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Congress Must Investigate U.S. Loans To Azerbaijan’s Secretive Silk Way Airline

Silk-Way

Silk Way Airlines

By Harut Sassounian

Last year, I wrote an article reporting that the Silk Way Airlines of Azerbaijan made 350 secret flights to transport hundreds of tons of weapons from Bulgaria to ISIS terrorists in Syria and other Middle Eastern countries between 2014 and 2017. We now have a new surprising revelation that Silk Way received $419.5 million of loans from the U.S. Export-Import Bank (EXIM) to buy three 747-8 cargo planes from Boeing to continue its sinister operations.

The disclosure was made by a reporter for the Organized Crime and Corruption Reporting Project (OCCRP) by filing a Freedom of Information Act (FOIA) request with the U.S. government in 2016. It is noteworthy that Silk Way, “owned by a company with past ties to Azerbaijan’s Aliyev family, won some lucrative contracts from the U.S. military,” according to FOIA documents. In fact, “Silk Way was given contracts worth more than $400 million with the U.S. Defense Department’s Transportation Command for more than decade,” according to Devansh Mehta of OCCRP. Silk Way transported “ammunition and other non-lethal materials” to Afghanistan as of 2005. “In addition to its relationship with the U.S. government, Silk Way Airlines has also worked as a subcontractor for the Canadian Department of National Defense, the German armed forces, and the French army,” Mehta revealed.

In April 2017, Silk Way increased its purchases from Boeing, signing a $1 billion deal for 10 new 737 MAX passenger planes, according to reporter Mehta. However, it is not known how the new acquisition was financed. Last October, Silk Way announced plans to buy two more 747-8 cargo planes.

Mehta disclosed that “the airline is owned by Silk Way Group, which, at least at one point, was closely associated with Azerbaijan’s ruling Aliyev family (which has used its planes for private trips) and has benefited from benevolent state deals. Information obtained through FOIA shows that Silk Way Airlines took steps to conceal its owners’ identity, perhaps to improve its chances of winning the valuable U.S. loan guarantees and military contracts.”

Mehta added that “Azerbaijan ranks 122nd out of 180 countries in Transparency International’s corruption perception index, while President Ilham Aliyev’s family owns luxury properties around the world worth over $140 million. The Panama Papers and other leaks have implicated the country’s first family as being involved in nearly all sectors of the Azerbaijani economy, from luxury hotels to mining to banking.”

According to the terms of the Export-Import Bank’s $419.5 million loan to Silk Way, in case of default the loss would be repaid by the state-owned International Bank of Azerbaijan (IBA). The problem is that IBA has been “implicated in the Azerbaijani Laundromat, a massive scheme that pumped nearly $3 billion out of the country through various shell companies,” Mehta wrote. Furthermore, IBA is not in a position to guarantee the Silk Way loan, as the IBA itself declared bankruptcy in 2015, unable to pay its $3.3 billion debt!

Nate Schenkkan, project director of the Nations in Transit report at Freedom House, a US-based nonprofit that monitors democracy and human rights around the world, questioned the wisdom of EXIM Bank’s loan to Silk Way: “In Azerbaijan, where one family dominates economically and politically, and is then using state institutions to back its economic projects, there’s an obvious conflict of interest.”

Arzu Aliyeva, Pres. Aliyev’s 21-year-old daughter in 2010, was one of the three owners of Silk Way Bank, the financial arm of Silk Way Holding. Since 2017, her name is no longer mentioned as an owner. “Silk Way Holding, also referred to as Silk Way Group (SW Group) on its website, is a conglomerate that has currently listed 11 companies in its portfolio, including the airline,” according to Mehta. Silk Way Holding dominated Azerbaijan’s aviation sector after the state carrier AZAL airlines was privatized in a highly secretive manner without any bids and tenders. Mehta wrote that “a similar privatization of the telecom sector ended up with the [Aliyev] family earning about $1 billion in bribes in cash and share value, according to an earlier OCCRP story. The investigation also found that the money was funneled to the first family through various secret offshore companies. These companies have enabled the Aliyevs to control stakes in gold mines, telecommunications and construction businesses in Azerbaijan.”

According to a filing in 2006, Silk Way Airlines was owned by IHC (International Handling Company), an offshore entity based in the British Virgin Islands. In a 2017 filing, Silk Way Airlines stated that 40% of the company was owned by IHC, while 60% was owned by SW Holding, “effectively controlled” by Zaur Akhundov, an Azerbaijani citizen. Mehta stated that “IHC is linked to the Aliyev family through its director Jaouad Dbila who reportedly served as a proxy for the first family’s business interests in the past.”

In 2011, a Russian-born manager, Grigory Yurkov, was given power of attorney for both Silk Way Holding and IHC, according to Luxembourg’s official gazette. This appointment was used as a means to conceal the true owners of IHC.

