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TAJIKISTAN PRESIDENT EMOMALI RAHMON PROTECTED FROM RUSSIAN CORRUPTION CHARGE BY WASHINGTON

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By John Helmer, Moscow

Once upon a time, not so long ago, the United States and Russia appeared to agree that the President of Tajikistan, Emomali Rahmon, was a crook.

It now appears that whatever government officials say in private, in public it is now US policy, along with that of the multilateral banks which the US dominates, that Rahmon’s reputation is to be protected, enhanced even. By contrast, United Company Rusal, Russia’s state aluminium monopoly, is turning up the public pressure on Rahmon with threats to expose his private money-box in the British Virgin Islands unless he pays two court-ordered judgements for a total of $347 million.

The Russian pressure is designed to persuade Rahmon to finalize and sign terms of agreement for basing Russian forces in Tajikistan. The US is aiming to hold out a reward for Rahmon if he doesn’t. Rahmon is also about to decide whether to continue paying a Washington lobbyist a fee of $100,000 per month, and what the aim of this lobbying effort should be over the coming weeks.

Classified cables from the US Embassy in Dushanbe, the Tajik capital, reveal that during the years when Oleg Deripaska, Rusal’s controller, held Rahmon’s concession for the operation of the Tajikistan Aluminium Plant (originally TadAZ, then Talco), the largest industrial enterprise in the country, US officials believed Rahmon was receiving corrupt reward. The evidence available to the Americans included documentation of alumina supply and aluminium payment schemes for the plant which Rahmon arranged through two British Virgin Islands (BVI) front companies, CDH Investments and Talco Management Ltd. According to Tajik law, the president directly administered the aluminium plant. As for Rahmon’s and his family’s involvement in the plant’s trading companies in BVI, that was an open secret revealed in long and complex litigation in the UK High Court. For the story of that evidence, read this [1].

Rusal abandoned the UK court litigation in 2007, and Rahmon replaced Rusal’s concession with a new one favouring Norway’s government-controlled aluminium company, Norsk Hydro. At the same time, Rahmon repaid a debt owed to the US aluminium trader, Gerald Metals, and promised the Americans a new share of the Talco business which Rusal had lost. When Rahmon then commenced London proceedings against Rusal for corruption, Rusal countered with claims against Talco and against the BVI entity, CDH. The claims and counter-claims were heard [2] last year by a 3-man arbitration panel of the Zurich Chamber of Commerce.

On October 9 Rusal announced [3] it had won the first of the claims. On October 22 Rusal said [4] it had won the second of the claims, plus a supporting judgement from the Swiss Federal Supreme Court, and an order to pay from the High Court of the BVI. For this story, click [5].

Rusal has been threatening “to take other legal actions in support of its enforcement action. This will include an application to liquidate CDH, whereupon a court-appointed liquidator will open up CDH’s books and records. Furthermore, there will be an application for discovery of bank records of CDH’s dollar-denominated transfers in the United States and elsewhere, and other similar measures.”

At the end of November the BVI court issued an order liquidating CDH, and allowing the opening of its records [6], if Rusal’s accountants can find them. “We expect these discovery actions to lead to a network of offshore entities and accounts connected with Talco,” Rusal has warned. Rahmon’s transactions are the real target.

Just before Christmas Talco issued its first public response, implying that Rahmon is hoping to go over Deripaska’s head and resolve the Rusal claims with the Kremlin. The company, said [7] chief financial officer Sherali Kabirov, “does not want its relations with Russia’s RusAl aluminum company to affect bilateral political and economic cooperation between Tajikistan and the Russian Federation. There are many ways to solve this issue positively, in the interests of our nations.”

For the time being, the US Government remains silent on Rahmon. Wikileaks releases of State Department cables cover a decade of communications between US officials in Dushanbe and Washington, but the dossier stops in early 2010. According [8] to a secret US Embassy cable of February 16, 2010, “from the President down to the policeman on the street, government is characterized by cronyism and corruption. [Rakhmon and his family controlled the country’s major businesses and played] “hardball to protect their business interests, no matter the cost to the economy writ large.” This cable also reveals that in the US assessment, the Rogun (also spelled Roghun) Dam project, a major new source of hydroelectricity for the country, was promoted by Rahmon for his personal benefit through Talco’s sale of aluminium. “Considering Talco’s share of electricity consumption, the Roghun campaign looks like a means to ensure Talco’s continued profitability.” See this [9].

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James Fabiani

US support to build the Rogun Dam is the apparent aim of a current lobbying campaign in Washington. Rahmon initiated this in a contract between the BVI company Talco Management Ltd., and Fabiani & Company, signed on September 12, 2012. The terms of agreement go further than the dam, obliging [10] Fabiani “to assist Client in increasing The Republic of Tajikistan’s investment profile and improving the country’s overall political, social, cultural and commercial relationships in the U.S.” Fabiani was paid $1.2 million in monthly instalments of $100,000 until September 30, 2013, when the contract ran out.

By Russian standards, the fee is unusually high. Deripaska pays Endeavor, a lobbying firm in Washington, $40,000 [11] per month. Ukrainian lobbying for US intervention to support the opposition to President Victor Yanukovich is also a fraction of Rahmon’s outlay. Former Ukrainian prime minister Yulia Timoshenko, for example, started paying the firm of Wiley Rein $20,000 per month, and then raised the fee to $45,000 [12]. Victor Pinchuk, the Ukrainian pipemaker backing Ukrainian membership of the European Union, has been paying lobbyist Douglas Schoen $40,000 [13] per month.

Fabiani is also lobbying for US backing for the Azerbaijan Government. For that three-year old contract Baku is paying $200,000 [14] per month.

