Loss of $8bn: they in Azerbaijan have found the scapegoat to blame for currency crisis

In crisis-stricken Azerbaijan, they are prosecuting the former chairman of the International Bank of Azerbaijan Jahangir Gajiyev.

Gajiyev and seven more people are facing charges of embezzlement, abuse of office, forgery and illegal purchase, possession, sale and transportation of firearms.

Gajiyev pleads non-guilty and blames Azerbaijani Finance Minister Samir Sharifov. He said that the audit committee of the bank consisted mostly of finance ministry employees: “They sat in the bank and approved all of our decisions. The indictment contains no single fact related to people from the audit committee, the financial council or the board,” Gajiyev said.

“Sharifov must be summoned to the court and must be seated near me. They say that some loans have not been redeemed, but their redemption deadlines are not over yet. Everybody knows that as many as 2,000,000 people in the country have loan debt. If so, we should eliminate the banking system and detain those who issue loans,” Gajiyev said.

Sharifov’s reaction was quick. He blamed Gajiyev for politicizing the trial. “His statements are groundless. He just wants to distract public attention and to politicize the crimes,” Sharifov said.

The ministry’s press office notes that Gajiyev abused his office and lent billions of US dollars to his relatives and friends. “In many cases, he sent the loans to his offshore companies and embezzled the money,” says the source.

“In Oct 2009-Mar 2015, despite the Supervisory Council’s decisions, they lent legal and physical entities a total of 1.3bn manats, 1.4bn US dollars and 300mn euros. In the meantime, they withdrew from the country as much as 3.7bn US dollars and 1.1bn euros and used the money for buying the bills of newly established offshore companies. Later the funds were transferred to the projects where the key beneficiary was Gajiyev,” says the press office of the finance ministry.

As regards the loans approved by the Supervisory Council there were seven such loans worth 250mn US dollars and 261mn manats. And all of them have already been repaid.

As you may see, having shut down dozens of banks, the authorities have broken their teeth on almighty Gajiyev, who has taken billions of US dollars out of the country on the instruction of his influential relative (former National Security Minister Eldar Mahmudov – edit.). Hence, his key goal was to get illegal benefits for the offshore companies, which borrowed loans from European and U.S. banks and failed to repay them. The debts were repaid by Azerbaijani banks at the expense of their customers.

These illegal deals have made many Azerbaijani banks insolvent.

Many experts have criticized the ministry’s attitude. According to expert Gubada Ibadoglu, this means that for six years the Central Bank, the Finance Ministry and the State Customs Office neglected the banking sector and that the biggest bank of the South Caucasus was engaged in embezzlement. “In democratic countries, such a situation would cause financial supervisors to resign and to face prosecution. The 5bn US dollars illegally taken out of the country and the billions of manats issued as unsecured loans are the key reasons why our national currency is facing such problems,” Ibadoglu says on Facebook.

Expert Samir Isayev share Ibadoglu’s opinion: “For six years the Supervisory Council (the Finance Ministry) did nothing to prevent the withdrawal of funds from the country. So, they are as much responsible as Gajiyev is,” he says on Facebook.

According to the deputy head of the Assistance to Economic Initiatives NGO Rovshan Agayev, a total of $8bn has been embezzled at the International Bank of Azerbaijan. “They lent some people as much as $50mn-60mn, used the money for their own purposes and registered the unrepaid loans as problematic and hopeless,” Agayev says.

The other channel was offshore companies. “They bought the bills of those companies as a means for taking money out of the country. Those $8bn would suffice Azerbaijan’s education for 7-8 years, health care for 20 years and social security for 5 years,” Agayev says.

He blames not only Gajiyev but also all the country’s financial managers and government officials. The leader of the People’s Front of Azerbaijan Ali Kerimli says that Azerbaijan’s financial system has slumped. “Manat has been killed and is being given artificial respiration so as nobody can notice its death. The banks’ decision to stop selling US dollar will shortly result in a shortage of imported goods, the prices will go up, manat will fall even lower. And all this is going on in a country that has earned as much as $135bn on oil over the last few years,” Kerimli says.

What the finance ministry means is that for many years Azerbaijan’s banking sector has been uncontrolled. Were it not for the slumping oil prices and the impending financing collapse, the authorities might well continue ignoring this situation.

Maksud Talibli, specially for EADaily (Baku)