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The report was originally published by Aravot.am

Pastinfo.am. Two years have passed since the shady and potentially corrupt business deal arranged by the Armenian Government. The investment pledges by the “GeoProMining” have remained nothing more but hot air: neither the outlines of the copper smelting plant, nor any draft plans for a new nuclear power plant have seen light. A response to a FOI request, submitted by the “Pastinfo” news agency to the Armenian Ministry of Economy, confirmed: no works in terms of building a copper smelting plant have been launched, despite only one year remaining till a deadline articulated by Pashinyan.

Two years since the ‘special operation’ of seizing ZCMC shares

On September 30, 2021 it was officially announced that the Zangezur Copper Molybdenum Combine, or ZCMC, had a new shareholder, Roman Trotsenko, a Kremlin-affiliated Russian billionaire with quite a suspicious biography. It was revealed that a company, belonging to Trotsenko, called “Industrial Company”, had acquired 60% of shares of ZCMC – the largest Armenian taxpayer – and rushed to transfer 15% of the ZCMC shares to the Armenian Government, as a gift. The reasons and conditions for such a move are unclear. No official explanation has been revealed till now of why and how the largest Armenian taxpayer entity had been acquired by a Kremlin-affiliated business tycoon or why the latter decided to give away a sizeable portion of shares to the Pashinyan Government. This deal attracted not only criticism in the opposition, but also caused objections inside the team that supported Pashinyan. Even the “Republic” party chairperson Aram Sargsyan publicly stated that he was negative about the deal and the process, that took place at night. “In particular, it is unclear to me why someone decided to make gifts to the state, and what exactly that someone will receive in return”, – Sargsyan said in one of his interviews.

This game by the Trotsenko & Pashinyan duo attracted the attention of international organisations. No coincidence that in the annual report for 2023 the Transparency International downshifted Armenia by three points in terms of anti-corruption measures by the Government. The allegations about corruption in this shady deal are rooted not only in the fact that the new major shareholder is closely affiliated with the Kremlin, but more so in the ways and means by which he acquired the top Armenian taxpayer entity. Despite the fact that the Armenian Government spared no effort to conceal the details of the deal, the “Pastinfo” and a number of other mass media have unveiled in their investigative reports a rather gruesome reality of how the Pashinyan regime had had both direct participation and indirect role in seizing a business and transferring it to a tycoon closely tied with the Kremlin.

As “Pastinfo” reported earlier, “Zangezur Mining” company, which was the ZCMC’s 12,5% shareholder, filed a complaint in the court to claim the rights of preferential acquisition of the company’s shares. In other words, in case any shareholder decided to sell their assets, “Zangezur Mining” claimed to retain their rights to acquire these shares as a matter of preference above other potential buyers. As to why “Zangezur Mining” had become suspicious about ZCMC top management’s (which represented one of the shareholders) possible plans to sell their shares which in turn would diminish the stable profit margin of their share, is the other side of the coin, which will be unveiled at a later stage. The complaint, lodged with the court, shall be addressed below in the first place.

The complaint, submitted to the Armenian court on August 2, 2021, was not only ruled admissible, but also the court applied a means of securing the claim, placing a lien on 75% of the total shares of the ZCMC. Yet, on September 30 the Court of General Jurisdiction in Syunik region decided to hold a hearing and a few hours later – already after work hours – those shares were transferred to Roman Trotsenko’s GeoProMining and, more specifically, were underwritten to its subsidiary “Industrial Company”. In the next step the “Industrial Company” quickly, deep at night, decided to award 15% of the ZCMC shares to the Armenian Government. The latter most likely can be considered as an acknowledgement move to the Government for the arrangement of the acquisition of such profitable enterprise.

It’s noteworthy, that the court order was officially signed the following day, which, however, did not upset the plans to arrange for both the acquisition and the donation processes to be completed before the court order was delivered. This left the open an question whether the parties to the deal were aware what ruling the judge would make. But even these are only “small details” in this entire story. At later stages the Court of Appeals, indeed, voided the order issued by the Court of First Instance and annulled it, but the business deal had already been sealed.

It’s curious that Pashinyan, too, publicly accepted that this case had been an expression of government racketeering. “They say we do not fulfill our promises. In Kapan we promised, we said ‘enough is enough’ and said that in ZCMC the Government shall acquire its shares”, – Nikol Pashinyan said at the Armenian National Assembly on April 21, 2023 and boasted that this promise had been fulfilled.

Now let’s turn to the question of why the 12,5% shareholder had become suspicious that the company’s top management and, simultaneously, almost equal shareholder may abandon a profitable business enterprise. In fact, the Armenian State Revenue Service had launched a criminal investigation against ZCMC’s former General Manager Mger Poloskov, who had also been one of the main shareholders.