Semi-annual reports on the Tajikistan contract filed with the Foreign Agents Registration unit of the US Department of Justice indicate frequent meetings between the lobbyists, US Government officials, Congressmen, Senators, their staffs, and members of congressional committees. In reporting these contacts to the Justice Department, Fabiani describes their purpose as “regarding Tajikistan-US Relations and the Rogun Dam hydroelectric project.” Targets for the lobbying have included US policymakers on intelligence, military strategy, arms supply, and foreign policy, as well as energy and foreign aid. The World Bank and International Monetary Fund (IMF) in Washington have also been contacted by Fabiani.

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Rahmon with SecState Hillary Clinton,
October 2011

For the time being, US Government financial assistance to Tajikistan is very small, and the most recent outlays for fiscal years 2012 and 2013 have dropped well below the peak year of FY 2002. Much of the US money is spent on Tajik transit and border operations supporting the US war in Afghanistan and on combatting Afghan narcotics smuggling. Since July of 2013, a Congressional Research Service report claims [15], Rahmon is asking for “U.S. security support to assist Tajikistan after the planned drawdown of U.S. forces in Afghanistan in 2014.”

The Fabiani campaign has produced a 31-page document [16] which it has circulated to officials in government, as well as to the press. It is entitled “Case Statement – Tajikistan and the Rogun Dam: A Statement to educate the public on the importance of the Rogun Dam”. This argues that the dam, begun by the Soviet Union and then abandoned for lack of money, is “a priority…to provide energy to much needed areas in Afghanistan and Pakistan. Rogun can therefore play an integral role in advancing the economic development of Central Asia and, in turn, ensuring the long-term security of the region.”

There would also be a strategic payoff for Washington. “Greater utilization of these [hydroelectric] resources will hasten the economic development of Tajikistan and its citizens — delivering the following benefits to the United States in the process: Bringing Tajikistan into the global marketplace; decreasing their dependence on Russia and China for political and economic support.”

The Fabiani document stops short of proposing US financial grants, loans, or guarantees for the $2 billion cost estimated for the Rogun Dam.

A source at the Department of Justice says that Fabiani and Talco Management ought to have filed a new report on their activities for the past six months by a December 31 deadline. Fabiani is negotiating the renewal of the lobbying engagement, but it is not commenting on why its fees are being paid by the BVI company.

Since 2004, when Deripaska agreed with Rahmon on payment terms for Rusal’s concession to run the aluminium plant, both the World Bank and the International Monetary Fund (IMF) have been publicly critical of the role Rahmon has played personally in the aluminium business, and of the failure by Talco and other state enterprises, including the National Bank of Tajikistan, to account for billions of dollars in trade cashflows, loans, and grants.

A World Bank report of June 2004 recommended [17] that “the [Tajik] Government should create a unit to monitor [Talco’s] quarterly financial flows, debt and arrears, as well as financial and other performance targets. In addition, the unit should oversee governance arrangements, including appointment of Directors and the publication of regular financial information, audited financial statements and company charters.”

Four years later, the IMF reported publicly that nothing had changed. In an unusual announcement [18] of March 2008 the Fund criticized the entire financial administration of the country and declared a partial default on the government’s repayment of loans. Talco, the IMF announced in June 2008, had the “most worrisome financial operations [which] remain non-transparent.”

By last year, however, the World Bank had abandoned public criticism of Rahmon’s administration. The most recent World Bank summary [19] of its position in Tajikistan, issued in June of 2013, had nothing to say about governance and corruption beyond claiming: “Country Governance and Anticorruption Framework mainstreams governance across the World Bank’s portfolio in Tajikistan.” Talco wasn’t mentioned. The Bank has also doubled its non-repayable grants to Tajikistan from $75 million in the 2009-2011 period to $150 million in 2012-2014.

Annual IMF missions to Tajikistan in 2012 and 2013 reveal the Fund had ordered Rahmon to accept an external audit of Talco’s accounts for 2008 and 2009, though not for the years since then. The IMF mission reports also reveal that a parallel audit of Talco Management in BVI was demanded. The IMF said [20] it required publication of the audits, and a letter from Rahmon himself to the Fund accepted that “in continuing with our commitment to transparency, we hereby request that all program related documents… be published on the IMF website.” The IMF reports claim [21] the Talco and Talco Management audit documents were delivered in November 2011, adding it “welcomed the government’s continued commitment to transparency, including publication of Talco Management’s audited financial statements…”

In fact, there has been no publication of the audits, nor of what one Washington source calls the “sensitive” Talco management records.

Asked last week to explain why, Conny Lotze, head of the IMF’s press office, claimed: “with regards to the government/Talco publishing Talco Management’s audited statement, the government/Talco has met the IMF condition and published the audited financial statements and audit reports for Talco Management for 2008-09. For obtaining such documents they would need to be obtained directly from the government or Talco.”

Is this evidence that the IMF is covering up for Rahmon and Talco, Lotze was asked. “We object to your allegation of trying to ‘mislead’ or ‘manipulate’ considering the explanation [given] you. If you need more on the IMF’s mandate and work, we would be happy to provide you with information.”

Lotze also confirms that another recent IMF recommendation for Talco has been rejected by Rahmon. Following a two-week study mission to Dushanbe in April 2013, the IMF recommended “the introduction of a dividends policy for state-owned enterprises, including for Talco Management.” Nine months later, according to Lotze, “the government has adopted by resolution a dividends policy for state-owned enterprises that are 100-percent owned by the government. Talco Management, however, was not included in the list of enterprises covered by that resolution.”