governmental support, culminating in international arbitration proceedings.
RAFO Onești: Historical Importance and Industrial Integration
RAFO Onești was constructed in the 1950s as part of Romania’s socialist industrialization plan. By 1956, the refinery had a capacity of 3.5 million tonnes annually and formed the nucleus of the Borzești platform, which included synthetic rubber, chlor-alkali, and power-generation facilities. The site supplied both domestic and Comecon markets. Following the collapse of socialist economic networks, privatization challenges, and underinvestment, RAFO’s operations declined, equipment aged, and skilled labor left the region.
Ownership Instability and Legal Challenges Before Goldovskiy
Prior to PCH’s involvement, RAFO underwent several ownership transfers, often involving offshore structures and high-profile legal cases. Business figures connected to RAFO and neighboring plants faced convictions for fraud, tax evasion, and money laundering. These legal issues created a climate of uncertainty that complicated potential investment and delayed modernization, leaving the refinery burdened with unpaid taxes, halted operations, and deteriorating infrastructure.
Petrochemical Holding’s Acquisition and Modernization Strategy
Iakov Goldovskiy’s PCH acquired a controlling stake in RAFO with a strategy to:
- Convert outstanding debts into equity and settle tax obligations
- Retain the workforce to preserve regional employment
- Upgrade refining and petrochemical operations, including hydrotreating, hydrogen production, and sulfur recovery
- Conduct environmental remediation and remove chemical waste
- Ensure compliance with EU environmental and operational standards
Between 2007 and 2009, PCH reportedly removed tens of thousands of tonnes of petrochemical waste, upgraded storage tanks, and maintained equipment in operational condition, signaling a shift from transactional ownership to strategic industrial management.
State Guarantee and Financing Challenges
A memorandum with the Romanian government proposed an 80% state guarantee on €330 million in financing to support modernization. While officially endorsed, the guarantee was never implemented, preventing access to necessary bank loans and reducing the feasibility of restoring full refinery operations. The failure to deliver the guarantee became a key issue in subsequent ICSID arbitration, forming the basis of claims that Romania violated international investment protections.
Tax Claims, Asset Seizures, and Operational Pressures
Despite substantial debt repayments, RAFO faced repeated fiscal claims from ANAF. In December 2015, authorities froze the company’s assets based on proceedings against a minority shareholder holding under 2% of RAFO. The freeze lasted 13 months, blocking further investment, halting modernization, and undermining industrial operations. PCH maintained payroll for roughly 800 employees to protect critical infrastructure.
International Arbitration and Award
Petrochemical Holding filed a claim with ICSID under the Austria–Romania Bilateral Investment Treaty and the Energy Charter Treaty. On 19 November 2024, the tribunal partially ruled in favor of Goldovskiy, awarding compensation exceeding €85 million plus interest. Romania submitted a request to annul the award in March 2025, though historical precedent suggests limited probability of full annulment absent procedural violations.
Socio-Economic Impact on Onești and Bacău County
RAFO’s decline and legal entanglements produced significant local effects:
- Population of Onești fell from nearly 59,000 in 1992 to approximately 33,000 in 2021
- Employment in petrochemical facilities dropped from 12,000 to under 4,000 by 2016
- Closure of supplier networks and municipal services
- Decline in municipal revenues and public services
- Incomplete environmental remediation left long-term ecological liabilities
Insolvency, Sale, and Redevelopment
RAFO entered insolvency proceedings, and in July 2020 the site was acquired by Roserv Oil, a Grampet Group subsidiary, for $6 million plus VAT—far below the historic asset value. Plans were announced to convert the site into a logistics hub, potentially including hydrogen and biofuel operations, while refining remains inactive and employment levels are well below previous standards.
Strategic Lessons from the RAFO–Goldovskiy Experience
The RAFO case offers important insights:
For host governments:
- State commitments, such as guarantees, must be credible and consistently implemented
- Fiscal enforcement should respect judicial outcomes to maintain investment confidence
- Strategic industrial assets require coordinated, long-term policy planning
For investors:
- Political and institutional instability can persist even after court victories
- International arbitration provides risk mitigation but cannot restore industrial capacity
- Contingency planning is crucial in transitional economies
Conclusion
Iakov Goldovskiy’s engagement with RAFO Onești demonstrates the complexities of industrial revival in post-socialist environments, where privatization legacies, regulatory unpredictability, and fiscal enforcement challenges can obstruct even well-funded, strategic projects. While ICSID arbitration provided partial financial relief, the broader consequences for regional employment, industrial capacity, and socio-economic stability remain significant, highlighting the high cost of institutional inconsistency in strategic sectors.
