Page 1 of
2 IMF blows whistle on Tajik
corruption By John Helmer
MOSCOW - The wind-chill factor this winter
in Tajikistan has produced record low temperatures
and uncounted miseries for a population struggling
with inadequate electricity supply and failing
heat. Tajik newborns have been reported as having
died from hypothermia while in hospital wards.
But on March 5, a single whistle-blow from
the International Monetary Fund (IMF) sent a chill
through the one well-heated residence in the
country. That's the presidential palace of Emomali
Rakhmonov (aka Rahmon), the head of the
land-locked Central Asian country since 1992.
For the IMF revealed publicly for the
first time, and at the level of the fund's board
of directors, that the National Bank of Tajikistan
(NBT) and the Finance Ministry
in Dushanbe have been fiddling the country's
accounts for several years, falsifying the flow of
funds and concealing the disappearance of as yet
uncounted millions of dollars of international
loan funds.
On March 5, the "Executive
Board of the International Monetary Fund (IMF) met
today to review a report from the Managing
Director on noncomplying disbursements to the
Republic of Tajikistan and a breach of obligations
under Article VIII, Section 5 of the IMF's
Articles of Agreement".
Article VIII,
Section 5 is the acid test of a country's
financial reporting, for this is the provision
according to which IMF members such as Tajikistan
are required to report accurate values for their
import and export of merchandise and also
"investments within the territories of the member
owned abroad and investments abroad owned by
persons in its territories so far as it is
possible to furnish this information".
Investigations now underway - not only at
the IMF - have begun to document Rahmon's control
of hundreds of millions of dollars taken each year
out of Tajikistan from the aluminum industry and
kept warm in a Caribbean haven.
Part of
the secret link between Rahmon and his associates
in Dushanbe and the Caribbean haven was
inadvertently disclosed in the UK High Court in
February. That was when a lawyer told a British
judge that his clients, who own a British Virgin
Islands company called CDH, operating in Tortola,
can't give their instructions to him in English
because they can't speak the language and don't
live outside Tajikistan. CDH, it was revealed in
the court, is the company controlling the
financial flows of the Tajik aluminum industry.
Not transparent Since a World
Bank report of 2004 first focused on Rahmon's role
directly supervising the operation of Tajikistan's
billion-dollar aluminum business - the country's
principal product and export - and the IMF warned
in 2006 that "the details of the [aluminum trade]
arrangement are not fully transparent", it has
been only a matter of time before the real flow of
cash would fail to match the accounts handed to
the IMF.
For the time being, the IMF
inspectors won't say if they are focusing on
aluminum cash. At least US$79 million has gone
missing over several years, the IMF said on March
5, and had been diverted from "the three-year
Poverty Reduction and Growth Facility (PRGF)
arrangement". This money had been spent, in IMF
bankspeak, "on the basis of inaccurate information
provided by the Tajik authorities relating to the
performance criteria on the net international
reserves of the Republic of Tajikistan, the net
domestic assets of the National Bank of Tajikistan
(NBT), and against the NBT issuing directed
credits."
The fund board said it was
calling in $47.4 million of the debt owing, adding
that it was upset the Tajik authorities had
thought they could evade repayment altogether.
According to the public statement, the IMF
"expressed its regret on the nature and extent of
misreporting, and emphasized the seriousness it
attaches to the fact that MDRI resources extended
to Tajikistan cannot be made subject to
repayment".
Referring to the winter
freeze, and the "severe humanitarian crisis
prevailing in the country", the IMF said it would
give Rahmon's government an extension of "the
repayment period beyond the normal 30-day
repayment expectation period called for under the
misreporting framework."
The IMF also said
it was starting a new investigation, claiming "the
Tajik authorities have agreed to undertake a
special audit of the NBT, to be carried out by a
recognized international firm. The audit will aim
to establish a reliable foundation for the future
provision of monetary data and data on external
debt, and to define steps to ensure transparency
of all financial operations of the NBT."
The day after this announcement was issued
at IMF headquarters, Masood Ahmed, head of the
IMF's external relations department, tried to play
down the import of what had been discovered.
Instead of charging that officials reporting to
Rahmon had been caught red-handed, Ahmed said the
IMF faced "a difficult decision ... because on the
one hand there has been a serious incidence of
misreporting or relevant economic data by the
Tajik authorities. At the same time, the board was
very conscious of the fact that the country is
going through a very difficult economic
circumstance."