Meanwhile, Zaur Akhundov had mysteriously become the 100% owner of the entire Silk Way Group in 2014. By that time, the firm and its many holdings were already worth billions of dollars, Mehta declared, based on the company’s loan guarantee application. Akhundov, 50, had held several official positions in Azerbaijan. “It is unclear how Akhundov became the owner of a billion-dollar conglomerate with more than 10 aircrafts, an insurance company, a construction company and an aircraft maintenance company, to name a few of the enterprises in the Silk Way Group,” Mehta wondered.

According Schenkkan of Freedom House, “Azerbaijan can be described as a centralized, vertical pyramid where the benefits go to one family that collects rents throughout the economy. This includes all sorts of transactions, not only official state transactions that might involve taxes and public funds, but also things that involve what we normally consider the private sector: import-export, consumer goods, transport—any area of the economy, the family has a stake in it and receives a cut on what takes place.”

The U.S. Congress should hold a hearing to investigate the appropriateness of EXIM Bank’s $419.5 million loan guarantee to Silk Way Airlines, its arms shipments to terrorist groups in the Middle East, and its hidden ownership by the ruling Aliyev family. After all, why should Azerbaijan, a country with billions of petrodollars, be given a U.S. loan?

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Aliyev Family’s Financial Role In Shipping Weapons to Terrorists

By Harut Sassounian
FLArmenians Guest Contributor

Last week I wrote about the sensational revelations by Bulgarian investigative journalist Dilyana Gaytandzhieva in Trud newspaper, who reported on leaked documents that Azerbaijan’s state-run Silk Way Airlines has shipped under diplomatic cover 350 planeloads of heavy weapons and ammunition to terrorist groups around the world during the last three years.

A report by Radio Free Europe (RFE) Azeri investigative reporter Khadija Ismayilova, who has been jailed for her disclosures of Azerbaijan government’s human rights abuses, has revealed in a 2010 report on Pres. Aliyev’s daughter, Arzu Aliyeva’s part ownership of a company that is linked to Silk Way Airlines. This fact explains how the airline managed to get all the diplomatic clearances to ship such large quantities of weapons to terrorists.

It turns out that Silk Way Airlines belongs to SW Holding, a group of companies that “enjoys a near-complete monopoly of airline service,” including mid-flight meals served by Sky Catering, and taxi service run by Airport Gate, both of which are owned by SW Holding. In addition, technical maintenance of the national carrier’s planes and helicopters are carried out by Silkway Technics, and “multiple other companies controlling everything from Traveler assistance to ticket sales to duty-free stores are all owned by SW Holding,” according to Ismayilova.

SW Holding also owns Silk Way Bank which is owned by Pres. Aliyev’s then 21-year old Arzu Aliyeva and Zarifa Hamzayeva, wife of president of Azerbaijan’s AZAL state airline company, according to RFE’s Azerbaijani Service. Silk Way Airlines is also a part owner of the Silk Way Bank.

Azerbaijan’s President Ilham Aliyev and his wife, Mehirban, who was recently named the country’s Vice President

Interestingly, Ismayilova reports that “the rise of SW Holding, which has seamlessly absorbed many of AZAL’s former businesses, has raised questions about dubious privatization practices in Aliyev’s Azerbaijan. It also serves to underscore how the political elite continues to use close friends and family members to preserve its hold on the country’s most valuable assets — despite Azerbaijani laws that list nepotism by state officials as an offense punishable by up to 12 years in jail.”

Pres. Ilham Aliyev is simply continuing the practice started by his father Heydar Aliyev, who after ruling Azerbaijan for two decades passed the Presidential baton to his son. In a constitutional referendum in 2009, term limits on the President were abolished making Ilham Aliyev President for Life! Not to take any chances, he recently appointed his wife, Mehriban Aliyeva, as Vice President, to become his possible successor.

As I had reported earlier, based on an article in The Washington Post,” Pres. Aliyev’s preteen son, Heydar, was the legal owner of nine luxury mansions in Dubai purchased for $44 million. President’s two daughters, Arzu and Leyla, also own property in Dubai. The three children together own property in Dubai worth $75 million. Obviously this is not money they earned nor did their parents! Pres. Aliyev’s annual salary is $230,000. Ismayilova estimates Pres. Alyev’s wealth to be “in tens of millions of dollars.” This is surely an underestimate, given the lack of concrete figures. However, just the fact that Aliyev’s three children own property in Dubai worth $75 million, Pres. Aliyev’s wealth could be safely estimated to be in the hundreds of millions of dollars if not in the billions of dollars! Contrary to Azerbaijani law, neither Pres. Aliyev nor his wife has declared their net worth.

Under Azerbaijani law, public officials are prohibited from owning businesses, while family members are exempt from this restriction, a loophole exploited by the Aliyevs to hide their earnings in their children’s holdings. Just Arzu Aliyeva’s part ownership of the Silk Way Bank is worth over $12 million. According to RFE, “presidential secretary Azer Gasimov confirmed that Arzu Aliyeva was one of the owners of the Silk Way Bank.”

