Bulgaria to investigate $3bn Azerbaijan Laundromat claims

Bulgaria to investigate $3bn Azerbaijan Laundromat claims

Prosecutor launches inquiry into payments made to Kalin Mitrev, subsequently appointed to board of London-based EBRD bank

Powered by Guardian.co.ukThis article titled “Bulgaria to investigate $3bn Azerbaijan Laundromat claims” was written by Luke Harding, for theguardian.com on Thursday 7th September 2017 14.43 UTC

Bulgaria has ordered an investigation following revelations by the Guardian and other media partners that Azerbaijan operated a secret $2.9bn fund used to lobby influential Europeans and to funnel money offshore.

Prosecutor Sotir Tsatsarov said he was launching an inquiry into Kalin Mitrev, Bulgaria’s representative to the European Bank of Reconstruction and Development (EBRD). Mitrev received at least €425,000 (£390,000) from the scheme, which has been nicknamed the Azerbaijani Laundromat.

Mitrev denies wrongdoing. He says the payments to his Swiss and Bulgarian accounts were for legitimate consultancy work and happened before he joined the bank’s board in London. The reports were a “doomed political attack” on his wife Irina Bokova, the director-general of Unesco, Mitrev said.

Officials will now seek to establish if there is evidence of tax evasion or money laundering, the prosecutor’s office in Sofia announced on Thursday. Mitrev denies being aware of the original source of the funds and says he declared the income in Bulgaria and paid tax in full.

Mitrev’s future now remains unclear after his case was discussed on Thursday by Bulgaria’s cabinet. Speaking afterwards, finance minister, Vladislav Goranov, said that government had not taken a position on whether Mitrev should be removed from his EBRD job. It had written to the bank asking for its view, Goranov said.

The EBRD said on Thursday that only Bulgaria could take action against Mitrev, or exonerate him. His role was equivalent to that of an ambassador, it said, adding that he was not an employee. Board members from other European states are concerned by the Laundromat revelations and would like Mitrev to stand down, it is understood.

Bulgaria’s investigation comes at a sensitive time for the bank, which is on the brink of making a major loan to Azerbaijan. The EBRD’s president, Suma Chakrabati, is on a two-day visit to the country’s capital, Baku. The bank, founded in 1991, was established to support eastern Europe and to develop its private sector.

At stake is the future of the controversial southern gas corridor, the largest energy project the EU is currently pursuing together with Baku. Records loans in European public money are being considered for sections of the mega pipeline, which will transport gas from Azerbaijan to Italy. BP and Azerbaijan’s state-owned energy firm are key partners.

In October the EBRD will decide at a board meeting whether to give Azerbaijan a $500m (£380m) loan.

Sarah Shoraka, a spokesperson with the campaigning group Platform, said the payments to Mitrev could be “a huge stain on the bank’s reputation”. Until the case was properly investigated the EBRD should suspend any decision on the gas corridor project, she said.

Xavier Sol, director of the bank-monitoring organisation Counter Balance, said the Laundromat revelations came at a time when the EU was strengthening its ties with the Azerbaijan regime. It was negotiating the gas deal together with a comprehensive agreement with Baku to replace an existing partnership arrangement.

Sol added: “European public banks are considering huge loans for the southern gas corridor. Such loans would send a worrying signal of political support to the Azeri regime despite ongoing human rights violations in the country.”

Mitrev is an EBRD veteran. He has served on the bank’s board on and off since 1996 and is known as a well-respected and influential voice.

The revelation that he consulted for an Azeri company is awkward for Bokova because of her UN role. She bestowed one of Unesco’s highest honours, the Mozart Medal, on Azerbaijan’s first lady and vice-president, Mehriban Aliyeva. Aliyeva is a long-time Unesco goodwill ambassador.

Bokova has denied that there is a conflict between her husband’s work and her UN role.

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