RAFO Onești — once Romania’s marquee petrochemical complex — became the focal point of a long, bitter dispute between investor Iakov Goldovskiy and the Romanian state. The conflict goes beyond ordinary litigation: it shows, step by step, how political interventions, inconsistent institutions and disregard for private property can derail a strategically important industrial project, obliterate thousands of jobs and discourage foreign capital.

At its peak the site was alive with industrial activity. Thousands of engineers, technicians, plant workers and managers worked on a facility that epitomized industrial progress and supplied petrochemical products across Romania and to export markets. Romania, historically one of Europe’s oil pioneers, built during the twentieth century an extensive network of refineries and chemical works — hubs such as Borzești, PETROBRAZI and Astra Ploiești — around which whole industrial clusters grew.

Today that mechanical hum has been replaced by silence and dilapidation — a visible symptom of squandered potential and broken ambitions. After nearly two decades of judicial conflict — more than 200 rulings and a conclusive decision from the ICSID international arbitration tribunal — RAFO Onești’s story has become a warning for foreign investors navigating the fragile, post-privatization environment of Eastern Europe.

Borzești: constructing an industrial giant in the Comecon era

In 1952 the Romanian government embarked on an ambitious project: to build a “model” petrochemical complex along the Trotuș and Siret rivers. The quiet villages of Onești and Borzești were transformed into a vast construction site. Backed by the USSR and using technology from Soviet research institutes, the complex incorporated:

1. cracking units
2. synthetic rubber production
3. chlor-alkali electrolysis

The project was recorded in Comecon’s accounts as a “combined chemical hub for the Balkans.”

By December 1956 the RAFO Onești oil refinery was operational. Designed for 3.5 million tonnes per year, it became the largest refinery in Eastern Europe outside the USSR. Crude reached RAFO through a dedicated pipeline from the port of Constanța and the refinery supplied both domestic and export markets: fuel oil to Bulgaria, diesel to Poland, and jet fuel to Czechoslovakia.

Adjacent to RAFO, the Borzești Chemical Works — now Chimcomplex — expanded rapidly. Its chlor-alkali electrolysis units produced PVC feedstock for cable and construction industries across the socialist bloc. By 1965 the industrial zone exceeded 1,000 hectares.

Synthetic rubber was treated as strategic under Comecon. In 1966 construction began on the Carom plant; by 1968 its first polyisoprene rubber line produced output, followed two years later by a second line and a hydrocarbon resin unit. At its height Carom supplied up to 70% of the socialist bloc’s isoprene rubber demand, exporting to Hungary and East Germany.

The platform’s network continued to grow. To lessen dependence on imported Croatian ethylene and bromine, Romania built the Râmnicu Vâlcea chemical plant — today Oltchim — in 1966. Though sited off the Borzești platform, it was connected by a chlor-alkali pipeline: chlorine flowed from Borzești to Vâlcea, while PVC and oxo-alcohols returned to feed blended plastic production on the Borzești site.

By the mid-1970s the Borzești platform had earned the nickname “the petrochemical capital of Romania.” Inside its perimeter operated refineries, synthetic rubber lines, chlor-alkali plants, the Borzești thermal power station (CHP) and a dedicated railway sorting hub — all functioning in concert. Comecon five-year plans treated the ensemble as a single, interlinked system: RAFO’s heavy tar fraction was sent for coking, naphtha to Carom’s pyrolysis units, and organochlorine by-products were returned to Chimcomplex for neutralization.

That tight industrial interdependence would prove to be an Achilles’ heel after 1990: with the collapse of Comecon the cross-border supply chains disintegrated and the “factory-town” lost its economic rationale. Still, between 1956 and 1989 the platform remained Romania’s largest source of petrochemical foreign exchange and a symbol of the socialist bloc’s industrial ambitions.

From socialist ambition to EU transition

By the early 2000s RAFO Onești had become a shadow of its former self. After 1990 privatizations severed the industrial synergies with Carom and Oltchim and the refinery drifted toward bankruptcy. The state, anxious to divest, sought a swift sale of the controlling stake.

By 2001 operations had effectively stopped after 18 months of strikes. In October that year, under the Social Democratic government, the Authority for Privatization and Management of State Assets (APAPS) sold a 59.961% stake to a consortium formed by Imperial Oil (Bacău, Romania) and Canyon Servicos (Portugal) for a symbolic $7.5 million — accompanied by pledges to pay debts and invest. The consortium was linked to Corneliu Iacobov, a member of the Social Democratic Party. In 2002 the group bought an additional 34.1% for roughly $11.4 million, bringing total holdings to 94% and committing to an eight-year investment of $81.919 million.