Gulu Khalilov, the spokesman for the State Committee on Privatization of State Property, told RFE that he had no information on the privatization of AZAL, the state airline company, including its holdings, like AZAL Bank. RFE was told that none of the legal procedures for privatization were followed.

“In the meantime, SW Holding has slowly but steadily acquired nearly all of AZAL’s former companies, including the insurance firm AZAL Sigorta, which is now co-owned by SW Holding and the two daughters of Jahangir Asgarov, the president of AZAL and the husband of Zarifa Hamzayeva, the current co-owner of Silk Way Bank,” according to Ismayilova. “SW Holding has also been the sole contractor on a number of high-profile AZAL projects, including airport-construction deals in Lankaran, Ganja, and Zagatala worth a total of $150 million.”

Pres. Aliyev and his family must be held responsible as part owners of a state-run airline that ships sophisticated weapons to terrorists around the world!

U.S., Turkey, Armenia Conference on Tourism and Hospitality: The Highway to Sustainable Regional Development

By Caucasus Research Resource Centers – Armenia Blog
July 3, 2013

On June 28-30, 2013, ATA Fellows (American, Turkish, and Armenian Fellows), which is a partnership of academics from the University of Florida, U.S.A., Dokuz Eylul University, Turkey, and Armenian State University of Economics, Armenia, as well as industry practitioners from each country, organized a conference on tourism and hospitality: “The Highway to Sustainable Regional Development.”

The conference was attended by CRRC-Armenia Junior Research Fellows Tigran Sukiasyan and Ani Karapetyan and brought together academics, researchers, NGO representatives, industry practitioners and scholars of different disciplines to focus on the knowledge development and implementation in the field of tourism and hospitality.

(Also on Florida Armenians: American, Turkish, Armenian Universities Participate in Joint Tourism Project)

U.S. Ambassador to Armenia John A. Heffern gave the opening statement, emphasizing the importance of the ATA Fellows Project. In turn, Dr. Artak Manukyan, Armenian Director of the project, made a presentation on the prospects of the opening Armenia-Turkey borders, where detailed analysis from different angles were presented.

The three-day conference integrated separate sessions focusing on the theoretical, empirical and sustainable development opportunities. The discussions of the first session were dedicated to Peace and Tourism, Tourism and Sustainable Development, as well as Tourism Management and Corporate Responsibility. Dr. Mahmood Khan, a professor from Virginia Tech, talked about tourism and peace, stressing that governments should not intervene in the process of tourism development; indeed, people should do the job. In that way, only tourism will lead to peace facilitation process, he stated. Another interesting presentation was made by Dr. Kaye Chon, a professor from the School of Hotel and Tourism Management at Hong Kong Polytechnic University. He talked about innovative approaches to  tourism and hospitality, and how they would lead to better quality and outcomes.

The second session of the conference was devoted to the Sustainable Tourism Issues and Capacity Building as a Prerequisite for Sustainable Development. During this session, several interesting comments were made by Armin Zerunyan, Country General Manager, Hilton Worldwide, Turkey, referring to the tourism development in Armenia. According to Mr. Zerunyan, high prices of flights to Armenia create a serious obstacle to the tourism development. Also, he pointed the importance of Armenian Diaspora for attracting more tourists to Armenia, bringing an example of Eastern Europe countries, which used their diaspora connections to create a well-developed tourism infrastructure. Lastly, Mr. Zerunyan marked out the importance of winter tourism for Armenia. As a supporting example, he noted that in winter, significant number of Turkish people travel to Bulgaria, where winter tourism is highly developed; indeed, by developing its own infrastructure, Armenia could be a strong competitor in that field. In addition, Dr. Muzaffer Uysal, Professor of Tourism at Virginia Tech, mentioned Italy with its free skiing and snowboarding schools having a huge positive impact on the tourism development, and suggested to implement similar projects in Armenia.

The last day of the conference summed up with a brainstorming session related to the further development of the ATA fellows project. The participants were divided into three groups: Research, Product Development, and Policy Making. In the Product Development part leading role of marketing and training for the actors providing tourism services, and investment opportunities for tourism development were emphasized, also stressing the fact that Armenia is the first Christian country (similar examples in other countries, where the religion played an important role for tourism development, were brought by Dr. Kaye Chon). More specific research in the region and cross border collaborations were proposed in the Research part,  where  CRRC Fellow Tigran Sukiasyan made a speech related to the project idea, which may contribute to the knowledge development and its implementation within the framework of the ATA fellows program. Database creation and analysis of the tourism trends in the Caucasus Region, cooperation with universities, NGOs, public and private institutions concluded the last Policy Making part of the brainstorming session.

The presentations will soon be posted on the ATA Fellows website.

This article originally appeared on the Caucus Research Resource Centers – Armenia Blog and is reprinted with the permission of the author.