“For the purposes of large-scale tax evasion, through entities registered in foreign countries and non-resident entities affiliated with him and on their behalf, utilising a specially designed scheme, the suspect had arranged contracts for the produce of Zangezur Copper Molybdenum Combine – namely copper concentrate – to be supplied in prices significantly lower than the market value, which caused lower levels of reported taxable profit and subsequently the state budget did not get taxes and other required payments in the amount of 15.017.640.469 Armenian Drams” – the official press statement released by the State Revenue Service claimed. Poloskov was also declared wanted, but this information was attempted to conceal. “Pastinfo” FOI requests were responded by law enforcement agencies in rather a strange way, claiming the requested information contained personal data which could not be released without permission of the accused. The police, by indirectly confirming Poloskov’s been on a wanted list, has responded they did not have right to go public about it. This, most likely, has been a completely novel approach in combating crime, since previously the images of those being wanted were published to be found also with the help of the general public. In this case, it appeared, the goal of the law enforcement bodies was not to find him. Instead, it might be one of the tools to exert pressure on Poloskov to first sell the 75% of shares of the ZCMC, and then also his own shares. This is what exactly happened eventually. In 2022 it was announced that the criminal case against him was to be dislodged, since allegedly the financial losses and damage caused to the state had been restored.

It might seem that the law enforcement bodies launched the criminal case to only claim his shares and make a change among the ZCMC owners.

The question is – why has the Pashinyan regime not allowed for the shares to be sold as prescribed by the ZCMC bylaws, why has the Government violated the rights of the other shareholders to preferential acquisition of the shares, and why has such a key asset in the national economy been awarded to someone known to be so closely affiliated with the Kremlin?

Who is Mr Trotsenko?

As mentioned above, Roman Trotsenko is not a random businessman. He has a shady reputation in Russia and Russian media has branded him as someone focusing on business seizure operations. Mr Trotsenko, who had previously been accused of seizing a chemical plant in Russia, has now achieved considerable success in concentrating sizable shares of the Armenian mining industry in his hands. Namely, he has become a major shareholder in Armenia’s largest Sotk gold mine, he owns Agarak Copper Molybdenum Combine, the mines in Meghradzor, and aspires to grab also the copper and molybdenum open-pit mine in Teghut. In other words, Pashinyan’s regime, which currently finds itself in a diplomatic ‘cold war’ with Russia, is awarding one of the most important economic sectors in the country to a shady Russian business tycoon. All these despite the fact that Pashinyan has arguably been urged by the Americans directly – “Don’t flirt with Trotsenko!”, or in other words “not to play” with him. The government has not denied such communication with the Americans. The above raises a very serious question: what kind of ‘earthquakes’ can the Armenian economy be exposed to in case Pashinyan’s Government goes in the direction of altering the strategic alliance with Russia?

Forgotten investments pledges

In order to justify the likely corrupt and questionable business deal and substantiate the argument that the deal had been in the best interests of Armenia, Nikol Pashinyan resorted to his favorite tool – manipulations. Pashinyan has even declared that the new major shareholder will be making major investments in Armenia – namely, building a new nuclear power plant and a copper smelting plant.

““GeoProMining” has made a proposal to Armenia, we discussed that proposal and determined that the proposal is in line with the Armenian national interests, since it includes two very important components. First – it’s about building a copper smelting plant, which means that Armenia will not merely export copper concentrate, but we must produce the metal itself. And second, integral part of this project is to also build a new nuclear power plant. This major business entity has shouldered investment obligations for the copper smelting plant, and then we also launched negotiations about building a new nuclear power plant in Armenia. The nuclear power plant cannot be a fully private entity, and the Government will also take an active role there. And it turns out that our interests coincide”. This is a quote from Nikol Pashinyan’s statement at the National Assembly in October 2021, where he also added that the copper smelting plant construction was planned to be launched before 2025.

Moreover, it was officially stated that Roman Trotsenko aimed at making long-term and large-scale investment projects in the Armenian mining sector – with an overall volume up to $4 billion. Even the chairman of the “Republic” party Aram Sargsyan considered such a large size of investment pledges a mere exaggeration, who added that a copper smelting plant in Armenia can be built with up to $800 million overall costs. “With Russia – our economy is going to be neither environmentally-friendly, neither in terms of industrial output, nor in terms of investments,” Sargsyan argued in an interview with local Shant TV.

Anyways, two years since the major investment pledges “Pastinfo” tried to find out if there are any updates. And no surprise there: no progress reported.

“The issue of the copper smelting plant is in the stage of investment proposal and relevant state agencies are engaged in the process”, – Armenian Ministry of Economy said in an official response in September 2023. Regarding the nuclear power plant issue – here we have backpedaling, worse than lack of progress.

Failure in managing the ZCMC shares

Trotsenko is failing on the delivery of his pledged investments, while the Government has no idea how to manage the ZCMC shares it was awarded. In one year three different managing bodies were named.