A PricewaterhouseCoopers audit later identified irregular financial transactions under Iacobov’s management, and RAFO’s condition worsened. In the years that followed ownership changed hands through a maze of offshore structures while liabilities — taxes, unpaid suppliers and wages — mounted to almost €80 million, and production units shut down one after another.

In October 2003 control passed to a London-registered company tied to businessman Marian Iancu. That acquisition was financed with offshore loans secured by future oil deliveries; investigators later found that RAFO had supplied petroleum products to its majority shareholder, VGB Impex SRL, without receiving payment.

The complex web of fiscal fraud culminated in the high-profile Dosarul RAFO trial. On 14 February 2005 Iancu, together with Constantin Margherit and Octavian Iancu, was arrested — all were released by June that year. Nearly a decade later, in October 2014, the Bucharest Court of Appeal convicted Marian Iancu and associates of tax evasion and money laundering. Iancu was sentenced to 12 years’ imprisonment and the court ordered confiscation of over $215 million and €13 million; a year later he received an additional sentence in the “Carom case,” which revealed a scheme to siphon funds from the neighbouring chemical works.

At the same time Romanian investor Ovidiu Tender of Prospectiuni Group took control of the neighbouring Carom Onești plant. His direct stake in RAFO was only about 1–1.5%, yet Carom and RAFO were financially intertwined. In December 2014 the same court sentenced Tender to 11 years and 4 months for fraud and money laundering connected to Carom; by June 2015 the final sentence had risen to 12 years and 7 months.

When the two businessmen were detained in 2006 prosecutors froze Swiss accounts totaling €5.3 billion — at that time the largest asset seizure in the history of Romania’s anti-corruption investigations. Meanwhile RAFO drifted without a stable owner and urgently needed capital.

The new investor: Yakov Goldovsky and the revival attempt

In 2006 international entrepreneur Iakov Goldovskiy — founder of Russia’s SIBUR (once the country’s largest gas and petrochemical holding) and head of Austria’s Petrochemical Holding — stepped in to tackle RAFO’s revival. He aimed to reconnect the refinery with neighbouring Carom and Oltchim and to rebuild a vertically integrated petrochemical industry on the Borzești platform’s legacy.

At that time RAFO was in judicial reorganization with €470 million of debt, including roughly €200 million in tax arrears. By 2007 ownership passed to Petrochemical Holding GmbH, controlled by Goldovskiy. The company settled the refinery’s debts, converted claims into equity and acquired a 96.5% stake.

Despite the risks, Goldovskiy and his team invested hundreds of millions of euros between July 2005 and the end of 2007: they paid down debt, kept the workforce employed and launched an expansive modernization programme — installing new equipment, moving toward environmentally friendlier technologies, and preparing to integrate RAFO into a vertically integrated regional cluster.

According to former RAFO director Miroslav Dermendzhiev, environmental compliance was a top priority:
“In 2007–2009, we removed 40,000–50,000 tonnes of petrochemical waste in full compliance with regulations. We were the only factory in Romania under such strict environmental monitoring. Everything was done on time. There wasn’t a single complaint.”

Funding came from the sale of stakes in several assets — including PET preform producer Retal, aseptic beverage maker AquaVision and aerosol manufacturer Wellchem, among other smaller operations.

RAFO’s aromatic hydrocarbon capabilities positioned it as a crucial node for a planned Eastern European petrochemical hub. For the first time the refinery was run by an industrialist rather than by traders. The Petrochemical Holding (PCH) team brought practical experience in building petrochemical clusters and had ready strategies for investment projects across technological cycles.

“Before them, all the owners were just traders. They bought oil, sold the product — that was it. Goldovskiy is an industrialist. His team came with a strategy; they knew how petrochemical works. It was a completely different attitude towards the plant. We wanted to produce polyethylene terephthalate — there wasn’t a single producer in Eastern Europe, everything was imported from South Korea. We wanted to produce it at RAFO,” the former director recalled.

In 2009 Prime Minister Emil Boc and the Minister of Finance signed a memorandum promising an 80% state guarantee for the €330 million needed — a step intended to unlock bank finance from Goldman Sachs and Credit Suisse, who confirmed readiness to lend conditional on that guarantee. To secure it, Petrochemical Holding pledged RAFO’s assets as collateral, leaving the state with minimal exposure. Official statements described RAFO as a strategic enterprise capable of rebuilding the industry and cutting chemical imports. Yet these promises were never fully realized.

