Page 2 of
2 Cover
off Tajikistan's missing millions By John
Helmer
has yet to disclose the tolling fee
for the year.
Experts engaged in trading
Tajik aluminum estimate the cost of
transportation of alumina inwards and aluminum
outwards at $150 million per annum.
The
purpose of the High Court case now pending in
London is to determine whether Talco’s trading
agents and de facto controllers, CDH and TML, are
making more profit, while the smelter
earns
less.
In
November, in a public speech, the leader of the
Tajik Communist Party, Shodi Shabdolov, said Talco
was paying just $40 million in annual tax to the
state budget. The figure corresponds to the
statutory corporate rate, but it is levied on
Talco’s tolling fee, not on the value of the
aluminum produced and exported. Shabdolov was
critical of the trading schemes that provide
"profits [to] purchasers and intermediaries rather
than [to] the national budget." The remarks were
published on Tajikistan’s Asia-Plus news agency,
before they quickly disappeared.
Trading scheme
losses According to sources in Oslo
and London, the smelter is losing more than $500
million in aluminum sale profits per year through
these trading schemes. Overseeing them, the
sources also allege, is a London-based firm called
Alaska Metals, controlled by an Iranian, Ali
Akhbar Mahdavi.
Alaska Metals operates a
modest website, identifying itself as a private
company formed in 1999 from a group of traders
principally engaged in nonferrous metal business.
Three London telephone numbers are given, but no
names and no physical address.
A source in
the company told Asia Times Online that Mahdavi
runs Alaska Metals, but he has refused to respond
to requests for an interview. The UK High Court
files are more revealing. According to publicly
available judgements, in 1998 Mahdavi arranged the
sale of almost $6 million worth of lead ingots to
an Iranian buyer, based on false documentation;
took and spent the money; but did not deliver the
metal. According to Justice Moore-Bick in the case
of Niru v. Mahdavi et al., "for a seller [Mahdavi]
which had presented a false bill of lading and had
failed to despatch any goods at all, this was
indeed a brazen attempt to throw its buyer off
balance in order to extricate itself from a
difficult situation." The lower court in 2002, and
the appeals court in 2003, ruled that Mahdavi was
liable to repay the money he had received, plus
interest and costs.
Mahdavi, Asia Times
Online has now learned, is a key figure currently
representing President Rahmon in the global trade
of Tajik aluminum. A report by Metal Bulletin,
issued this past November, reports that Alaska
Metals outbid other contenders for 240,000 tonnes
of alumina, produced by Nalco of India, and
believed to be intended for the Tajik smelter.
"The winning bid was considerably ahead of the
consensus of other bidders," the report of the
transaction claims.
Hydro has also
confirmed to Asia Times Online that its December
2006 agreement provides that it will sell the
Tajik plant 150,000 tonnes of alumina per annum
and buy up to 200,000 tonnes of aluminum metal
produced by the plant. Hydro added in a statement
for Asia Times Online that the alumina is
delivered CIF (cost, insurance and freight) at
Poti (a Georgian port on the Black Sea), and the
metal to Hydro at a Baltic port on a FOB (free on
board) basis. The FOB term requires the seller to
clear the goods for export. The CIF terms means
the seller must pay the costs and freight
necessary to bring the goods to the named port of
destination but the risk of loss of or damage to
the goods, as well as any additional costs due to
events occurring after the time of delivery, are
transferred from the seller to the buyer.
According to Hydro spokesman Thomas
Knutzen, "Hydro does not disclose the exact prices
of such contracts but we can say that this is LME
[London Metal Exchange] linked." What Knutzen did
not reveal is whether Hydro’s LME link contains
the 10% over-market premium revealed in the Nalco
deal with Alaska.
A source close to Talco
told Asia Times Online that, for those aiming to
maximize their profit from Talco, "there is no
point in overcharging for alumina; they do not
sell it to Talco - they simply convert it to
aluminum. They would look for the cheapest
sources [of feedstock]. Since their fixed cost for
aluminum is simply the tolling fee for Talco,
they are not interested in overcharging. Costs are
- tolling fee to the plant, alumina, and
transport. At the current market, they are making
a killing! TadAZ is bled dry - that is clear. It
has no revenues apart from the tolling fee, which
is strictly controlled by [President] Rahmon. He
regulates the fee to allow Talco to be kept
afloat.
''If Talco was allowed to trade,
as it was doing before Nazarov was ousted in 2004,
the windfall profit from rising aluminum prices
would have been Talco’s, and not Rahmon's. At the
24% effective corporate tax rate, the Tajik state
budget would have received $72 million, in
addition to the $40 million Talco has to pay."
