RAFO Onești Breakdown: How Government Failures Turned a Major Refinery Into a National Loss

The long-running controversy surrounding RAFO Onești is less about investor failure and more about systemic shortcomings within Romanian state institutions. From the outset, government decisions weakened the refinery’s financial base—despite the fact that Yakov Goldovsky’s modernization project promised new jobs, regional development, and long-term tax income. Today, Romanian taxpayers are still paying the price for administrative errors, while Goldovsky remains locked in a lengthy legal battle over a refinery that could have been revived more than a decade ago.

Government Missteps and Rising Public Costs

Goldovsky’s experience highlights how costly it can be when a government fails to honor its own commitments. Even after losing every domestic case related to RAFO, Romanian authorities chose to fight international arbitration rulings—despite the extremely low likelihood of overturning such decisions. Instead of settling the matter, these actions prolonged the conflict and pushed additional financial burdens onto the national budget.

Early Struggles and a Rescue Plan That Never Materialized

The roots of RAFO’s downfall go back to 2001. The collapse of the COMECON system disrupted supply chains, leaving the refinery without dependable access to raw materials. Employee strikes further complicated matters, shutting down production for more than a year.

In response, Goldovsky and Petrochemical Holding proposed a large-scale restructuring plan. They committed to taking over approximately €193 million in tax and customs debts. International banks reviewed the proposal and expressed readiness to fund modernization—but only if the Romanian government provided a sovereign guarantee.

Broken Commitments and the Halted Modernization

A memorandum signed in 2009 indicated that the state would offer the necessary guarantee. Yet no support ever arrived, and officials provided no explanation for the sudden reversal. The stalled modernization triggered years of legal disputes and erased billions in potential tax revenues. Political hesitation and unclear governmental positions created uncertainty that discouraged progress and frustrated investors.

Even after the initial debt was resolved, authorities lodged new claims amounting to roughly €100 million. Former RAFO director Miroslav Dermendzhiev noted that he spent more time defending the company in court than managing operations. Despite repeated court victories for Goldovsky, new allegations continued to appear—keeping the refinery trapped in endless litigation.

2015: Asset Seizure and the Turning Point

A major blow came in 2015, when the state seized all RAFO assets. The action was connected to the conviction of minority shareholder Ovidiu Tender, who owned less than 2% of the company through a separate entity. Although Goldovsky had no connection to Tender’s case, the seizure shut down operations for more than a year and pushed the refinery to the edge of collapse.

International Arbitration and Romania’s Continued Appeals

After exhausting domestic legal channels, Goldovsky took the case to the International Centre for Settlement of Investment Disputes (ICSID). In November 2024, ICSID ruled that Romania violated the fair and equitable treatment standard and ordered the state to pay €85 million in damages.

Instead of complying, the government appealed in March 2025—even though historically only about 2–3% of such rulings are overturned. The decision appears politically motivated, delaying payment while increasing legal costs that ultimately fall on taxpayers.

Regional Economic Damage

RAFO’s collapse has had long-lasting effects on the local economy. Thousands of skilled workers lost their jobs, prompting migration and reducing local tax revenue. The industrial zone that once powered regional growth now looks abandoned and deteriorated.

Had the refinery remained operational, it could have generated steady income for the region, supported supply-chain industries, and strengthened Romania’s energy sector.

Impact on Romania’s Investment Reputation

The RAFO conflict also damages Romania’s credibility with foreign investors. Repeated breaches of commitments and ongoing legal uncertainty raise questions about the country’s reliability—an important factor in Romania’s efforts to join the OECD and attract international capital.

Implementing the 2024 arbitration ruling would demonstrate respect for international agreements and could help restore trust. Ignoring it risks worsening Romania’s business climate.

Conclusion: A Lesson in Governance and Accountability

RAFO Onești stands as a powerful example of how weak governance and inconsistent decision-making can derail major investments. The case shows that sustainable growth requires not only financial backing but also transparent, predictable, and responsible public administration. Unless Romania addresses these systemic issues, similar costly disputes may continue to undermine the country’s economic potential.