Since the beginning the management of the Government shares was delegated to the Office of the Prime Minister. Next, in January 2022 the management functions, by a Government decree, were transferred to the Armenian National Interests Fund, or ANIF. The ANIF was quick to release a statement that they positively evaluate the decision of the Government to manage their shares in ZCMC through a professional entity. It’s important to mention that at that stage the shares increased to 21.9%, given that after Trotsenko’s move the Government had received “as a gift” in a classified decision shares from other minority shareholders – amounting to an additional 7% in total.

Yet, the management of the portfolio didnt work out in the case of ANIF either, which was revealed thanks to continuous efforts of submitting FOI requests by “Pastinfo”.

ANIF is an entity established by the Government in 2019 with the explicit mandate of attracting foreign investments, facilitating exports growth and co-financing large-scale investment programs in Armenia. The Board of Directors is comprised of three members, only one of whom is an Armenian – the former Deputy Prime Minister Tigran Avinyan. The other two are foreigners – an Italian banker and entrepreneur Isidoro Lucciola, and Dominique de Villepin –  former Prime Minister of France.

ANIF also has an Investment Committee, where two among three members are again foreigners, including the chairperson of the Committee.

In Summer 2022 written enquiries were submitted to ANIF’s French and Italian Board members, as well as the chairperson of the Investment Committee, seeking to receive answers to the following questions pertaining to the ZCMC’s shares. In particular, the FOI request contained the following questions:

– What has been the degree of lawfulness of transferring the ZCMC shares under ANIF’s management, or had they at least enquired clarifications to that question;

– Why have ZCMC shares been accepted for fiduciary management, if there is a legal claim surrounding that? Are there any inconsistencies with regards to ANIF’s policies, internal decisions, including code of ethics and corporate governance standards, as well as personal convictions, given their profile as public figures? Do they believe that the Court will not rule to return the relevant shares to the ZCMC or be transferred to another shareholder? If positive, the followup question would be whether their belief is rooted in the conviction that the Government would not allow the Court to rule against the position of the Government?

– Can there be any efficient and effective governance in a company where one shareholder initiated a judicial process with the company and other shareholders? Are you being able, in such circumstances, to ensure equality among the shareholders, or else are you part of a “corporate war” and have chosen sides? To what extent is this in line with the policies and the goals that your organisation strives for?

Except for the above, the members of the Board of Directors, Investment Committee chair and one other foreign member were also asked to answer whether they had personally been engaged in making decisions about the ZCMC shares, in particular whether they had voted in favor of accepting for fiduciary management such property that is part of a legal battle? If they did not partake in this, given the available public information on the matter, have they initiated any moves to check on the diligence and integrity of such a process, or else it was not important to them the allegations of corrupt business dealings by an organisation they are formally affiliated with only because they had not been part of such decisionmaking personally? Lastly, the FOI request included also questions whether as part of the decision to accept for fiduciary management the respondents requested to carry out an audit in the ZCMC? If not, why have the requests of such an audit by the other shareholder, which at the time still held their 12,5% of shares, were being denied?

However, our FOI request was not delivered to the relevant persons. The ANIF submitted an unsigned response, where it was claimed the following: “In response to your enquiries about ZCMC we hereby inform that ANIF, as a fiduciary manager of minority shares (like in any relevant case) is for the most part not partaking in the ZCMC’s daily business management circle. In our view, most of your questions shall be addressed to the ZCMC. The relations among shareholders are regulated by appropriate Armenian national legislation. Hence we can inform that your relevant questions, including the publicity issues, are being regulated by the appropriate national legislation”.

The above has given grounds to believe that ANIF decided to sideline or isolate the foreign members and tried to shield or otherwise keep it secret from them the entire illegal business process, as a result of which the Armenian Government acquired shares in the top one taxpayer in the country. “Pastinfo” published series of articles on the subject-matter, after which it was revealed that ANIF dropped the management of the ZCMC shares and since 2022 December the shares were transferred for management to the State Property Management Committee. In this case ANIF again rushed to make a statement. “ANIF hereinafter will not manage the Armenian Government’s shares in the ZCMC, which was transferred to ANIF’s fiduciary management by a Government decree in 2022. In accordance to a new decision by the Armenian Government the ZCMC shares owned by the Armenian Government will now be managed by the State Property Management Committee”, the 2022 December statement by ANIF read.

We can only presume that perhaps the ANIF’s foreign members did not want to be engaged with a deal that will most likely end up in international courts, as there are ample grounds and prospects of that.

Trotsenko, who pledged hundreds of millions in investments, is no more visible in public. He keeps under his fingertips the Armenian mining sector and, in return, the Government keeps the headache following a questionable or likely corrupt business deal. One of the ZCMC minority shareholders is determined to unveil in international judicial institutions many dark sides of this deal and violations of their rights – to achieve not just voiding the deal, but also compensation for losses incurred.