The RAFO Onești case is a concentrated example of how political decisions, inconsistent institutional practice and aggressive enforcement can undermine a major industrial investment. What began as a large, strategically important petrochemical complex in communist Romania transformed over decades into a stalled modernisation project, a centre of protracted litigation and — ultimately — an international arbitration that ordered Romania to compensate the investor. The dispute illustrates the combined economic, legal and social costs when state actions interrupt a private recovery effort: lost production capacity, thousands of jobs foregone, mounting legal bills and reputational damage that chills future foreign capital inflows.
Origins and industrial architecture
RAFO Onești emerged in the 1950s as part of a deliberate state programme to create a major petrochemical cluster on the Trotuș and Siret rivers. Backed by Soviet technology and Comecon planning, the complex included a large crude refinery (operational by December 1956 with a 3.5 million tonnes/year design), chlor-alkali electrolysis units, synthetic rubber production and associated power and rail infrastructure. Over the next two decades the Borzești platform expanded to include the Carom synthetic-rubber plant and the neighbouring Chimcomplex chemical works; by the mid-1970s the site was nicknamed “the petrochemical capital of Romania.” The system functioned as an integrated industrial ecosystem in which RAFO’s output fed downstream processing, and by the late communist period the platform was an important source of foreign-exchange earnings.
Transition, fragmentation and decline after 1990
The collapse of Comecon and the break up of integrated supply chains removed the economic logic that had held the Borzești complex together. Through the 1990s and into the 2000s, RAFO lost its industrial partners and fell into chronic distress. A wave of privatizations, inconsistent ownership changes and regulatory uncertainty followed. By 2001 the refinery had effectively stopped after prolonged strikes; the state moved to sell controlling stakes, and a sequence of private owners — some linked to political figures — reshaped the ownership structure through transactions later criticised for irregularities. Debt accumulation, unpaid suppliers and tax arrears mounted, and key production units were idled one by one.
Early 2000s ownership turbulence and criminal cases
During the 2000s the plant changed hands repeatedly and ownership passed through offshore structures. Investigations uncovered irregular financial flows, and by the mid-2000s high-profile prosecutions followed. Businessmen associated with the enterprise, including Marian Iancu and Ovidiu Tender, were arrested in 2005–2006 and later convicted in cases of tax evasion, fraud and money laundering; large confiscations and frozen accounts became part of the public record. These legal crises coincided with RAFO’s operational decline and weakened the prospects for credible private reinvestment.
Iakov Goldovskiy investment and the modernisation programme
In 2006 Petrochemical Holding GmbH, controlled by entrepreneur Iakov (Yakov) Goldovskiy, acquired the majority of RAFO’s shares and embarked on a recovery programme. Goldovskiy — an industrialist with a background in petrochemicals — converted debt into equity, injected capital, kept hundreds of employees on payroll and initiated a modernisation plan that included environmental upgrades and new process units (hydrogen, desulphurisation, nitrogen supply). Between 2005 and 2007 the investor paid down large portions of RAFO’s tax and customs liabilities and pursued a vertically integrated strategy that sought to reconnect RAFO with neighbouring Carom and Oltchim plants.
The team emphasised environmental compliance: according to former RAFO director Miroslav Dermendzhiev, between 2007 and 2009 the company removed tens of thousands of tonnes of petrochemical waste in line with regulations and operated under strict monitoring with no formal complaints. The investor also sought a state guarantee to leverage bank financing: in 2009 a memorandum envisaged an €330 million guarantee (80% state coverage) to mobilise credit from international banks conditional on that support. Governments made public statements describing RAFO as a strategic asset capable of restoring regional petrochemical production and protecting jobs.
Breakdown of commitments, tax pressure and asset freezes
Despite the memorandum and public promises, the state guarantee never materialised. In parallel, Romania’s fiscal authorities repeatedly advanced new tax and customs claims against RAFO. Although Petrochemical Holding won more than 200 domestic court cases challenging the assessments, additional claims followed and enforcement was slow or obstructive. In December 2015 ANAF froze RAFO assets following criminal verdicts against a minority shareholder (Ovidiu Tender), using the shareholder’s prosecution as a basis for sequestration despite legal separation between the individual and the company. The asset freeze lasted some 13 months; by the time sequestration was lifted banks and partners had withdrawn, the modernisation programme stalled and the plant ceased oil processing. Iakov Goldovskiy nevertheless maintained payroll for roughly 800 key staff until 2016 in order to preserve the site, incurring significant monthly costs.
