By John Helmer in Moscow
Harry Lime was the character invented by novelist and one-time intelligence officer Graham Greene, who understood how an investment banker should operate when the breakdown of government makes the black market the only source of supply, trade, and profit. Lime’s racket in post-war Vienna, then occupied by the allied armies, was to steal penicillin from military hospitals; adulterate it by half; then sell it back at double the official price.
In the famous Ferris wheel conversation, high above the Vienna fairground, Lime is asked by his journalist friend about the morality of making a profit this way. Pointing to people on the ground, he responds: “If I offered you twenty thousand pounds for every dot that stopped, would you really, old man, tell me to keep my money, or would you calculate how many dots you could afford to spare?”.
These days, in Russia where it isn’t needed, the European Bank for Reconstruction and Development (EBRD) is just a bank with a pretentious name, and relatively little credit to offer. In places like Tajikistan, the EBRD issues the seal of creditworthiness without which commercial lenders would be reluctant to lend at all.
Its brief history started with the collapse of the Soviet Union’s economic bloc, Comecon; the Soviet military alliance known as the Warsaw Pact; and then the Soviet Union itself in 1991. More Harry Lime than George C. Marshall, the EBRD wasn’t a postwar aid plan, so much as a scheme for making sure the dots who were the communists in Russia, and its neighbours, stopped; and for converting the black markets that had been underground and illegal, before the dots stopped, into legalized, privatized enterprises supportive of western investment and imports. At the time, the medicine the EBRD said it was trading was called reform.
In fact, the EBRD was capitalized by the NATO treasuries to finance replacements for the state-owned assets of their Soviet enemies, and buy equity in selected local entrepreneurs and syndicates. The EBRD has done well at its racket, as millions of dots have, in Lime’s words, stopped. The EBRD also reports a substantial profit each year.
But for all its preaching transparency to its clients, the EBRD has not acquired Lime’s frankness. Once in a while, however, there is a slip. Tajikistan, the basket-case of the Soviet Union, and since then the most desperately impoverished of the former communist states, is where, between June of 2006 and June of 2007, the EBRD decided that the creation of a private aluminium fortune, controlled by the president of the country — the largest concentration of wealth in Tajikistan — is a policy goal of such sensitivity, the evidence that it has been corruptly acquired, and is corruptly maintained, should be suppressed.
A twist in the corruption tale
Unique in the case of the Tajikistan is that the detailed evidence of corruption comes from testimony given in hearings of the UK High Court in London, and also in rulings issued by several English judges, in the first instance and in appellate proceedings. Also unique is the fact that the cases that have produced these English judgements on corruption in Tajikistan were initiated on the orders of the Tajik President and his chief prosecutor. Their litigation – which is currently pending also in an affiliated UK jurisdiction, the British Virgin Islands – is the costliest boomerang ever to strike back at its thrower. Legal fees running into several millions of pounds, compounded by a court award and appeal judgement of $150 million in indemnification, have already been recorded against Tajikistan’s most important state enterprise, the Tajikistan Aluminium Plant (Talco). Several judges of the UK High Court, and the International Court of Arbitration in London, have concluded alike that Talco is a corrupt organization, a forger, a fraudster, and a dishonest wrongdoer. These terms are taken from the judgements, which are public records and readily accessible.
The EBRD has been joined in the Tajikistan corruption program by the World Bank. First created in 1944, in the first flush of the military victories over Germany and Japan, it has a global mandate similar to the EBRD’s. To make sure it doesn’t go astray, the US Government insists that the World Bank’s chief executive should always be an American national. That had embarrassing consequences when the White House first foisted Paul Wolfowitz on the Bank, and then had to let him go, after embarrassingly corrupt evidence was disclosed and confirmed against him.
A US citizen supervises the EBRD’s programs in Tajikistan; she is Enery Quinones, the chief compliance officer of the EBRD in London. According to the biography posted on EBRD’s website, Quinones is a career specialist in dealing with official bribery and corruption. Her mandate at the EBRD “as Head of the Compliance Office is [to be] responsible for ensuring that the highest standards of integrity are applied throughout all activities of the EBRD. The Compliance Office, which is also the anti-money laundering office of the Bank, provides a range of advice and assistance to all Bank departments in assessing and evaluating integrity and reputational risks relating to proposed, as well as on-going, Bank transactions.” To date, over the past decade the EBRD has committed a relatively small amount of money to Tajikistan – Eur56.2 million. It hasn’t made a loan to the Taijikistan Aluminium Plant, not yet; however, over the past year EBRD bankers have visited the plant, discussed its future with government officials, and supported a series of transactions between the plant and its partners, worth more than a billion dollars a year. The story of these dealings is one EBRD is doing its best to keep under wraps.