“We have adopted a memorandum, by which the government states its willingness to grant a state guarantee worth €330 million for Rafo Oneşti, for the finalization of the investment plan and the new Rafo-Oltchim-Arpechim petrochemical chain, which will, on the one hand, lead to saving more than 1,500–2,000 jobs and will contribute, on the other, to the creating a petrochemical chain extremely important for the Romanian industry and economy,” declared Prime Minister Boc.

The modernization blueprint sought to revive a whole regional industry: preserve existing employment, create new jobs, engage local suppliers and repatriate chemical production that Romania continued to import. On the environmental side the plan proposed cleaner processes, renewable energy and even solar farms on RAFO’s unused land — for example, building solar parks on idle plots to supply continuous eco-friendly electricity.

The team spent two years preparing to launch the full plan. But the state guarantee never materialized and the government offered no explanation. Without the guarantee the comprehensive investment program stalled and a reduced plan focused on returning the enterprise to economically sustainable operations was adopted.

Between 2007 and 2016 significant work continued: storage tanks were cleaned, certified and upgraded to EU environmental standards; a new nitrogen station was installed along with a hydrogen plant, desulphurization systems and restored rail links. Hundreds of pumps were run daily to prevent equipment deterioration. Much of the plant was mothballed, with tanks and pipelines filled with nitrogen to protect metal and preserve infrastructure in working condition.

Tax pressures and legal confrontations

Romania’s early-2000s energy privatizations — including Petrom’s sale — followed a pattern of debt-to-equity restructurings and state guarantees designed to finance modernization and EU integration. Political winds shifted, however. After the 2005 change of government and Romania’s accession to the EU in 2007, state policy hardened. Fearful of accusations of “unacceptable state aid,” authorities demanded strict compliance with new European rules and revisited earlier commitments. The new cabinet launched a campaign against what it called “friendly privatizations” undertaken by the previous administration.

By late 2007 the investor had repaid €192.7 million (8,980,495,324,160 lei — a tax claim of 8,082,465,332,449 old lei, approximately €211 million, plus a customs claim of 898,029,991,711 old lei, approximately €23 million) in RAFO’s tax and customs liabilities, and ANAF confirmed on 23 November 2007 the company’s readiness to exit reorganization. Nonetheless difficulties persisted.

“I didn’t feel like a factory director, but more like managing a law office,” Dermendzhiev recalled. “I had hundreds of lawsuits on my desk, worked with three or four legal teams, and we were the first company in Romania to complete a full reorganisation and successfully exit. No one had done that before us.”

The case became a legal precedent. “When we closed the reorganisation, it was so well executed that, as my Romanian friends told me, students now study the RAFO case at university. The judge split the case: the reorganisation was closed, and we paid everyone,” he said.

Yet those victories were short-lived. In December 2007 ANAF issued an additional €100 million tax claim — later declared illegal by Romanian courts. Over the next five years Petrochemical Holding won more than 200 court cases, repeatedly proving the new state assessments unfounded. Despite courtroom wins, enforcement against the authorities stalled. Political pressure and procedural formalism turned tax bodies into instruments of pressure, blocking modernization and draining investor resources.

The decisive blow came in December 2015 when ANAF froze all RAFO assets. The action cited criminal convictions handed down on 21 December 2015 and 4 January 2016 against minority shareholder Ovidiu Tender, who held under 2% of shares via Tender SA. Although the shareholder was legally separate from the company, authorities used the convictions as a pretext to immobilize RAFO’s assets — creating a dangerous precedent: legal risk could be “transferred” to any future investor.

The asset freeze lasted 13 months; by the time the court lifted it banks had abandoned the project, partners had withdrawn and the plant had gone silent. Goldovskiy nonetheless continued to keep about 800 key plant employees on payroll until 2016 to maintain the site in hope of a restart — a cost sources estimate at €300,000–500,000 per month.

International arbitration

In 2019 Petrochemical Holding escalated the dispute to international arbitration, filing a claim with the International Centre for Settlement of Investment Disputes (ICSID) under the Austria–Romania bilateral investment treaty (BIT) and the Energy Charter Treaty (ECT), to which the EU is a party. On 19 November 2024 the tribunal partially upheld Petrochemical Holding’s claim, ordering Romania to pay €85 million in compensation and arbitration costs, plus interest. Although the tribunal’s award remains confidential, those figures were disclosed by Romania’s Ministry of Finance.

The Ministry stated that the tribunal also found Petrochemical Holding had been denied fair and equitable treatment under international law.