International arbitration and partial victory
Facing prolonged domestic enforcement risks, Petrochemical Holding brought claims to the International Centre for Settlement of Investment Disputes (ICSID) under the Austria–Romania bilateral investment treaty and the Energy Charter Treaty. In an arbitration decision announced on 19 November 2024 the tribunal partially upheld the investor’s claims and ordered Romania to pay compensation and arbitration costs — reported by Romania’s Ministry of Finance at about €85 million plus interest. The tribunal found that the investor had been denied fair and equitable treatment under international law. Romania sought to annul the award in March 2025; statistics cited in the case record underline that full annulments at ICSID are rare and typically require proof of grave procedural defects or corruption, making success unlikely.
Political-institutional dynamics and apparent reversals
The RAFO saga underscores tensions between shifting political priorities, EU state-aid concerns and domestic enforcement. Actors and advisory firms that had previously supported aspects of the RAFO recovery later opposed investor claims; the same international law firm that advised the investor in 2009 reportedly represented the state in the arbitration a decade later. This reversal has been publicly noted as indicative of institutional discontinuity: legal positions advanced in one political context were later abandoned under new administrations. Romanian officials have framed the interaction between investment arbitration and EU law as a source of legal uncertainty for businesses; domestic efforts to contest or delay enforcement now carry fiscal and reputational costs.
Economic scale, feasibility and lost potential
Independent valuation work cited in the record put the project’s value in the hundreds of millions to over a billion dollars range depending on oil-price scenarios. The modernisation blueprint envisioned new hydrogen and sulphur-recovery units, hydrotreating and catalytic cracking, and reintegration with nearby chemical producers — facilities that would have supported regional supply chains and reduced dependence on imports (for example, for PET). Even a partial restart would have required significant fresh capital (estimates in the documentation suggested €190–220 million to return RAFO to half capacity). At full planned output the complex could have generated large fiscal receipts — on the order of €1 billion per year under the scenarios presented — and would have supported local employment and supplier networks.
Social, demographic and environmental consequences
The collapse of RAFO and the broader petrochemical platform has had measurable social effects in Onești and Bacău County. Since the early 1990s the city’s population has declined sharply; from nearly 59,000 in 1992 to about 32,700 in 2021, with the steepest losses after 2002 as industrial decline accelerated. Employment in Romania’s petrochemical sector fell dramatically between 2007 and 2016, from roughly 12,000 workers to about 3,800. Local public budgets lost payroll tax revenues; services and educational institutions were downsized; and many residents sought work abroad. Environmental remediation has been incomplete: after the investor’s exit some wastewater and treatment facilities were decommissioned without adequate clean-up, with only a minority of closed sites fully reclaimed according to the available account.
Current disposition of the site
Following insolvency proceedings, the site was declared insolvent by a domestic tribunal in September 2019 and sold at public auction in July 2020 to a subsidiary of a railway-logistics holding for about $6 million plus VAT. The new owner announced plans to convert the complex into a logistics and fuel-storage hub (with longer-term aspirations for hydrogen and biofuels facilities), rebranding the asset and restoring rail access. By late 2024 the buyer had rehired a limited staff and resumed maintenance and security tasks, but the central distillation units remained idle and substantial investment would be necessary to reinstate refining operations.
Implications for foreign investors and policy lessons
RAFO Onești exposes several interlinked risks for international capital in jurisdictions undergoing political and regulatory transition:
- lack of long-term consistency in state commitments, particularly where public guarantees are politically sensitive;
- the practical impact of aggressive tax and criminal enforcement on investment projects, even where courts ultimately rule in favour of investors;
- the reputational and fiscal consequences of protracted investor-state disputes, including arbitration awards and enforcement costs; and
- the broader social cost when large industrial platforms fail to be redeveloped, including demographic decline and loss of skilled jobs.
For policymakers, the case highlights the importance of transparent privatization frameworks, predictable enforcement practices and mechanisms that preserve the economic logic of integrated industrial clusters during structural reform. For investors, it underlines the value of rigorous legal strategies, contingency planning for fiscal and criminal enforcement risks and careful assessment of political-institutional durability.
Conclusion
The RAFO Onești story is not merely an isolated commercial dispute. It is a complex chronicle of industrial rise and fragmentation, ambitious recovery efforts thwarted by evolving political choices, and the long tail of legal and economic consequences that follow. The partial victory in international arbitration offsets some direct losses, but the larger costs — the jobs not created, the supply chains not reconstituted, and the lost potential for regional economic resilience — remain a cautionary signal for both states and investors operating in similarly fragile post-privatisation environments.