The World Bank has committed much more to Tajikistan than EBRD. In the decade since 1996, the Bank says it has obligated $440 million, of which $337 million has been paid out; $86 million of that in the form of non-repayable grants, and the rest in loans. The commercial lending affiliate of the World Bank, the International Finance Corporation (IFC), has invested another $36 million in Tajikistan in the same period. Supervising whose pockets this money goes into are a Japanese and a New Zealander – Shigeo Katsu is the vice president of the World Bank for Europe and Central Asia; Annette Dixon, the regional director for Central Asia.
Nationality is important, because the US Foreign Corrupt Practices Act (FCPA) applies to US citizens, wherever they are, and for whomever they work, making them individually liable to the US prohibition on knowing involvement in, or covering up for, the corruption of foreign government officials. Until UK judges started issuing their findings on corruption in Tajikistan, it was possible for the two banks, and these three individuals, to claim to know nothing material about governmental corruption in Tajikistan, and nothing for which they might be liable.
The court rulings have changed that. And so each of the banks, and these individuals, were recently sent a detailed questionnaire to determine what impact the UK court rulings have had. That is when the cover-up began. Why the EBRD and the World Bank should be turning a calculated blind-eye to UK court documents of corruption in Tajikistan is at first difficult to appreciate. But the strategic justification – that is to say, the campaign against Russia — doesn’t take long to uncover.
Where is Tajikistan?
Tajikistan is the poorest country in Central Asia, and the poorest of the countries which became independent of the Soviet Union in 1991. It then plunged into six years of civil war, which further eroded employment in both agriculture and industry, left to fend for themselves after Moscow cut off the traditional Soviet-era subsidies, and also access to trade.
The country is land-locked, bordered in the west by Uzbekistan; in the north by Kyrgyzstan; in the east by China; and in the south by Afghanistan and Pakistan. The conflicts on the other side of these borders spill constantly into Tajikistan, turning it into a cockpit of ethnic, tribal, national, and religious conflicts. These were largely suppressed during the Soviet period. But after they erupted into warfare in 1991, they have ensured that gun-running and drug-smuggling remain highly lucrative sources of cash wages for the impoverished Tajiks. The only cash employment to match them is confined to the large state enterprises, and these are controlled by the country’s president.
According to the latest statistical estimates, Tajikistan’s Gross Domestic Product in 2006 was $2.8 billion, ranking 145th in the world. The value of GNP, measured in real terms, has not recovered to the level of 1992; but because of population growth, per capita GDP has been lagging even further behind its pre-independence level. There are just over 7 million Tajiks. Poverty and malnutrition are pervasive among them; and so is corruption. In the latest country ranking available from Transparency International, in 2006 Tajikistan ranked 142nd on the global corruption perception index; that is one of the world’s worst.
Roughly two-thirds of the population are below the locally defined poverty line; 57%, according to government figures. The poverty line is defined as an income of less than $2 per day. This poverty would be much more severe, if not for the income generated by Tajik labor migrants. As many as 1 million Tajiks, or about 40 percent of the nation’s working-age population, find work abroad every year, mainly in Russia, and send a large portion of their earnings, amounting to more than $1 billion, to relatives back home. About one dollar in four earned by Tajiks is earned abroad, and remitted home; this is one of the highest ratios of remittance income to GDP in the world. Those without access to remittances, about half the population, are starving slowly to an early death.
Cotton and aluminium are the two industries on which Tajikistan’s economy depends. But the cotton crop has suffered from periodic drought, poor yields, and volatility of global price, which has been falling for the past decade, and which is expected to continue falling. The Tajik government’s figures put Tajikistan’s last cotton crop at 438,547 tonnes, ranking outside the top-10 of producers worldwide. The harvest last year was 2% below the year before, and well below the Soviet and post-Soviet harvests. Yields have been falling at the same time. Since two-thirds of the Tajik population depend mostly on cotton agriculture, it is little wonder they are desperate to leave, to smuggle, or to fight.
