‘Corruptistan’: the low-down on Azerbaijan’s regime

What follows is an excerpt from an article called ‘Corruptistan’, published by Foreign Policy magazine and republished by Freedom House. SOCAR owns 20% of Malta’s new power station project.

You can read the full article on the Freedom House website, but will have to register to read it on Foreign Policy.

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AZERBAIJAN

The presidential family of Azerbaijan has made its fortune in the country’s lucrative oil sector. During the rule of President Heydar Aliyev, a former KGB chief who seized power in 1993, his son Ilham served as vice president of the state oil company, SOCAR, which controls the country’s 7 billion barrels of oil reserves. When Heydar died in 2003, the presidency passed to Ilham in a tightly controlled election. SOCAR remains a state-owned firm, despite attempts by foreign investors to bribe Azerbaijan’s rulers into a privatization deal. The sovereign wealth fund that receives Azerbaijan’s oil revenues is essentially controlled by the president, and SOCAR itself has spawned subsidiaries and contractors with opaque private ownership structures.

Azerbaijani law prohibits government officials, including the president, from owning businesses, but there are no such restrictions on family members. A recent investigative series by Radio Free Europe/Radio Liberty uncovered a long list of offshore companies and luxury properties registered in the names of Ilham Aliyev’s children. For example, his daughters, Leyla and Arzu Aliyeva, ages 27 and 23, respectively, are literally sitting on a gold mine. In 2007, the regime gave the Azerbaijan International Mineral Resources Operating Company (AIMROC) a 70 percent stake in a gold field near the western village of Chovdar as well as five other sites. The state retains the remaining 30 percent. The Chovdar mine alone boasts 44 tons of gold and 164 tons of silver reserves worth $2.5 billion. AIMROC is a joint venture of four companies, one of which — Britain-based Globex International, with an 11 percent stake worth about $200 million — is in turn owned by three Panama-registered holding companies that all list the two Aliyeva sisters as senior managers.

Other investigations have uncovered similar structures in other industries. Panamanian records list Leyla and Arzu Aliyeva as top executives on the registries of three holding companies: Hughson Management, Grinnell Management, and Gladwin Management. Hughson reportedly owns a 51 percent stake in ATA Holdings, one of Azerbaijan’s largest conglomerates, with units in the financial services, insurance, and construction industries. Moreover, Hughson, Grinnell, and Gladwin each own 24 percent stakes in Azerfon, a major Azerbaijani telecommunications company with nearly 1.7 million mobile subscribers. Azerbaijan’s Communications Ministry has repeatedly claimed that Azerfon is owned by Siemens, though the German company denies ever owning shares. Arzu also owns a large stake in SW Holdings, an airline industry monopoly that was formed through the privatization of the state airline AZAL.

According to a 2010 Washington Post article, Azerbaijani citizens with the same names and ages as the president’s children owned a number of properties in Dubai valued at $75 million. Real estate officials said that at least some of the purchases were paid for upfront by a representative of the president’s family. In early 2009, the article reported, within a period of two weeks, nine waterfront mansions in Dubai’s luxury Palm Jumeirah development were purchased for $44 million by one Heydar Aliyev, who has the same name and birth date as the president’s 11-year-old son.

Like Karimova, Leyla has worked to improve her family’s image — tarnished by violent crackdowns on the opposition and the jailing of critical bloggers and journalists — through charity work. She is vice president of the Heydar Aliyev Foundation (HAF), a “nongovernmental” organization dedicated to development of science, technology, health, and education. The HAF was established by Leyla’s mother, first lady Mehriban Aliyeva. According to her website, it “builds more schools than Azerbaijan’s Ministry of Education, more hospitals than the Ministry of Health, and conducts more cultural events than the Ministry of Culture.” The foundation effectively stamps the Aliyev name on services that touch the lives of everyday Azerbaijanis — services that might otherwise be provided by the government using public funds, as entitlements rather than gifts.

Leyla recently launched the art and fashion magazine Baku, which is published in Moscow. Her husband, pop star Emin Agalarov, had the privilege of performing in a coveted slot at the 2012 Eurovision Song Contest, hosted in Azerbaijan’s capital.

A few years ago, Arzu became the face of tourism in Azerbaijan when she appeared in a promotional video that aired on major world networks, including CNN, in a bid to attract international visitors and burnish the country’s image. The 46-second clip shows a blonde Arzu amid glamorous surroundings, luxury cars, elaborate mansions, and seaside resorts.