The cynicism of protecting
the culprits from the consequences of their
apparent stealing, ostensibly to protect the
altogether innocent Tajik population, has
accelerated into a full-blown coverup by Ahmed of
what the IMF investigations have shown of looting
of the country's cashflows by Rahmon and his
associates. But this is getting ahead of our
story.
Missing loans On March
14, a Financial Times report from Bangkok cited
the IMF as confirming that, in addition to the
Washington audit revealed early in the month, the
Asian Development Bank (ADB) in Manila and other
multilateral lenders to Tajikistan are also
investigating the apparent mis-accounting, and
possibly fraudulent diversion, of about $500
million in loans intended to be channeled through
the commercial banking system to the cotton sector
- next to aluminum, Tajikistan's main line of
business.
Mohsin Khan, head of the IMF's
Central Asia Department, declared: "Was it fraud,
mistakes or some systematic policy? The country is
going to have to work hard at re-establishing its
credibility." Khan was putting the position
mildly.
But Ahmed, head of the fund's
external relations department, conceding there was
no disputing what Khan had said publicly, told
Asia Times Online he would not be drawn into
identifying the scope or targets of the new
financial checks in Dushanbe. Through a spokesman,
Ahmed said he would have "no further comments". He
implied wanting to keep clear of the flow of Tajik
aluminum money. What had been released publicly
was "exhaustive as regards the IMF's assessment of
the case".
Ahmed is trying to conceal a
serious shift in sentiment towards Tajikistan,
inside the IMF and among the other international
lenders - the ADB, the World Bank, and the
European Bank for Reconstruction and Development.
A cold warrior who also served three years,
2003-2006, with the UK's Department for
International Development, Ahmed was in charge of
aid and grant schemes to boost Rahmon as an
anti-Russian figure in Central Asia.
Now,
however, Ahmed risks protecting Rahmon from
liability in one of the biggest kleptocratic
(state stealing) schemes the IMF has publicly
admitted to uncovering. Just how big has been
substantiated, also for the first time, in
documentary evidence and witness statements
presented in the UK High Court on February 15,
before Justice Tomlinson.
In the London
court, three agreements that regulate Tajikistan's
aluminum business were disclosed. The documents
had been ordered for disclosure by the court,
which is hearing a claim by the Tajikistan
Aluminum Plant (TadAZ aka Talco), at Rahmon's
instruction, against Avaz Nazarov and his
companies; Nazarov is a leading Tajik businessman
and formerly actively involved in the smelter's
operations and trade. Nazarov has filed a counter
claim against Talco, accusing it of fraud, forgery
and a scheme to divert most of the country's
earnings from aluminum to British Virgin Islands
(BVI)front companies.
Three agreements
were identified in court: one dated December 17,
2006, is between the aluminum plant and the
Norwegian company, Hydro Aluminum; another dated
December 27, 2006, between Hydro, the plant, and
CDH, the BVI affiliate supervising the plant's
business; and a third, dated April 18, 2007,
between Hydro, the plant, and Talco Management, a
company, also registered in the BVI, which
substituted for CDH from the start of last year
and which appears to be controlled by the same
people in Dushanbe.
The three agreements,
and an explanatory document spelling out how the
flows of raw materials, aluminum and money move in
and out of Tajikistan, amplify on Hydro's public
announcements in 2006 and 2007 that it had
resolved its conflicts over broken contracts with
Tajikistan and is now committed to supplying the
smelter with about 150,000 tonnes of alumina each
year, and taking about 200,000 tonnes of aluminum
from the plant.
If that looks
straightforward - Hydro appears to sell alumina to
Talco, and Talco appears to sell aluminum to Hydro
- then appearances are deceiving. The court
presentation of the documents shows that,
according to a scheme of tolling the raw materials
for processing at contrived prices, Talco receives
alumina from Hydro and gives it to CDH. CDH then
contracts it for processing by the smelter and
receives the metal back in exchange. CDH then
sells the same metal back to Talco at the market
price, and Talco sells it to Hydro at a loss.
The combination of input and output prices
leaves Hydro with a profit on its alumina and its
aluminum. However, the biggest profit is reserved
for CDH, leaving the plant in Tajikistan with what
is described in court as "a huge loss on the
entire transaction". This diversion is done with
the full knowledge of Hydro.
From the
thicket of commercial language spelling out the
trading scheme, the court was told that the
Caribbean cutout CDH (later Talco Management)
"sells the aluminum and it allocated that
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