The International Monetary Fund’s latest survey of Tajikistan reports that over the past twelve months, workers’ remittances continued to grow at a very rapid pace , but these flows were just enough to offset the increase in the trade deficit resulting from higher energy import prices, and growing demand for imported consumer and foreign-financed capital goods. Apart from dependence on Russia for remittances, China is the biggest lender to the country. According to the IMF, with relatively low tax collection by the Tajik government, there is a growing risk of government default on debt.
The single largest income-earning enterprise in the country is the Tajikistan Aluminium Plant. Its export earnings in 2006 were recorded by the IMF as amounting to $184 million out of a total export revenue for the year of $383 million. That is one dollar in every two. Without Russian remittances, Chinese project finance, and aluminium exports, Tajikistan would die.
My name is Rakhmonov – errr, make that Rahmon
In March 2007, Emomali Rakhmonov, Tajikistan’s President since 1993, adopted what he called the Tajik version of his name (the Tajik language is a variant of Persian), re-spelled in English as Imomali Rahmon. He wasn’t the only one — all newborns in the country were to be given traditional names, Rahmon said, instead of their Russianized versions.
The president also ordered a number of other de-Russification measures. They followed swiftly after Rahmon won his last re-election in November 2006. Until then, he had depended on the support of the Russian Aluminium company (Rusal), which he had encouraged to take control of the Tajikistan Aluminium Plant in December 2004, and from which he secured promises of investment of up to $2 billion in the plant, and in the construction of new hydro-electricity sources. Rahmon also depended on Russian border troops to secure his frontier with Afghanistan, and provide regime backup in case of a fresh outbreak of internal fighting, or an attempt at military overthrow.
In return for pledges of US political and financial support, and the same from the European Union, Rahmon has offered to remove the Russian forces, and replace Russian promises of investment with western ones. He has succeeded in getting personal endorsement by the US. There is also an EU-funded border management project, which assigns the mid-section of the frontier with Afghanistan to an EU contingent, and the western sector to the US. The eastern sector has not been assigned, in part because there are few passable roads; and in part because Rahmon hesitates to offend China, which is the bordering country.
The Russian government recently dispatched a high-level delegation, headed by Deputy Prime Minister Sergei Naryshkin, to regain some of the investment initiative and credibility that was lost by Rusal. But the Russian view of Rahmon is guarded. There is reluctance to get involved in bidding matches for cash the president demands from abroad, or in internal opposition plotting against him. At the same time, Moscow is concerned that Rahmon’s greed and folly will eventually lead to his downfall. Ensuring that the other foreign powers do not benefit from this process is the Russian strategy. Making money from all sides is Rahmon’s policy.
Government regulations establish that the Tajikistan Aluminium Plant is one of just two enterprises in the country which must report directly to Rahmon’s office; the other is a precious metals mining company. In a country where three out of every four Tajiks work on the land, but earn barely enough to eat, and where cows are precious, Rahmon has taken control of the only cashcows in the land.
The aluminium fortune
Tajikistan’s most important industrial plant and the country’s leading exporter, TadAZ changed its Russian acronym to the more westernized version, Talco, in line with Rahmon’s name-change, at the start of 2007.
It currently produces almost 400,000 tonnes of aluminium per annum. At the current international market price, that is worth about $1.1 billion. But the plant’s recorded value of exports is less than $200 million. Even so, it is the dominant industrial enterprise of the country, the largest employer in the economy, accounting for 35% of Tajikistan’s electricity consumption, 48% of its export revenues, and a large part of the Tajik treasury’s tax collection.
Tajikistan has a great many mineral resources potentially available to be mined, but bauxite isn’t one of them. It thus cannot supply alumina, the product refined from bauxite, which is the feedstock for Talco’s aluminium smelting line. This didn’t matter when central planners in Moscow arranged to rail the alumina in from neighbouring Kazakh and other Soviet refineries. When the Soviet Union stopped, Talco had no cash or working capital to buy its feedstock. At first, it wrote barter contracts, exchanging raw material inputs for output of metal. Rahmon then introduced what are called tolling contracts.
