Mukhtar Ablyazov’s “virtual vice”: How to entangle the world’s mass media

Engaged in a series of ferocious court battles, Kazakhstan’s champion robber banker Mukhtar Ablyazov has extended the battleground in his foiled attempts to get public opinion at home and beyond on his side for some time to the public domain. His latest prey seems to have been the venerable Financial Times, resulting in a number of misunderstandings surrounding his arch-foe Timur Kulibayev. As usual in such cases, there is little more than thin air behind it all – whether business interests or speculations of a more political character are concerned.

by Charles van der Leeuw, KZW senior contributor

Mukhtar Ablyazov’s “virtual vice”: How to entangle the world’s mass media“In Britain he’s known as the billionaire who bought Prince Andrew’s Sunninghill Park mansion for a generous price,” the Financial Times introduces Mr.Kulibayev in a lengthy news report published in October 16. “In his home country of Kazakhstan, Timur Kulibayev is the son-in-law of the president, chairman of the $80bn sovereign wealth fund and a hard-headed businessman with interests that touch most areas of the economy. […] In person, the 45-year-old Mr. Kulibayev or “TK”, as he is known among foreign investors, gives no hint of his high-flying connections. Hands clasped before him, interpreter standing by, he is all business.” Not much of that is being reflected in the report. “The country’s main strategic objective, he said, was to wean itself off ‘its dependence on oil and gas’ and diversify the economy. Initiatives are in place to encourage the development of the small business sector while investment is being ploughed into research and development for education and science,” the text reads further. This, however, has been trumpeted by friend and foe concerning Kazakhstan for years – thereby, no news. There is no word in the report on the Halyk Savings Bank, for instance, which Kulibayev co-owns and which for all it matters is the best-performing bank in Kazakhstan in the midst of global and domestic financial turmoil. It would have been interesting to know how someone can combine so many functions and still avoid the pitfall of conflicting interests. The FT fails even to hint at it – a missed opportunity.

On the political front, the point is being missed as well. “One unavoidable issue looming for foreign investors is that of succession,” the FT articles concludes. “President Nursultan Nazarbayev, who turned 71 in July, has so far refused to name a successor and there is concern about a possible risk of a power vacuum should he suddenly leave office. A snap presidential election earlier this year where Mr Nazarbayev won 95 per cent of the vote was regarded as an attempt to lay the issue to rest. Mr Kulibayev is regarded by many as a potential successor, although some observers believe he would prefer to be kingmaker rather than king. According to him, however, succession is not an issue.’ Earlier this year, we had presidential elections. That is why for the next five years this issue is not relevant,’ he said.”

Once more, this can hardly be considered sensational since the issue was already being cleared up in the public domain twice in the course of summer this year. Thus, a regional newsreel called Silk Road Intelligencer quoted Kulibayev on 8 September this year, for the second time, as denying having any ambitions for the presidential office. “Nursultan Nazarbayev has just been reelected president of Kazakhstan, and the [succession] issue has been resolved for the coming years,” the agency quoted Kulibayev as telling a news conference in Astana. “What concerns me personally, I was never engaged in politics and I do not belong in any political party. […] I feel comfortable in business, and I want to make my mark in business.”

Furthermore, what the FT article most of all fails to explain is that should for any reason the President of Kazakhstan fails to terminate his term in office, continuity of public governance is secured by the country’s Constitution, and the Shakespearian scenario suggested by the FT has no legal ground. Thus, Article 3, paragraph 3, reads: “Nobody shall have the right to appropriate power in the Republic of Kazakhstan. Appropriation of power shall be persecuted by law. The right to act on behalf of the people and the state shall belong to the President as well as to the Parliament of the Republic within the limits of the constitutional powers. The government and other state bodies shall act on behalf of the state only within the limits of their delegated authorities.’ It is followed by paragraph 4: “The state power in the Republic of Kazakhstan is unified and executed on the basis of the Constitution and laws in accordance with the principle of its division into the legislative, executive and judicial branches and a system of checks and balances that governs their interaction.”

The role of the head of state in Kazakhstan id being defined in Article 40 as follows: “The President of the Republic of Kazakhstan shall be the head of state, its highest official determining the main directions of the domestic and foreign policy of the state and representing Kazakhstan within the country and in international relations. The President of the Republic shall be the symbol and guarantor of the unity of the people and the state power, inviolability of the Constitution, rights and freedoms of an individual and citizen. The President of the Republic shall ensure by his arbitration concerted functioning of all branches of state power and responsibility of the institutions of power before the people.” The last observation might not be what certain kinds of investors like to see. It explains clearly that any “deal” clinched behind closed doors between corporate executives and their Kazakh state counterpart’s representatives is more than a gentlemen’s agreement and may be subject to corrections at any time by the people of Kazakhstan within the Constitution, should it appear that certain parties’ legal rights have been, are or could be violated as a result of the business agreement. This can happen under the rule of the present head of state as well as under any successor taking his place either timely or prematurely under the Constitution.