The pressure on Hydro for greater
disclosure of its Tajik dealings is also mounting
in Oslo, where the company has been threatened by
parliament members with a corruption
investigation. An investigation by Oslo business
journal N24 revealed that recently Hydro
executives were summoned to the Ministry of Trade
and Industry where they were questioned by the
Minister of Trade Andersen.
"We have had a
conversation with Hydro and received the same
answers as you in the press did," Andersen told
N24 reporter, Trond Gram. "Hydro is the one who
must answer further questions from the press on
the case, and on that basis we will see if there
will be any need to further investigate this
case."
In October, Hydro announced that it
plans shortly to delist its shares from the New
York Stock Exchange and end its reporting and
compliance obligations to the US regulator, the US
Securities and Exchange Commission. Delisting is
also planned from stock exchanges in Paris,
Frankfurt, Hamburg and Dusseldorf. When completed,
Hydro will be traded and regulated in Oslo and
London.
In a company statement, Hydro
chief financial officer John Ottestad said: "As a
focused aluminum company, we are committed to
reducing the complexity of our operations. The
delisting and deregistration will enable us to
simplify financial reporting processes, while
maintaining the same high-quality financial
reporting and disclosures. Corporate governance
will not be affected…"
On December 27,
Hydro announced that it had appointed a new head
of communications, Inger Sethov. She was asked
what relationship Hydro has with TML, and what the
Norwegians know of the roles played to channel the
smelter’s revenues and profits by TML and Alaska
Metals. Sethov was unavailable to respond, her
office told Asia Times this week. In her place,
Halvor Molland, Vice President and Head of
Communication for Hydro, said: "Hydro is buying
aluminum from and selling alumina to Talco
Management Limited on market-based conditions. The
arrangements are an integral part of our
settlement agreement with the Talco smelter. Hydro
does not have insight into Talco Management
Limited's contracts and dealings with other
companies, and we are therefore unable to comment
on these."
The Hydro spokesman was also
asked whether Hydro had reached a similar
conclusion to the IMF’s report that "the details
of the arrangement are not fully transparent."
Mallor told Asia Times Online: "The World Bank is
aware of Hydro's contracts with Talco Management
Limited, and IMF's comments which you have quoted
should, thus, not be taken as a criticism of
Hydro's arrangements."
The missing half
billion dollars in annual aluminum earnings will
sooner or later bring the Norwegians down, Nazarov
intimated in an interview with Metal Bulletin in
London in November. "Their's is a temporary
solution. It exists whilst the case is being
litigated."
Referring to Rahmon as the
stumbling block, Nazarov said "we are interested
not only in coming back, but also in optimizing
operations at [Talco] to turn it into the engine
of economic development in Tajikistan to the
benefit of all Tajiks … We are keen to provide a
viable long-term solution, but we recognize there
is a political dimension."
Talco,
TML and official spokesmen for Rahmon have not
responded to questions. The company website
provides production volumes, but financial data
appear to be unaudited and incomplete, with
nothing since the first quarter of 2007: (see
Talco website)
A
press release, issued through the Tajik news
agency Asia-Plus on December 21, defends the
reassignment of sales contracts and the tolling
operations of the offshore cutouts, claiming "the
business strategy chosen by the TALCO has allowed
it to considerably improve its financial indices
…" the press release said. The company's top
managers attribute this success to the
introduction of a system of tolling operations…
"the tolling system, including processing of
customers (own) [take-back] feedstock with further
export of product of processing under customs
control, is the most widespread type of operation
in the world metallurgical business. It has
replaced the old system of barter operations and
it has become the only way to overcome the
crisis…"
The company press release also
responds to the parliamentary attack on Talco’s
low tax payments. "In January-September 2007,
TALCO transferred 133.7 million somonis (US$38.64
million) to the national budget. In 2007, the
anticipated contribution of TALCO to the national
budget will be 180 million somonis, which is 67
million somonis more than in 2004. Over the same
nine-month period, TALCO's external trade turnover
amounted to US$1.473 billion, which was 115 per
cent more than the January-September 2006 level or
US$190 million more."
President Rahmon has
also revealed how sensitive he is to the
possibility that fortunes are being spirited out
of Tajikistan, if not by Caribbean companies, then
by fortune-tellers, sorcerers, and witches. On
December 12, the Tajik parliament passed a law,
requested by the president, to outlaw such
practices. "Those indulging in sorcery and
fortune-telling shall be fined between 30 and 40
times the minimum monthly wage [equivalent to
$170-$226]," the statute reads.
John
Helmer has been a Moscow-based
correspondent since 1989, specializing in the
coverage of Russian business.
(Copyright 2008 Asia Times Online Ltd.
All rights reserved. Please contact us about
sales, syndication and republishing.)
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