Tolling explains the difference between what the plant receives for its production, and what the product fetches on the international market. The practice of tolling is well-known in the aluminium trade. It is a lawful contractual arrangement, unless the price differential conceals transfer pricing that violates local legislation, or a scheme to defraud the plant, or the local tax authority. Lawful tolling usually requires that the tollor, or trader, is legally separate from the tollee, or smelter; and that the two are not connected to the same holding company. Tolling is used when lack of cash prevents smelter companies from paying for the raw materials (principally alumina) they require for the potlines. Tolling contracts allow suppliers of the raw materials to deliver to the plant what is required, and fix the input price, while taking as payment the metal which the smelter produces. This is exported by the tollor, who leaves the tollee with a fee for production and processing. When the metal crosses the border, its declared value is what the smelter received for turning it out.
Thus, it has happened that the difference between what Talco’s production is sold for outside Tajikistan, and the value of production paid inside the country, is the source of the largest privately controlled fortune in the country. According to the charges laid by Tajik government prosecutors, and by the UK lawyers acting for Talco, that fortune has been fraudulently and corruptly spirited out of the country by the tolling contractors, in league with Talco’s management. How this was done when Talco’s management was directly under President Rahmon’s supervision and control, hasn‘t been explained. According to the counter-claims, the Talco fortune belongs to Rahmon, and he accumulates it by requiring the offshore traders and tollors to pay him a concession percentage of the international metal price. When the plant’s managers and traders have resisted Rahmon’s demand for his cut of the proceeds, he has accused them of unlawfully exploiting the tolling contracts from which he himself had sought to benefit. Details of this story – Rahmon’s claims, and the counter-claims — can be found in the UK court records.
First built in the mid-1980s, when Talco was one of the most technically advanced smelters in the Soviet Union, the breakup of the USSR, and subsequent civil war inside Tajikistan, curtailed the plant’s ability to operate. Supplies of the alumina required for the production line were cut off, along with operating capital and credit for trade, as well as the rail system, on which the land-locked republic had depended during Soviet times. By the mid-1990s, production at Talco had fallen from design capacity of 517,000 tonnes per year to less than 200,000 tonnes. Because costs to supply and operate the plant were larger than sales revenues, Talco was losing about $40 million per year.
In 1996, Avaz Nazarov, a Tajik, together with a group of his companies, began large-scale supply of alumina to the smelter, and financed the shipment of aluminium to ports in Russia or Estonia. Output steadily recovered. From the year 2000, the operating balance-sheet of the plant moved from red to black, as the Nazarov group arranged with Hydro, the aluminium unit of the Norwegian oil, energy and metals conglomerate, Norsk Hydro, to become the largest buyer of the metal.
At the end of 2004, Rahmon arranged for government officials to threaten criminal proceedings against Nazarov and members of the Talco management loyal to him, headed by the chief executive, Abdukadyr Ermatov. They fled to London. Instead of Nazarov, Ermatov, and Hydro, Rahmon arranged for Rusal to take over the export trade of the plant. Management was transferred to loyalists of Rahmon. State prosecutors attempted to lure Nazarov to a meeting in Moscow, capture him, and return him to Dushanbe, the Tajik capital, for trial. He was accused of conspiring to overthrow Rahmon and his government, and foment rebellion. In February 2005, just weeks after the Rusal takeover of the plant, arbitration court proceedings were initiated in London as Hydro charged Talco with contract default for failing to deliver about 80,000 tonnes of aluminium, worth an estimated $145 million.
In May 2005, Talco filed a lawsuit in the High Court in London. This alleged that the Nazarov group of companies bribed the smelter management to look the other way while it overcharged Talco for its alumina, shortchanging the company of alleged profits of about $220 million. Nazarov and his companies counter-claimed, accusing Talco, Rahmon’s circle, and Rusal of corruption, racketeering, and fraud. The outcome of these London legal proceedings has been the de facto trial of Rahmon’s management of the most important state enterprise in Tajiklistan. Several English judges have ruled, and their judgements to date provide an unprecedented verdict.
In November 2005 the International Court of Arbitration in London ruled that Talco had violated its aluminium delivery contracts with Hydro, and should repay Hydro $145 million, plus charges and costs. Talco appealed, and attempted to have the High Court keep its ruling secret. Both applications were rejected by the court.
In April 2006, Justice Morrison of the High Court reaffirmed in a ruling the earlier findings of fact by the Arbitration Court, and a ruling by Justice Blackburn that Talco had conspired with Rusal for the corrupt purpose of ousting the Nazarov group, and skimming off profits of the smelter operation “for the benefit of unnamed persons”.