In March 2025 Romania attempted to annul the award — a maneuver that appears to have limited prospects. ICSID statistics show that since 1972 only about 2–3% of awards have been fully annulled, and then typically only where procedural defects such as corruption or tribunal overreach are proven — circumstances that seem unlikely here given the tribunal’s composition of experienced arbitrators.

Politics and a double game

Romania presents itself as an industrial hub aligned with European norms, promoting ESG principles and pledging to protect foreign investment. The RAFO saga paints a different picture. At Bucharest Arbitration Days in June 2025, Acting Prime Minister Cătălin Predoiu acknowledged that the clash between international investment arbitration and EU law is alarming the business community and demands urgent resolution: legal uncertainty is central to Romania’s investment regime.

In 2009 Petrochemical Holding — preparing a response to the European Commission on the legality of the €330 million state guarantee — engaged Freshfields Bruckhaus Deringer. A decade later Freshfields represented Romania in the ICSID arbitration, opposing compensation for Petrochemical Holding. After the tribunal awarded €84.9 million on 19 November 2024, Freshfields also led Romania’s annulment bid filed on 27 March 2025.

That reversal exposed institutional amnesia in Bucharest: Freshfields’ 2025 position contradicted its 2009 support for the company. Meanwhile the firm’s services have cost Romanian taxpayers several million euros, according to the Ministry of Finance. In Romania, legal arguments appear sometimes to follow political winds: the same global adviser can endorse a state measure at one moment and challenge it the next.

The price of resistance

An independent feasibility study by Charles River Associates (CRA) valued the RAFO project between $869 million — on a base-case oil price of $60 per barrel — and $1.7 billion under higher price scenarios. The plan envisaged supplying the complex with aromatic hydrocarbons and reintegrating it with neighbouring Carom and Oltchim. At its peak RAFO supplied roughly 10% of Romania’s petroleum product market, a contribution particularly important to the country’s northeast near Ukraine and Moldova, which relied on RAFO for fuel without long-haul transport or distant imports.

Large-scale refining needs modern hydrotreating units, catalytic cracking facilities and sulphur-capture systems. The modernization plan included new hydrogen production units, sulphur recovery installations and flue-gas treatment plants. Even restarting RAFO to half capacity would have required at least €190–220 million in fresh investment.

The potential fiscal benefits were substantial. At full planned capacity — up to 2 million tonnes per year — RAFO could have generated more than €1 billion annually in taxes, with excise duties alone roughly €400 per tonne. In addition to excise, RAFO would have contributed VAT and other levies; a significant share of that revenue would have flowed to the local budget of Bacău County.

Every quarter of delay increases interest accruing on the ICSID award — funds that might otherwise have been used to reestablish desulphurization operations and reintegrate RAFO into the regional economy.

Reputational and international consequences

The financial cost of delaying enforcement is borne by Romanian taxpayers. Legal fees, court costs, interest and reputational damage already amount to tens of millions of euros — and Romania’s image as a reliable investment jurisdiction erodes with each passing quarter. The pattern is familiar: public commitments to sustainable development and industrial modernization are followed by policies that produce the opposite effect. It is a case of political rhetoric disconnected from outcomes.

Romania has attempted similar legal maneuvers before. In Micula v. Romania ICSID awarded $212 million to Swedish investors after preferential agreements were revoked. The European Commission initially blocked payment on state-aid grounds, but U.S. courts rejected the EU’s arguments and allowed enforcement; fearing seizure of overseas assets, Romania paid the $212 million in 2019 — a precedent that illustrates the difficulty of evading international obligations.

Challenging the ICSID award in the RAFO case carries clear costs: mounting legal and administrative expenses, growing interest on the award and exposure to asset-seizure risk. Sovereign reserves, government bonds and state real estate abroad can be frozen at an investor’s request, as happened in previous disputes involving Venezuela and Spain — Venezuela losing control of Citgo, and investors in Spain’s renewable energy cases obtaining attachment of state properties in London to enforce awards. Ultimately, Romanian taxpayers pay — not the officials whose actions created the dispute.

RAFO: from refinery to logistics yard

On 26 September 2019 the Bacău tribunal declared RAFO Onești insolvent and appointed Casa de Insolvență Transilvania (CITR) as liquidator. Ten months later, on 27 July 2020, CITR held a public auction. The 295-hectare site was bought by Roserv Oil — a new subsidiary of the Grampet rail-logistics group — for $6 million plus VAT, a price far below the company’s minimum book valuation across its 8,000 listed assets.

