Corruption At The Caspian Sea

A bribery scandal in the Azeri oil industry has definitely reached the government. Last Friday, Kazakhstan's government rejected all accusations that it was involved in corrupt practices while dealing with foreign investors. All deals in the oil and gas sector in the 90?s would have bee lawful and transparent. The Kazakh energy minister even stated that he would reject any allegations of corruption in his country and especially in the government.

However, US investigation into bribery allegations surrounding efforts to privatize the Azeri state oil company Socar five years ago has implicated President Haidar Aliev and his son, Ilham Aliev. A United States District Court handed down an indictment earlier this month against Swiss lawyer Hans Bodmer, who was accused of paying millions of dollars in bribes to four unnamed senior Azerbaijani officials. One was referred to by prosecutors as a senior Azeri official who was the ultimate decision maker with all respect to all significant aspects of privatization. Another was identified as a senior Socar official. It seems that those figures were President Aliev and his son Ilham, who was the former Socar head.

The indictment mentions two investment vehicles, Oily Rock and Minaret, established in 1997 by Viktor Kozheny, a Czech investor. He intended to purchase Azeri privatization vouchers in a bid which should allow his group to take control of SOCAR. Investors associated with Oily Rock and Minaret later convinced Omega Advisors, a US hedge fund, and several affiliates to join it as co-investors,. Omega bought $126 million in vouchers in 1998. Hans Bodmer, who represented Oily Rock, Minaret, Omega and other investors, paid millions of dollars of bribes to the Azeri officials to make sure that Oily Rock and its investment consortium would be able to acquire control of Socar in the privatization process, the indictment says.

The trial in the US comes at a time when the political uncertainty is already high in the country. Heidar Aliev, who has been president of Azerbaijan for more than 30 years, lies seriously ill in a U.S. hospital while his son, Ilham, the newly appointed prime minister, is campaigning to succeed him in the coming presidential elections. Major oil and gas companies consider Azerbaijan to be the gateway for the huge Central Asian oil and gas resources and its importance can therefore not be understated.

The Azeri bribery case unfolded when another Caspian littoral state was already under scrutiny. ChevronTexaco confirmed that it had been complying with a subpoena issued by the US Justice Department relating to bribery allegations in Kazakhstan. In this case, top government officials, to be precise President Nursultan Nazarbayev and former Prime Minister Nurlan Balgimbaev, are involved, too.

Many of the world's largest oil companies are looking nervously over their shoulder as the net widens in the US probe into bribery allegations in Kazakhstan. A former employee of Exxon Mobil, Bryan Williams, has already admitted related tax irregularities, but the company, like all others being dragged into the mire, insists that it did nothing improper in its dealings in Kazakhstan. The US investigations focuses on the sale of the biggest six oil and gas fields in the country including the giant Kashagan, Karachaganak, and Tengiz field. Apart from US companies, BG, BP, ConocoPhillips, ENI, Lukoil, Royal Dutch/Shell, Statoil, and Total are involved, as well.


Author: Nana Bendukize