Ablyazov’s Russian cash-and-carry machinery: how the east was lost/II

Ablyazov’s Russian cash-and-carry machinery: how the east was lost/IIHow can a man, virtually on his own despite the presence of numerous proxies in the process, steal between 10 and 12 billion US dollar? The question rises time and again as proceedings against Kazakhstan’s master banker/swindler Mukhtar Ablyazov drag on – as does a second question: did he do it all on his own or did he have help (at a price) from outside – varying from traditional organised crime syndicates to well-established banks on the global scene? The question imposes itself in particular in the midst of attempts to recover some of the 10 to 12 billion greenbacks diverted by Ablyazov and his associates, to recover at least some of the stolen collateral in the form of real estate in the Russian Federation are in full swing despite the summer season. A total in the order of 21billion Russian rouble is at stake here – but BTA’s position as a leading claimant is being challenged by others who now see their money stuck in project identical to collateral embezzled by Ablyazov earlier. Moreover, after his escape to Britain Ablyazov appears to have sold at least two of those, thereby adding quite sinister dimensions to his earlier schemes. They concern the so-called logistics park near Moscow’s Domodedovo airport, and the “sting in the heart of Moscow” in the form of the unfinished skyscraper Eurasia Tower.


The new majority owner of Tekhinvest, the project developer behind the half-finished Eurasia Tower, one of the skyscrapers due to mark the new La-Defense-style futurist complex on the bank of the Moskva river, is reportedly in negotiations with Russia’s major state-controlled Vneshtorgbank to obtain a loan of 300 million US dollar, Kommersant reported in late July. The loan is supposed to be covered by a stake in the project, in turn covered by shares in the new owner, Moskva Naphta, controlled by two north-Caucasian tycoons. For the completion of the complex, with a market value estimated at well over a billion greenbacks, some $350 million is needed in all. The loan, however, renders the chance of BTA under its post-Ablyazov, state-dominated management to recover at least part of the money it lost on the Eurasia Tower in the form of collateral recuperation more remote than ever. Though an earlier parallel loan to Sberbank of Russia in the order of 5 billion rouble plus service costs has been redeemed, no other collateral is available, thereby implying that Vneshtorgbank is likely to demand priority claims in case of default.

The Eurasia Tower affair is a perfect example of the enormity of the task BTA has set itself to claim cash back on the banks of the Thames and property throughout the Russian Federation. Construction of the skyscraper was started in 2004, partially covered by a loan coming from BTA’s parent bank in Almaty but first transferred to BTA-Russia. Payments dropped into default virtually from the very beginning. Thereby, a 50 per cent stake in the project fell into the lender’s hands – but this was no longer BTA proper or even BTA Russia, but to be sought within Ablyazov’s myriad of offshore mailbox firms. This process, which occurred in various stages, seems to have been completed in 2006.

Meanwhile, the other 50 per cent stake in the project was given to Sberbank of Russia for a credit line of 12.5 billion Russian rouble – only 5 billion of which was used. In spring 2009, meaning after his downfall in Kazakhstan and his subsequent flight to London, Ablyazov sold his share, nominally held by one of his offshore companies called Blackdesert, in the holding company which owned the Eurasia Tower project, Tekhinvest, for the trifle of 50 million US dollar to his partner Pavel Fuchs (see below). By then, unpaid bills had been piling up, and unlike Ablyazov’s claimant firm Sberbank took action in court to get its 5 billion rouble, payments of which failed to be made, back in the form of an equivalent stake of the holding company. It was then that a businessman from Dagestan, Suleyman Kerimov, together with his partners the Gutseriyev brothers from Ingushetia, also in the northern Caucasus, intervened and promptly paid the 5 billion rouble plus costs and interests back to Sberbank – in exchange for a stake of 75 per cent in Tekhinvest given by Fuchs.

Eurasia Tower has been the second case in which the name of Kerimov popped up. On January 12 2011, RBC Daily, published by Russia’s leading investment agency RosBusinessConsulting, was among the first to disclose the link between Kerimov and the Gutseriyev brothers on one end of the line and Mukhtar Ablyazov on the other. “Mukhtar Ablyazov, ex-Chairman of the Board of Directors of BTA Bank, succeeded in selling his flag property development asset, North Domodedovo Logistics Park (Severnoye Domodedovo) with an area of 558,000 square metre at the end of last year,” the article revealed. “The asset worth US$ 500 million was acquired by a BIN Group company related to Sait-Salam Gutseriev, and his partner in the deal was Suleyman Kerimov, according to market players.”