The knack in this context, in particular in relation to present-day speculations on “succession” is found in the first paragraph of Article 47 which reads: “The President of the Republic of Kazakhstan may be prematurely released from office in the case of continued incapacity to perform his duties due to illness. In this case the Parliament shall form a commission consisting of equal numbers of deputies from each Chamber and specialists of the respective areas of medicine. The decision of premature release based on the conclusion of the commission and that of the Constitutional Council confirming observance of the established constitutional procedures shall be adopted at a joint sitting of the Parliament’s Chambers by the majority of no less than three-fourths from the total number of deputies of each Chamber.” What happens next follows in Article 48: “In case of premature release or discharge of the President of the Republic of Kazakhstan from office as well as in case of his death the powers of the President of the Republic shall be transmitted to the Chairperson of the Senate of the Parliament for the rest of the term; if the Chairperson of the Senate is unable to assume the powers of the President they shall be transmitted to the Chairperson of the Majilis of the Parliament; if the Chairperson of the Majilis is unable to assume the powers of the President they shall be transmitted to the Prime Minister of the Republic. A person who has taken the powers of the President of the Republic shall correspondingly withdraw his powers of the Chairperson of the Senate, the Majilis, the Prime Minister.”

So what are these alleged “worries among investors” – other than just fabricated rumour that fails to be sustained by hard quotes? Little to chew on as it looks. The FT’s failure to dig for facts has not gone unnoticed, as one comment posted after the October 16 article’s publication reflects: “I would like to encourage FT reporters to investigate the means by which ‘TK’ became a billionaire. The intuitive answer is he is well-connected politically and Kazakhstan has deep and rich reserves of oil and gas, an industry that he purportedly controls. But that intuitive answer reply begs the question. The worn aphorism that ‘property is theft’ also does not suffice. What happened to investigative reporting? A: what is the source of the fortune? B: Where is the fortune “deposited”, managed, and invested? C: Exactly who is this man: what value has he created for society? The facts are sorely absent and they are needed. The FT interview is obsequious.”

A second comment points at the same friction. “Let’s recognize that Kazakhstan is the most stable and predictable country of all post-Soviet space, and any unbiased foreign investor can confirm this fact,” it reads. “Therefore one should take into account that doing business in Kazakhstan is possible and pretty profitable for foreign companies, otherwise nobody would work and stay there. Mr. Timur Kulibaev keeps low profile in his government and private duties, but he is doing much more positive for his country’s development than many others who show up on TV screens every day, and just talking about their own importance and so-called ‘influence’. As far as corruption in Kazakhstan is concerned, this evil is present not only in new, just recently formed states but even in very developed ‘democracies’, and it should be also taking into account. And about the succession of the president in Kazakhstan – it is a constant topic of discussion and bla-bla deliberations of many foreign so-called “analysts” and ‘independent observers’. Just better look what could be done in Kazakhstan with investments in oil and gas sector, and take practical steps on that. Believe me, it will bring much more profits(in all the aspects) than building ‘castles in the air’ on big politics.”

In other words: what is more interesting is the question where the rumours and allegations referred to in the FT’s report originate from. Cocktail parties with free drinks and expensive expatriate hangouts filled with people who can amply afford them are one explanation. A second guess that gives more reason for concern was reflected in an earlier article by the FT, published on July 1 and touching upon the same theme. “Accusations by an exiled Kazakh banker that Kulibayev had accepted bribes from a Chinese oil company were rejected by an Almaty court in 2007 on grounds that the suit was filed by an alleged criminal,” the article read – referring to an attempt by Kazakhstan’s thievish ex-banker who drained the country’s then largest bank BTA for more than $10 billion in fund and collateral diversion schemes, to raise a scandal in a recent Chinese investment round in Kazakhstan’s upstream oil business. Ablyazov is now wanted in Russia and Kazakhstan for fraud while entrenching himself downtown London under the protection of political asylum recently granted to him by the Home Office through opaque procedures and under vague arguments. For all it matters, the FT article’s qualification “on grounds that the suit was filed by an alleged criminal” is incorrect, since the Kazakh court’s conclusion has been based on its own investigations regardless the source of the accusation.

As usual, the entire war of words in relation to imaginary “worries among investors” is as hefty as it is pointless in this case as it has always been in any case. There is little, varying from floods and earthquakes to revolutions, that scares of any spike-spine investor who smells profit, experience teaches us. And transitions from one head of state to another are definitely not among the things that could possibly “worry” investors. When during the Russian October Revolution all property of the Royal Dutch Shell on Russian territory was confiscated, it was simply followed by negotiations between Leonid Krassin and Shell’s man-on-the-bridge Henry Deterding which ended in sales contracts of Soviet oil to the Anglo-Dutch multinational that brought the latter profits that even exceeded those made by its pre-Soviet business on the spot.

Less dramatic developments in later times only confirm the overall pattern in the relations between corporate and state interests. When back in the roaring 1970s Richard Nixon was forced to resign, a perfectly comparable constitutional regime in the USA put his deputy Gerald Ford in place pending new elections as stipulated in the American Constitution. As far as known, among all that might have been worried by the upheaval no investors showed any intention of withdrawing their funds from US enterprises. In the same manner, the City merely shrugged when subsequently Margaret Thatcher and Tony Blair were sent out through the back door in the UK by their own ruling parties, followed by losing that rule. If stock markets, generally speaking, react to such events, it has never been more than momentary and relative. It is therefore that allegations of “worries” should concentrate instead on the likes who generate and support such allegations being the likes of Ablyazov, plus the fact that the latter has drained Kazakhstan’s socioeconomic base of more than 10 billion US dollar in cash and collateral value – something that should worry investors a lot more than who happens to represent their host countries in business talk.