OCCRP new investigation: Aliyev clan controls assets worth more than US$ 3 billion in banking sector
Azerbaijan hopes to dazzle the world with the first-ever European Games, opening with a lavish ceremony in Baku on June 12. President Ilham Aliyev is banking on the European journalists to show the ancient city’s transformation to a 21st century playground. Meanwhile, the reporters for the Organized Crime and Corruption Reporting Project (OCCRP) posted a new story revealing that behind the scenes the Aliyev clan controls assets worth more than US$ 3 billion in at least eight of Azerbaijan’s 45 banks.
The reporters emphasize that while outwardly the country is rich, that wealth is not trickling down to the citizens of Azerbaijan who increasingly are going into debt to survive. As of Feb. 1 2015, there were 2.3 million people who had bank loans, a sharp increase of 17.7 percent in one year, as many struggle to cover sharply rising living expenses. Interest rates on consumer loans in 2014 averaged 18 percent, three times higher than in the European Union.
Still one clan is benefiting from the misery: the clan of Azerbaijan's President Ilham Aliyev. The clan is linked to some of the banks through Ata Holding, a conglomerate that also includes the Aliyev clan's vast and growing holdings in other economic sectors, including telecommunications, construction, transportation, mining, and gas and oil. The clan also controls Pasha Holding, a conglomerate with interests in banking, as well as construction, insurance, travel and investments, according to an Ernst and Young audit. That means some consumers are likely taking out high-interest loans from banks tied to the ruling clan in order to pay for goods and services provided by companies tied to the ruling clan, the reporters point.
Inflation has averaged 7 percent annually in Azerbaijan since 2007, which may help explain why so many people are borrowing money to cover both daily expenses and huge one-time costs like the lavish weddings. By comparison, the annual rate of inflation for EU countries has exceeded 3 percent only in 2009, and the inflation rates on average have been near zero for the past five years. On top of all this, the value of the Azerbaijan manat dropped 33 percent against the US dollar on Feb. 21, 2015. As a result, many people in Azerbaijan are suffering their most serious cash squeeze in more than a decade, according to the story.
Yet even taking into account the severe drop in the currency exchange rate, OCCRP calculates that the banking assets controlled by the clan at the beginning of 2014 were worth at least US$3 billion. On that date, these eight private banks held 19 percent of the country's banking assets. Three of these banks (Capital Bank, Xalq Bank and Pasha Bank) were ranked in the top four in assets held by private banks. The majority state-owned International Bank of Azerbaijan held 38 percent of bank assets.
Since Ilham Aliyev became president in 2003, his clans' personal financial stake in many of Azerbaijan's leading economic sectors has grown. Azerbaijani economist Zohrab Ismayil told OCCRP that the problem is a 2012 amendment in the law on access to information, which closed registry information for commercial institutions.
The ruling clan controls 29 percent of the shares in Silk Way Bank which is a division of SW Holding, a conglomerate that controls Silk Way Airlines often used by the ruling clan for private trips. ADOR LLC controls 42 percent of the shares in Expressbank. ADOR LLC is registered at the same address as some representatives of the Aliyev clan. Anadolu Investment Company, which owns 94 percent of Azerbaijan Industrial Bank, is also registered at the same address. One of the founders of Anadolu is the niece of Hassan Gozel, who has managed several Aliyev clan businesses and set up three offshore companies in the British Virgin Islands for the clan, according to the investigation.
In addition, government officials, their family members and close associates of President Ilham Aliyev have ownership shares in five more banks. 99 percent of AFB Bank shares are controlled by Gilan MMC. The parent company of Gilan MMC is United Enterprises-International Limited. The two sons of Minister of Emergency Situations Kamaladdin Heydarov, Tale and Nicat Heydarov, have been listed as directors of the United Enterprises-International Limited. Anar Mammadov, the son of Minister of Transportation Ziya Mammadov, was at one time an 81 percent owner of Bank of Azerbaijan. Mehdiyeva Nigar Ismayil, who is the daughter-in-law of the head of the Presidential Administration Ramiz Mehdiyev, controls 75 percent of the shares in Bank BTB.
''And banking is only part of their empire,'' the reporters write. This is just one of the stories that Azerbaijani investigative reporter Khadija Ismayilova was working on in December 2014 when she was jailed in Baku on trumped-up charges. Civil society watchdogs and her colleagues believe the real reason she was jailed was her reporting on business deals involving the Aliyev clan.
OCCRP notes that the reporters continue Ismayilova's work in defiance of her ongoing incarceration. Drew Sullivan, OCCRP editor, says Khadija's illegal detention, like that of nearly a hundred other Azerbaijani prisoners of conscience, is proof of the lengths to which the Aliyev clan will go to protect the billions they have looted from Azerbaijan. But Sullivan stresses that the clan should know that for each reporter arrested, twenty or forty or even one hundred will take their place and finish their work. “They will always be in the news for their thievery, their shockingly lavish lifestyles and their disgraceful exploitation of the Azerbaijani people. They are in our media jail,” he added.
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