Page 2 of
2 Global tizz over Tajik aluminum
deal By John Helmer
to a positive development within
the areas of health, safety and environment in
Talco, which would benefit the workers and the
environment as well as the Talco smelter
operations."
In practice, Hydro is doing
its buying and selling with the British Virgin
Islands company, not with Tajikistan. And what
happens to the smelter and its workers is TML's
business, not Hydro's. For all Hydro knows, TML
could be over-charging the plant for electricity
and alumina, under-paying for metal and shorting the
plant workers for wages. The
World Bank has charged Tajik government officials
with profiteering with the supply of electricity
to state enterprises, and so Asia Times Online
asked Hydro what it knows about this crucial
factor in the profitability of the smelter.
Hydo passed the buck to TML. "Hydro
purchases aluminum and sells alumina to Talco
Management and there is no connection [for Hydro]
to Talco's electricity prices," the company
statement responds.
Regarding what it
knows about TML, Hydro's lawyers testify: "Talco
Management Ltd has also undertaken an obligation
to be audited by an international recognized
auditor. Such audit reports are to be displayed to
the World Bank, EBRD and Hydro."
To
clarify the future, indefinite and passive form of
this wording, Hydro was asked what auditor has
been selected, what are the dates of commencement
and completion of the first audit period, and when
Hydro expects to see this auditor's report? Hydro
spokesman Thomas Knutzen refused to answer the
questions. Instead, he said: "If you want
information regarding the audit of Talco
Management, we suggest if you inquire directly
with Talco Management."
TML does not
respond at the contact numbers publicly listed,
nor does Talco. But Hydro's refusal reinforces the
NA24 report that the Norwegian company does not
know or does not want to admit that it has not
seen an auditor's report on the cashflow of TML.
This suggests that Hydro's money is flowing, not
through a transparent and audited channel of the
Tajik state company, but through the Caribbean
cutout, which claims legal control over 100% of
the inputs and outputs of the smelter.
Testimony given in the London courts in
cases brought by Hydro against Talco in 2005, as
well as by the Ansol group of companies, which
managed the smelter until 2004, suggests that the
last international auditor to review the smelter's
accounts was PricewaterhouseCoopers (PwC). The
last audit according to international standards
was reported for calendar and financial year 2002
and completed by PwC in 2004.
Since then,
there has been only a warning from a World Bank
report on the smelter, dated June 2004. This
noted: "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 World Bank's
study also reported "more than 98% [of the plant's
aluminum] is exported to a limited number of
customers incorporated overseas, under exclusive
contractual agreements. The ownership of these
companies is unclear."
Hydro has told Asia
Times Online it has been "discussing issues" with
the World Bank, but there is no sign that Hydro or
the bank has implemented the following bank
recommendation in the June 2004 report: "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."
In fact,
Hydro has gone in the opposite direction, backing
Rahmon's control of the aluminum cashflow and
suggesting he legitimize his position on a visit
to Oslo as guest of the company and the king of
Norway. Norwegian media have reported, and Hydro
has now confirmed to Asia Times Online, that
Hydro's director Eivind Reiten attempted this year
to lobby for a state visit to Norway by Rahmon.
Foreign Minister Jonas Store refused.
Asked to explain why Hydro had taken
Rahmon's part in Oslo, the company told Asia Times
Online: "In Mr Store's reply to Mr Reiten in May
2007, he stated [translation ours] 'visits on a
governmental level in countries in Central Asia
have so far been limited. The political contacts
should develop gradually in accordance with other
relations and weight is given to the totality of
Norway's relationship to the country in question.
I am therefore positive to a visit to Tajikistan
and other Central Asian countries at the State
Secretary (parliamentary under secretary) level.'
No other reasons were given by nor discussed with
Mr Store."
A source in Oslo said that
Hydro executives have also been summoned recently
to the Trade Ministry to explain their
relationship with Rahmon, the Tajik smelter and
the Caribbean cutout.
According to
business magazine NA24, government ministers are
not the only ones to be skeptical. Ingvild Vaggen
Malvik, a member of the Norwegian Parliament's
commerce committee, told NA24 that the record of
Hydro's dealings in Tajikistan "sounds like a
story about corruption from the beginning ... I
get the feeling that this is a company that needs
to do some housecleaning. Several things point in
the same direction and there are indications that
procedures must improve. It is clear that there
are many challenges when doing business abroad,
especially in regimes such as Tajikistan."
A second member of the Norwegian
Parliament, Sigvald Oppeboen Hansen, a Labor party
member on the commerce committee, is reported by
NA24 as saying of Hydro: "This doesn't sound good
... It's easy to fall into a trap, so you must
develop procedures to avoid it. If this is the
case, it just adds to the list of too many
unfortunate cases."
In the NA24
publication, reporter Trond Gram also quotes an
Oslo expert on corporate governance problems: "My
reaction is that it is apparent that Hydro is
accommodating corruption. It's not that they are
making bribes themselves, but that they are
accommodating the problem." The comment came from
Ivar Kolstad, senior researcher at Chr Michelsens
Institute and who is working on an institute
project, "Corruption in Natural Resources
Management".
Inside Hydro, company
executives admit there has been misreporting of
the aluminum trading accounts and revenues of the
Talco smelter. And because of the dominant share
of industrial output and trade that the plant
takes in the impoverished Tajik economy, the
misreporting also extends to Tajikistan's gross
domestic product, imports, exports and balance of
payments - statistics that are prepared under the
supervision of the International Monetary Fund and
World Bank. How effective this supervision can be
when the financial flows through the Caribbean are
not counted is a question Hydro and the World Bank
have been asked by Asia Times Online to consider.
Until this month's disclosures in Oslo, there had
been no reply.
Norwegian sensitivities to
Hydro Aluminum's exposure in Tajikistan arise at a
doubly awkward time for the state as controlling
shareholder and for Norwegian corporate
regulators. The latter are already investigating
alleged corruption in the conduct of Hydro's
sister company and energy affiliate StatoilHydro,
which has been accused of involvement in improper
payments to government officials in Libya and
elsewhere in return for lucrative concessions.
Hydro was asked if its risks in Tajikistan
are still insured. According to the company:
"Hydro believes that it has appropriately
mitigated any significant risks related to these
transactions either through the contractual terms
or by designated security arrangements. The
details of these arrangements are confidential." A
source close to Hydro says the company is using a
corporate captive to insure itself in Tajikistan.
Spokesman Knutzen also told Asia Times Online that
"as Hydro is listed on the NY Stock Exchange,
Hydro follows the SEC rules and is assisted in
this regard by US counsel".
While
remaining silent for the time being on Tajikistan,
the Adam Smith consultants concede that
"corruption affects entire societies adversely and
attitudes to corruption become increasingly
ambivalent as long as the incidence of corruption
remains unchecked. The climate of mistrust that
corruption engenders further blights efforts to
encourage productive private investment and
effective public private partnership."
John Helmer has been a
Moscow-based correspondent since 1989,
specializing in the coverage of Russian business.
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