With a long list of dealings on his record many of which look doubtful at best, Suleyman Kerimov looks like a well-fitting match for the likes of Ablyazov. Born in Derbent in 1966, he graduated in 1989 in entrepreneurial management and accounting at the Makhachkala State University. After a series of short-lived jobs in state enterprises in the process of privatisation, he turned to politics and in 1999 became a member of the State Duma on behalf of Zhirinovsky’s extreme-right so-called Liberal Democratic Party of Russia (LDPR). Already then, his name had made headlines in connection with a $500 million embezzlement from the Russian Food Corporation, the state organisation charged with purchases and sales of grain from Russian farmers. Though the latter’s chief director Magomedtagir Abdulbasirov (also from Dagestan) was eventually charged with fraud and tried, Kerimov’s name was left out of official documents concerning the affair.

The next move by Kerimov was the purchase of Murmansk-based Vnukovo Airlines – using not cash but (allegedly forged) promissory notes. The undermined capital position led to the company’s insolvency – and in the process to the murder of the company’s trade union leader and whistleblower Gennady Borisov. This carried Kerimov to his present-day instrumental holding Moscow Naphta, at the time a petrol station network in and around Moscow and also in financial dire straits. In November 1998, he had bought the enterprise for 50 million US dollar. Whether he actually ever paid was to remain unclear, but he subsequently used the firm’s stock in 2000 to purchase up to 20 per cent of the preferred stock in Russia’s federal oil pipeline network Transneft (all common stock is in the hands of the state) – which half a year later he sold for $400 million. Moscow Naphta was to play a key role in the subsequent notorious so-called oil-for-food scam under the United Nations with Iraq. On a political level, the cover-up was provided by the still omnipresent Zhirinovsky from the shadow.

Kerimov’s dealings with Mikhail Gutseriyev started in June 2000, when the latter offered the opportunity to purchase an oil company called Varyeganneft, a subsidiary of Sidanco, a joint venture between western and Russian partners and also in a state of insolvency, to Kerimov for an undisclosed amount but hardly likely to be more than some tens of millions of dollars. The company was thereupon sold to Slavneft, with Gutseriyev at the helm, for $200 million. Looking back, it seems likely that part of the deal involved stock in Moscow Naphta, since little later Gutseriyev turned up as a partner in the enterprise. Whatever the case, by then the construction boom in the former Soviet Union was in full swing, and neither Gutseriyev nor Kerimov wanted to miss the opportunity. Using stock in Moscow Naphta and other paper assets as collateral, the couple started buying heavily into key building and property firms, including mortgage and loan providers, in the Russian capital. In an article published in early March 2005, Noviye Izvestia gave an impressive shortlist of the acquisitions, most of which were centred around SPK Development, originally an agricultural enterprise that had ventured into more lucrative (or so it looked at the time) activity. “In April 2005, [Moscow] Nafta by Kerimov became a co-owner of Mosstroyekonombank, after a couple of months [Moscow] Nafta gained control of the SPK Development (Glavmosstroy, Mospromstroymaterialy and Mosmontazhspetsstroy), and in July [it] became the owner of 17% of the common stock in Mospromstroy,” the report was to read. “Karimov subsequently sold the business in parts – SPK “Development” was bought by “Basic Element» of Oleg Deripaska (Kerimov earned about $ 200 million on the transaction), and Mospromstroy and Mosstroyekonombank was acquired by [the Ingush banking consortium] BIN, headed by Saito Gutseriev (the brother of Mikhail Gutseriev).”