In May 2006, Justice Morrison of the High Court ruled on Talco’s appeal of the arbitration order, announcing that Talco “are not the victims of fraud, they have been the perpetrators of it in this litigation…. [Talco] has been involved in deliberate attempts to mislead the [Arbitration] Tribunal and have committed acts which in this jurisdiction are serious crimes [forgery and attempting to gain a pecuniary advantage by fraud].”
In July 2006 the High Court ruled that Rusal should face trial for alleged fraud and racketeering in its takeover tactics. This decision was the first ever to oblige the Russian company to submit to the jurisdiction of a reputable foreign court. It was issued by Justice Cresswell of the High Court.
In October 2006 Justice Morrison of the High Court ruled against further claims by Talco and its lawyers, and formally accused Talco of “wrongdoing”. The judge added: “[Talco’s] approach to litigation demonstrates a contempt for the normal constraints which control parties’ conduct in highly charged adversarial proceedings”.
Rahmon changes mind, not pocket
The London court rulings were a stinging blow to Rahmon’s plans for Talco; they forced him to begin reevaluating his alliance with Rusal.
He then summoned Hydro, plus representatives of the Norwegian government, EBRD, and the World Bank, to a secret round of meetings in Dushanbe, the Tajik capital. These took place from June 24 to 27, 2006. The World Bank claims officially it didn’t participate; that is denied by a source inside the World Bank, and by the Norwegians who were present.
EBRD officials admitted shortly afterwards that they had been in Dushanbe themselves at the same time. The EBRD was an important creditor to Rusal at the time, as was the IFC of the World Bank group, and both had reason to allay the suspicion of the Russians that they weren’t plotting with Rahmon against Rusal. In retrospect, that has become obvious. At the time, however, all EBRD officials would say was that “the two missions were a coincidence — these things happen.” The EBRD officials in charge of Tajikistan even claimed that they didn’t inquire of their World Bank colleagues what exactly had transpired.
The talks with Rahmon had been super-sensitive. They focused on the Tajik President’s proposal that, in return for not requiring Talco to pay the $150 million by then owed to Hydro, according to the UK court orders, Rahmon would set up an exclusive new trading arrangement between Talco and Hydro, and that this trade would ensure over time the compensation Hydro had successfully sued for. He also asked the Norwegians to give him time to arrange everything until after the presidential election, scheduled for November. Those who attended, especially the Norwegians, understood that Rahmon was promising to oust Rusal at the aluminium plant, and replace the Russians with the Norwegians. They didn’t have long to wait.
Rahmon was reelected on November 6, 2006. On December 20, it was publicly announced by Hydro and Talco that they had resolved the issues in dispute in the UK arbitration, and that they had reached new agreements at a fresh meeting in Dushanbe with Rahmon. According to the official statements from the companies, “the new agreements between Hydro and TadAZ have been reached with the help and approval of the World Bank and the European Bank for Reconstruction and Development”. A mid-summer coincidence had become a Christmas certainty.
On 22 December 2006 Talco launched a tender, and then on January 8, 2007, placed the tender notice in the Financial Times of London. This called for tender bids for “procurement of supply to TadAZ of raw materials (in required volumes and types) and electricity during the contract term.” The notice also acknowledged that the winning bidder would arrange tolling contracts, and that “the toller will be required to pay tax on the products of processing on the customs territory of the republic of Tajikistan.” The winner of this tender was subsequently announced as Talco Management Limited (TML).
According to Talco’s website, the tender was an open one, but TML itself is a closed book. It is registered in the British Virgin Islands (BVI), but no details of who owns it have been disclosed, nor why it is necessary to the operations of the plant, following the agreement between Talco and Hydro. Talco’s website reports that Hydro will provide the alumina feedstock to the plant, take primary aluminium for sale, and “render technical assistance and make investments”. These may be in environmental protection, as well as in electricity production.
In July 2007, according to Rahmon’s chief prosecutor, Bobojon Bobkhonov, in a statement reported by a Tajik government newspaper, this agreement between Talco and Hydro “is in compliance with all international standards, is a transparent and open document, a sign of increased confidence that the international business community has in this country.” Talco and Hydro have refused to provide a text of this agreement, or respond to reports that Rahmon and his family who control TML.
