An investigation by Azattyk’s Azerbaijani service has establishedthat banks controlled by the family of an autocratic president Ilham Aliyevhave nearly tripled their market share to 43 percent since 2015, when the government devalued the national currency.
20 years ago, power in Azerbaijan passed from an autocratic president Heydar Aliyev to his son Ilham. During this time his relatives became owners of huge fortunes through government contracts in industries such as natural resources, airlines and construction. Another source of large income for the family of the Azerbaijani president was banking sector: Aliyev’s daughters and other relatives control billions of dollars in assets through private lending institutions. Azattyk’s investigation showed that the influence of their banks is steadily growing.
Since 2015, four banks fully or partially controlled by the Aliyev family have tripled their market share in the country, even as the devaluation of the national currency, the manat, as a result of a sharp drop in oil prices, has hit household savings hard and created public panic.
PASHA Bank, Kapital Bank, Xalg Bank and Eurasia Bank became the largest credit institutions servicing loans under the state business development program for hundreds of millions of manats.
The value of assets of Aliyev-linked banks jumped from four billion manats ($5.1 billion at pre-devaluation rates) in 2015 to 20 billion manats ($11.8 billion at current rates) at the end of 2022, according to an RFE/RL investigation that based on financial statements of the banking sector.
Under Azerbaijani antimonopoly law, a market share above 35 percent is considered dominant and can be regulated, but in practice this has never been the case, says economist Natig Jafarli. The total market share held by these banks exceeds that of state-owned credit institutions, which has fallen from 38 percent in 2015 to 30 percent currently.
At the same time, more than 20 competitors left the market after the devaluation of the manat and the decision of the Azerbaijani Central Bank in January 2015 to raise the required minimum capital for working in the banking sector five times – to 50 million manat ($64 million).
The sharp growth of banks associated with Aliyev over the past eight years can be attributed to the consequences of devaluation, but these banks are absorbing assets much more actively than their competitors. In addition, they received cheap government loans to support businesses, which allowed these banks to make money by issuing loans to the population.
Banking analysts believe that the state gave preference to the Aliyev banks to the detriment of competitors with fewer political connections, resulting in a de facto oligopoly: entrepreneurs and the population have less choice in obtaining loans and loans cost them more.
Aliyev, 62, came to power in 2003 and has since increased his control over the country, rich in oil and gas resources. He recently announced early presidential elections on February 7, which he is certain to win given the political situation in Azerbaijan and laws that restrict fundamental rights and freedoms. The president of the country is elected for seven years, the number of terms is unlimited.
Azerbaijan ranks 157th out of 180 in Transparency International’s Corruption Perceptions Index. The US State Department stated that “the country’s economy is dominated by a small group of companies associated with the national government.”
RFE/RL contacted all four banks close to Aliyev for comment. At the time of publication, a response was received only from Kapital Bank. It notes that the growth of assets is associated with the expansion of online services and other technical innovations. When asked about issuing loans through the State Entrepreneurship Development Fund, the bank advised contacting the “relevant government agencies.”
In the Panama Papers investigation OCCRP revealedthat the business founded by Mamedov and later headed by Kamilov arose several months before the elections that consolidated Aliyev’s power. OCCRP also described how Mamedov invited members of the Aliyev family to join his company, which formed a powerful commercial and political partnership.
Plans for a secret fund
The proceeds from the AtaHolding structures were apparently supposed to flow into a secret Panama fund that Mamedov founded with the help of Mossack Fonseca, an offshore services provider that became notorious when the Panama Papers revealed its dubious dealings.
Judging by the leaked documents, President Aliyev’s wife, Mehriban, became one of two fund managers, along with Mamedov.
Among other things, a draft document surfaced, according to which the fund’s beneficiaries were supposed to include the son of President Heydar (he was only six years old at the time), the president’s still very young daughters, as well as Kamilov and Mamedov’s son. However, it is unclear from the available documents whether this scheme was actually implemented.
So, although it is impossible to clearly judge the sources of the Aliyevs’ wealth, it is clear that their financial “achievements” are closely intertwined with the successes of AtaHolding and its creators.
At the same time, new data from the Pandora Archive indicates that Kamilov was more closely connected with the Aliyevs’ offshore empire than anyone expected.
It appears in 35 of the 84 offshore companies studied for this article. In ten of them, he and members of the presidential family are shareholders. In three cases, it was Kamilov who acquired companies in the BVI, bought valuable real estate through them, and then transferred it to the Aliyev family.
Another important figure was Gafar Gurbanov, a former Tax Ministry official who was also president of AtaHolding. He was listed as a director of most of the 84 related offshore companies mentioned. (As his fame in the business world increased, he was replaced in these structures by his brother Adnan, and later by Mamedov’s nephew.)
In many cases, nothing is known about the activities of these companies, however, judging by documents from the company that handled their affairs, Trident Trust, some of them were opened to open bank accounts in Switzerland and the Czech Republic. Others presented themselves as investment or trading entities. And only a few owned real businesses in Azerbaijan.
It is certain that some of these “offshores” had valuable assets: we are talking about dozens of real estate properties (almost all in London), the total value of which reached 429 million pounds sterling ($694 million). According to registration data, the lion’s share of the properties were bought in cash.
Acquisitions sometimes turned into oddities. For example, Heydar Aliyev found himself the owner of four buildings on Maddox Street in the fashionable Mayfair district when he was only 11 years old.
The most expensive property in the hands of Aliyev’s relatives was a commercial complex on Conduit Street, bought by Kamilov for 35.5 million pounds ($58.8 million) and a few weeks later re-registered to Arzu Aliyeva, then 22 years old.
And the largest asset owned by the offshore network of companies was the Holborn Links commercial building complex worth 208 million pounds ($343 million), occupying several blocks in central London. The buildings include the historic Bloomsbury Tavern pub, and the British Museum is just steps away. Before the sale in 2016, this complex was managed by a company owned by Kamilov.
As a result of such combinations, the impression was created that the property had been disposed of. If not for one document found by journalists in the Pandora Archive, this property would have disappeared from public view and disappeared into a trust, the details of which are reliably hidden by the strict laws of the Isle of Man on corporate secrecy. However, Pashayev completed a Trident Trust declaration when he transferred the property, estimating the value of the trust’s assets at £100 million and identifying him as the source of the funds.
At this point the trace of real estate is lost.
In one of the latest documents in the Pandora Archive specifically relating to the Aliyevs and their associates, the Trident Trust requests additional information about Arzu Aliyeva from her representatives:
“In the course of our regular monitoring of international clientele, the verification mechanism indicated the beneficial owner of the companies mentioned above as [политически значимое лицо], the November 2018 email read. “The beneficial owner is the daughter of the President of the Republic of Azerbaijan.”
“We will require the following documents to satisfy the internal requirements for enhanced financial and legal due diligence: letter of recommendation from the bank, professional reference, resume.”
Aliyeva’s representatives responded the same day, sending an old recommendation from her bank in Azerbaijan. “We have known Ms. Arzu Aliyeva for more than ten years,” the recommendation said. “We consider her to be a trustworthy person and firmly believe that she would not make a commitment that she could not fulfill.”
Alexandra Lee (OCCRP/Kloop) also contributed to this story.