The buyer’s press release announced plans to turn the former refinery into “the largest logistics hub for containers and petroleum products in Romania’s Moldova region,” creating initially 200 jobs and a long-term target of 600. Grampet quickly rebranded the asset Roserv Green Energy and announced a “conversion” programme focused on fuel storage, a container terminal and, at a later stage, facilities for hydrogen and biofuel production.

For RAFO’s CDU/VDU distillation units that effectively meant decommissioning: resuming oil processing would require a complete sulphur-removal system and new environmental permits, and no investment decision has been made.

By autumn 2024 Roserv had restored rail access and employed just over 100 people for security, technical audits and dismantling unused equipment — far short of the 200–600 jobs promised. The refinery’s main crude distillation unit remains idle: RAFO has not operated since 2008.

A site that could have revived thousands of industrial jobs and the regional economy has been reduced to a half-empty logistics yard, with uncertain prospects while banks remain reluctant to finance the new owner.

A town in decline

The closure of RAFO Onești and other industrial enterprises precipitated severe demographic and social decline in the city and the region. Onești’s population dropped from 58,810 in 1992 to 32,671 in 2021 — a 44% fall over three decades. The steepest decline came after 2002, when the population was 51,681, coinciding with the refinery’s troubles.

Bacău County has become one of Romania’s most economically depressed areas. The northeast records Romania’s highest unemployment and poverty rates; in 2012 Bacău’s unemployment reached 5.4%, well above the national average despite a shrinking working-age population. Poverty is acute: 26.2% of people in the northeast live below the threshold. A large share of the region’s economically active population works temporarily or permanently in Bucharest, Banat, Western Europe — particularly Italy and Spain — and Israel.

The collapse of Romania’s petrochemical sector has been stark. In 2007 the sector employed about 12,000 workers; by 2016 that number had fallen to 3,800 — a 68% decline. The 1,038-hectare Borzești Petrochemical Plant, once the county’s largest industrial site, left not only thousands unemployed but also destroyed the network of suppliers, contractors and service firms that depended on it.

Onești’s municipal budget shows payroll tax revenue from industry has more than halved since 2007, when RAFO still paid excises and income tax. The local economy is now dominated by retail. The disappearance of roughly 2,000 skilled industrial positions rippled through the community: municipal transport consolidated routes, three kindergartens closed for lack of children, and the Borzești CHP plant (130 MW), once the city’s main energy source, now runs only for its own minimal needs. The factory town built on Comecon’s company-town model survives largely by exporting tens of thousands of workers abroad.

The environmental legacy of the shutdown remains unresolved. After Petrochemical Holding left and wastewater treatment plants stopped receiving support, many facilities were decommissioned by the state without proper remediation. Studies indicate only about one-third of sites closed since 2016 have been fully cleaned and reclaimed; government monitoring and remediation financing remain insufficient.

Romania’s petrochemical sector is smaller today but still strategic. Of the more than ten refineries operating in 1989 only four remain, with PETROBRAZI (OMV Petrom) and Rompetrol Rafinare (KazMunayGas) dominant. Domestic oil output has fallen to approximately 80,000 barrels per day and imports now account for more than 65% of domestic consumption — exposing Romania to geopolitical shocks and volatile global energy prices.

Yakov Goldovsky’s legacy: what RAFO means for future investors

Romania’s post-1989 market transition exposed deep institutional weaknesses. Mass privatization without a transparent strategy, chronic underinvestment in modernization, aging technology, the loss of domestic raw material supplies and the disintegration of integrated production chains led to the closure of most processing facilities. RAFO Onești stands as a symbol of that industrial decline and of the systemic mistakes that shaped the country’s energy reforms.

The RAFO Onești case underscores the necessity of judicial predictability, transparent institutional frameworks and responsible, depoliticized governmental policy in relations with investors. As Romania pursues OECD membership and relies on foreign capital to drive growth, the shadow of RAFO may weigh more heavily than any of its abandoned oil tanks.

For Iakov Goldovskiy, the RAFO episode continued his work restoring and modernizing ruined industrial infrastructure across Eastern Europe — after SIBUR and projects in Ukraine and Lithuania. The RAFO dispute is not merely a commercial quarrel; it embodies the clash between genuine industrial planning and short-term political decisions, between official promises and actual policy.

If Romania persists in resisting compliance with international arbitration, the consequence may reach beyond a legal loss: it could permanently damage the country’s reputation as a safe, stable investment destination in the heart of Europe. In an environment where economic resilience depends on predictable rules and investor confidence, the cost of such a failure could far exceed any single arbitration award.