Hydro’s December deal meant the writing was on the wall for Rusal. It had been ousted on Rahmon’s order, for Hydro’s benefit, just as Rahmon had arranged Nazarov’s ouster for Rusal’s benefit, two years earlier. Rusal had nothing further to gain (indeed, much to lose) by continuing to attack Nazarov in the London courts. And so, on April 27, 2007, it was announced by the UK law firm Clyde & Co, which had represented Nazarov and his group, that “Rusal and Ansol have reached a comprehensive settlement of all of their outstanding claims against one another without any admission of liability by either side. Both parties are content with the terms of the settlement and pleased that their disputes have now been resolved.”
This ended Russian funding for Talco’s court case against Nazarov. But Rahmon wanted the show to go on. He and chief prosecutor Boboknonov decided to open a new court attack in London on Rusal, accusing it of the same wrongdoing Rusal and Rahmon had already, though unsuccessfuilly, alleged against Nazarov. Despite the fact that Talco’s claims had already been discredited by High Court judges Cresswell, Blackburn, and Morrison, Talco’s London law firm Herbert Smith applied for an extension of time to prepare for trial of its claims against Nazarov until October 2008. This delay was granted by Justice Steele in June 2007. Talco also applied to the High Court for jurisdiction to charge Rusal with fraud, and join Rusal to the list of defendants in the Nazarov case. However, Justice Steele rejected this claim.
And so, in July Talco’s lawyers Herbert Smith moved to the British Virgin Islands (BVI), and filed a lawsuit there in which Talco repeated the accusations against Rusal, which had been thrown out of court in London the month before.
After details of Rusal’s secret financing of Talco’s London litigation had been exposed in court, and confirmed by the judges, the source of funds for the new round of litigation has attracted the speculation that it is coming from the Norwegians. An EBRD source claims the EBRD is not funding the latest round of Talco court claims. But the source did not rule out that the EBRD may be considering money for Talco. “If the Bank had a financial involvement with Talco,” spokesman Anthony Williams claims, “that would only follow a period of intense and thorough due diligence which would of course take into account all public statements, including court rulings to the extent that they are in the public domain.”
Rahmon refreshes allegations for anti-Russian campaign
Why it would pay Rahmon and Bobokhonov to risk their reputations once more, after getting them blackened through Talco in the first round, becomes clearer, once the role of the EBRD and World Bank to orchestrate the Norwegian takeover of Tajikistan’s aluminium business is understood as part of a general strategy to eliminate Russian influence in the country.
When asked a year ago how the EBRD would countenance lending to companies, against which there have been findings of corruption and business malpractice, an EBRD banker claimed there is a big difference between allegations and verdicts. The same banker repeated this distinction in a newspaper remark, quoted in a London newspaper last month. By continuing the High Court case in London against the Nazarov group, and opening a new one against Rusal in the related BVI jurisdiction, Rahmon, his chief prosecutor, Talco, and Herbert Smith are in effect telling the EBRD and the World Bank that nothing can be concluded from the High Court rulings – until and unless there is a trial and a verdict. Talco’s tactics are thus to keep these cases pending, but make sure there is no trial, and no verdict, for at least another year.
Until then, government news agencies in Dushanbe will continue broadcasting lengthy diatribes by officials repeating the old allegations against Nazarov, and adding the fresh claims against Rusal. In one of these statements, dated July 13, 2007, published by Asia-Plus, chief prosecutor Bobokhonov claimed that “all rulings handed down at the High Court in London have been in favor of TadAZ.”
The fact that this is false, and that the reverse is true, ought to be obvious. And it is – to everyone but the senior managers in charge of Tajikistan at the World Bank and the EBRD. To them, it is vital to preserve Rahmon’s strategic move towards the west, and to preserve the legal fiction that none of the rulings that have been handed down so far is so final, it creates an obligation on the bankers’part to pay attention.
Three monkeys who see no evil
Quinones was asked what anti-corruption reports and policy recommendations have been by made by the EBRD? Who has been in charge of the anti-corruption programme, and to whom does that official report? What actions have been taken to implement the anti-corruption programme in Tajikistan, and with what results to date?
As EBRD’s chief compliance officer, with the mandate that has already been cited, it is plain that Quinones is responsible. But through a spokesman, she claims she is not responsible for a “programme” at all. The questions, Quinones said, “suggest that the EBRD has specific (and, by implication, country-specific) anti-corruption programmes. It does not.”
