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    Central Asia
     May 10, 2012


Azerbaijan's first family strikes gold under cover
By Nushabe Fatullayeva and Khadija Ismayilova

BAKU - Novruz Allahverdiyev, 40, lives in a mud house in the village of Chovdar, a small mining town in the mountainous region near the border with Armenia. He is one of 800,000 internally displaced persons from the war with Armenia that battered his native Nagorno-Karabakh region in the early 1990s.

Allahverdiyev and members of 60 other displaced families found shelter and a place to farm in the mountains around Chovdar. Like many in his predicament, Allahverdiyev is patriotic, and the walls of his poor home are plastered with pages from an aging calendar featuring portraits of President Ilham Aliyev and his late father, former president Heydar Aliyev.

Allahverdiyev's family now faces yet another problem. A British

 

mining company has taken over some of his land and has blocked one of the two streams his village relies on for water. Allahverdiyev is sure President Aliyev will help him and his community.

But his faith may be misplaced. What Allahverdiyev doesn't know is that the president and his family own a stake in the new mine. The UK company is actually a front for the first family.

In two 2007 decrees, the state assigned the right to develop the Chovdar gold field and five other sites to a company called Azerbaijan International Mineral Resources Operating Company, Ltd. (AIMROC). AIMROC - which controls a 70% stake in the mines, while the Azerbaijan government controls 30% - has been building the infrastructure for the Chovdar mine and is expected to begin production this year.

Panamanian Trail
But sorting out AIMROC's structure is a daunting task. While Chovdar locals blame the "ingilis" (English) for their woes, the truth is quite different. AIMROC is a joint venture of four companies: Londex Resources SA, Willy and Meyris SA, Fargate Mining Corporation, and Globex International LLP. All four are shell companies that, according to Azerbaijani officials, were set up specifically for this deal. It is unclear if any of them have any mining experience or other mining projects.

​​A fifth company - Mitsui Mineral Development Engineering Co Ltd (MINDECO), a mining-engineering company owned by Japan's Mitsui Mining and Smelting Co - is listed as the official project supervisor, but has no ownership.

​​Of the four AIMROC owners, the only UK-based company is Globex International, which has an 11% stake, worth about US$200 million. But Globex is actually owned by three companies registered in Panama: Hising Management SA, Lynden Management Group, Inc, and Arblos Management Corporation. According to Panamanian registration records, all three firms list President Aliyev's two daughters - Leyla and Arzu Aliyeva - and Swiss businessman Olivier Mestelan as senior managers.



Ilham Aliyev's daughters, Arzu (left) and Leyla, are listed as senior managers at the Panamanian-registered companies.

Mestelan has long had close ties to the Aliyev family. He has organized artistic events with them and, together with Leyla and Arzu, appears in the records of other Panamanian companies being used as fronts for businesses in Azerbaijan, including the Azerfon cellular-services provider. Mestelan declined to be interviewed for this story.

Aliyev's office refused to answer questions about his family's business interests in the gold fields. Presidential spokesman Azer Gasimov did not return phone calls and did not respond to questions submitted in writing.

Opaque decisions
AIMROC has been controversial from its beginning. The consortium was formed by a 2006 presidential decree that identified Globex as part of the consortium. In 2007, AIMROC was awarded 30-year leases on the mineral fields.

Chovdar alone is a lucrative parcel. According to the Azerbaijani Environment Ministry, it contains reserves of 44 tonnes of gold and 164 tonnes of silver, worth about $2.5 billion at current prices.
The contracts were awarded to AIMROC hastily and over the objections expressed by many members of parliament during hearings held in June 2007. Lawmakers complained that the consortium's ownership was opaque; that the contract was awarded in violation of bidding procedures; that none of the companies had any history of mining; and that the deal was contrary to Azerbaijan's national interests.

​​During the hearings, deputy Valeh Aleskerov, chairman of the parliamentary Natural Resources Committee, defended the deal. He said the creation of offshore companies was "a common practice around the world" and that no tender was issued because of the uncertainty about how much mineral wealth there was. Instead, he said, the government held talks directly with potential investors.

The Environment Ministry's chief geologist, Agamahmud Samedov, told RFE/RL that the estimates of the other five fields are classified. He also declined to comment on AIMROC's ownership or its lack of mining experience.

When asked last month about AIMROC's ownership, Aleskerov said, "Do you think the Azerbaijani government would contract with someone unknown, with just anyone from the street?" When asked if the Aliyev family has any financial interest in the project, Aleskerov said only "Shame on you!" and hung up.

Professional proxies
Parsing the rest of AIMROC's structure is more difficult. Londex Resources and Fargate Mining are registered in Panama, according to documents obtained from the Panama Registry of Companies.

The documents indicate that the companies are interrelated through a complicated chain of company directorships. All three are or were at one time owned by two companies registered at the same address on the tiny Caribbean island of Nevis: Casal Management and Tagiva Management.

Casal and Tagiva act or acted as the director for at least 20 companies in the United Kingdom, the United States, and Panama. It is likely that the companies are professional proxies used to hide actual ownership.

According to a document of the Tax Registry of Azerbaijan, Willy and Meyris SA (listed in some documents as Will & Meyris SA) is represented by a Czech geologist, Mirko Vanecek, the executive editor of "The Journal of Geosciences" in Prague.

'The president is a good person'
Meanwhile, back in Chovdar, locals are looking forward to a rumored visit by President Aliyev to mark the opening of an ore refinery the consortium has built.

"We have heard that president will come to the opening ceremony of this factory," villager Paneh Huseynov says. "Please tell our president to come and visit us. Tell him we support his policies. We will not be allowed to approach him. Please, we ask him to come and ask about our living conditions. Then he'll see how we live and how we suffer."



Novruz Allahverdiyev is sure the president will help him.

Villagers had no idea that the president's family owns part of the mine operator. "How can the president be benefiting from this production? ... All of the companies here are foreign. Englishmen are running the business here," says one local who refuses to give his name.

Teacher Nureddin Ramazanov lost some land to AIMROC. With a salary of just $130 per month, Ramazanov says his family is starving.

"The company destroyed our road," he says. "Geologists took our land. They paid us only 2,000 manats [$2,500] per hectare. ... Now I don't know how we'll survive."

Meanwhile, Karabakh exile Allahverdiyev says he is hoping to get a job at the mine. Locals say mining jobs pay the equivalent of $12 a day. So far, the mining site has hired very few locals.

Despite grinding poverty and the problems with the mine, most locals remain firm in their faith in Aliyev, whose omnipresent portrait gazes out over the people of Chovdar from the walls of shops and schools.

"The president knows nothing about this," says teacher Ramazanov. "Local officials say the president ordered that our land be taken, but I don't believe it. He is a good person."

This report was produced by the Organized Crime and Corruption Reporting Project (OCCRP) in cooperation with RFE/RL's Azerbaijani Service. OCCRP project coordinator Paul Cristian Radu contributed from Bucharest, and RFE/RL correspondent Robert Coalson contributed from Prague

Copyright (c) 2012, RFE/RL Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave NW, Washington DC 20036

(To view the original article, please click here.)





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