In such a position, what happened to Fuchs and Ablyazov on the spot could hardly escape the two Caucasian tycoons. From the beginning, Tekhinvest had been the official owner of the Eurasia Tower, which had been established in 2002 by two parent companies. One was MosCityGroup (MCG), controlled by real estate tycoon and project developer Pavel Fuchs. The second one was the Eurasia Group, established in the winter of 2002/’03 by Ablyazov. Between 2004 and 2008, credits up to a total lump sum in the order of 300 million US dollar were set out by BTA, based on an annual interest rate of 20 per cent. Beneficiaries were not only Tekhinvest but also affiliated companies named Konvis, PaladioExport and CityBestPlus. The fact that all those beautiful-looking labels covered little else than Mukhtar Ablyazov was “not reported” to BTA. Nor was the bank officially aware that Tekhinvest was little more than a hollow shell, with its assets under control of Colligate, which was located outside either Russian or Kazakh judicial territory.

As mentioned, in 2011 the sale of Ablyazov’s 50 per cent share in Tekhinvest for the sum of 50 million US dollar to be paid over the counter was agreed upon with Fuchs, though several creditors (real ones, not nominal ones, that is) kept contesting it in courts of law both in Britain and the Russian Federation. Among them was BTA, along with Sberbank of Russia and Alpha Bank. BTA had entered the judicial fighting ring in March 2010, by starting proceedings in London against Colligate, Tekhinvest, Konvis, PaladioExport and CityBestPlus (the latter three have been dubbed the KPC companies), as well as Ablyazov and Khazhiyev in person. BTA’s new management on behalf of the state intended to lay its hands of Ablyazov’s stake in Tekhinvest and through it into the Eurasia Tower, which, once completed, was supposed to have a value of up to six times the $50 million Ablyazov was supposed to have received for his share in the venture.

One example of Ablyazov’s diversion methods related to the capitalisation of the Eurasia Tower project that leads to the Seychelles is the Feston/Fexon connection. Among Eurasia Logistics’ financial resources was a credit worth 56 million US dollar coming from a company registered on the Seychelles by the name of Feston, director of which was a certain Anwar Ayzhulov, but the sole owner of which has turned out to be Mukhtar Ablyazov. As collateral, Feston had been given a share of 50.5 per cent in EagleCity, which it subsequently sold for an undisclosed sum to another Seychelles-based firm named Fexon, the nominal director of which was Ablyazov’s trustee Igor Kononko. For all it matters, the latter was then already under investigation in Ukraine for an alleged connection with the murder of an Armenian businessman. As for Feston, it originally obtained a credit for the purpose from BTA’s main office in Almaty. Repayments and interest payments, however, took place to BTA’s Russian subsidiary. As in other transactions, the firms, which had the nominal right to claim collateral, were soon to disappear and make place for new corporate names. In the case of Eurasia Tower, the project developer and nominal owner at the time of Ablyazov’s sale would appear to be a company called Blackdesert.

“Blackdesert was the developer of a tower block in Moscow comparable in size and development to Canary Wharf,” a verdict by the English High Court dated October 10 2011 related. “[Judge Teare] concluded that there was a serious possibility that [Ablyazov]’s omissions were made in order to make it difficult for the Bank to enforce the Freezing Order.” Figures quoted confirm that suspicion and the assumption that large parts of the fund diversion have been concealed by Ablyazov and his associates from justice. The money which Ablyazov – officially, that is – received for his stake in Blackdesert looks hilarious in comparison to the tens of billions of roubles the building project must be worth. “[Ablyazov] agreed to sell his 50% interest in Blackdesert to Mr Fuchs under an agreement made on 15th September 2009,” the High Court’s report relates. “The sale price was $30 million. The agreement was subsequently varied and on 1st December 2009 the first tranche of the purchase price in the sum of $20 million was paid and title passed. The balance was due in May 2010 but remains unpaid.”

The Eurasia Tower and the Domodedovo “logopark” are not the only cases in which BTA endeavours to recuperate loan value in and around the Russian capital. Other cases the fates of which keep pending include at least two mining and processing combines in Siberia and a number of luxury compounds comprising shopping centres, residential blocks and office complexes downtown St.-Petersburg and Moscow. The trouble is that Russian courts of law tend to treat those issues on a case-to-case basis rather than in comprehensive proceedings as British courts intend to do. It renders procedures for all parties involved (including Russian taxpayers) more time- and cash-devouring, but for BTA it remains theonly hope to regain some of its losses due to Ablyazov’s diversion schemes on the collateral side of the seemingly never-ending story. (to be continued)