Moreover, she intimated through her spokesman that the London court rulings condemning Talco and associated Tajik government officials for wrongdoing aren’t relevant to the EBRD. “The EBRD’s anti-corruption and integrity agenda is achieved primarily, however, via the projects that it undertakes, the due diligence that is done before any project is approved, the conditions attached to projects and the monitoring of projects during the period of the EBRD’s involvement. The EBRD also works on integrity issues via policy dialogue with the authorities in our countries of operations.” Since the EBRD doesn’t yet have a project with Talco, the implication from Quinones is that there is nothing in the UK High Court cases for the EBRD to examine; at least, not until the cases conclude with verdicts; and not until the EBRD approves a financial relationship with Talco.
Admitting more about the High Court rulings to date would be risky for the EBRD, if its objective is to stabilize Rahmon’s regime in western hands, and preserve Hydro’s newly negotiated position from counter-attack by the Russians. Admissions would also be potentially risky for Quinones, if she knows more about corruption in Dushanbe than has been admitted into what her spokesman coyly refers to as “the public domain.”
It is more difficult for Katsu and Dixon at the World Bank to turn the same blind eye, not only because they have authorized a great deal more spending in Tajikistan; but also because they cannot deny that their bank has been investigating the potential for corruption in the way Talco is run by President Rahmon. Also, before and during the Wolfowitz presidency at the World Bank, much ado was publicly made by the bank about fighting country-specific corruption.
The C-word is a stinging nettle that requires careful handling.
A report by the World Bank, dated June 2004, entitled “Case Study – Tajik Aluminium Plant – TADAZ” noted that “the company is not governed by a Board of Directors or any other type of executive committee. Instead, it is under the sole command of its director, who reports only to the Tajik President at a monthly meeting”. The arrangement is exceptional in Tajikistan, the Bank report noted, and only one other state enterprise, Vostok Redmet, a precious metals producer, is organized on the same lines. The Bank thus confirmed that throughout the period in which Talco now accuses both the Nazarov group and Rusal of fraud, Rahmon himself was in direct control of the plant every month.
The World Bank’s case study also reported “more than 98 percent [of the plant’s aluminium] is exported to a limited number of customers incorporated overseas, under exclusive contractual agreements. The ownership of these companies is unclear.” The litigation record in the UK has now established what the World Bank claimed not to know – that before December 2004 the tolling companies offshore were controlled by Nazarov and Hydro, and that after December 2004 they were controlled by Rusal. The one continuity the Bank acknowledged was that both schemes of offshore tolling were directed by Rahmon.
The Bank acknowledged this required a remedy that was nothing short of radical – removing Rahmon from the line of command. According to the June 2004 report, the Bank recommended that “the [Tajik] Government should create a unit to monitor [TadAZ’s] quarterly financial flows, debt and arrears, as well as financial and other performance targets. In addition, the unit should oversee governance arrangements, including appointment of Directors and the publication of regular financial information, audited financial statements and company charters.”
Asked to verify what the World Bank has done subsequently, Katsu and Dixon refuse to answer. Instead, conceding the problem remains, they said through a spokesman that “the Bank is cognizant of the governance and corruption risks in Tajikistan and we continue to help the Government address these risks in all sectors. We take very seriously any allegations of corruption because it can deny valuable development assistance from reaching the poor who need it most.”
This is clumsily expressed, because the London judges have not issued allegations of corruption in Tajikistan; they have issued rulings. What action, Katsu and Dixon were asked, have they taken following the determination by Justice Morrison that: “in short, Tajik [Talco] and those behind them cannot be trusted”? They replied: “please be aware that the Bank does not monitor court cases between private parties beyond the information publicly available. To the extent that arbitration cases such as the recent one between TadAZ and Hydro increase the perception of business risk in Tajikistan and may impede FDI flows, we are pleased to see such cases resolved through respected judicial processes.”
Naturally, Katsu and Dixon aren’t forgetting that the Tajikistan Aluminium Plant isn’t a private party; and that chief prosecutor Bobokhonov is making a state criminal case of the civil charges that have been filed in London and BVI, linking them to allegations of sedition and plots against Rahmon. The blind eye Katsu and Dixon have turned is toward the High Court cases that have gone against Talco, but not the arbitration Katsu and Dixon have helped Rahmon rig in Hydro’s favour – and in his own.