Azerbaijan’s Laundromat scandal raises concerns over the EU’s growing business ties with the authoritarian regime

Azerbaijan’s president Ilham Aliyev with the EU’s High Representative of the European Union for Foreign Affairs and Security Policy Frederica Mogherini (Photo by European External Action Service – CC BY-NC 2.0)

Counter Balance

Brussels, 6 September 2017 – Statement by CEE Bankwatch Network, Counter Balance and Friends of the Earth Europe

Adding up to the list of shady practices of Azerbaijan’s authoritarian regime the Azerbaijani Laundromat corruption scheme raises serious concerns over the EU’s intensifying relationship with the government in Baku. In particular, the latest revelations cast even more doubts over the already controversial Southern Gas Corridor, the largest energy project the EU is currently pursuing together with Baku. Record loans in European public money[1] are currently being considered for sections of this mega pipeline, where Azerbaijan’s state-owned energy firm is a key shareholder.

Uncovered by a recent joint investigation led by OCCRP, the Laundromat is a USD 2.9-worth international system of money laundering that over two years (2012-2014) fuelled the Azerbaijani “influence machine”, and was used for bribing European politicians and generating benefits for the country’s elite close to President Ilham Aliyev.

The Azerbaijani regime has long been cracking down on journalists, civil society members and political proponents. The new revelations add to several earlier corruption cases allegedly enabled by Azerbaijani money. In May, Malta’s Prime Minister called early elections after allegations his wife and government officials had received Azerbaijani money. In April 2016 the Panama Papers investigation revealed offshore companies linked to family members of President Aliyev. In April, an investigation published in the Italian magazine L’Espresso exposed international schemes linking Azerbaijani oligarchs with companies close to Russia’s Vladimir Putin and Turkey’s Recep Tayyip Erdogan. The indictment of Luca Volonte, formerly the chair of the center right group in the Council of Europe’s parliamentary assembly, over bribery is considered to be part of Azerbaijan’s ‘caviar diplomacy’ efforts.

Yet, the EU is worryingly reinforcing the bond with Azerbaijan, ready to turn a blind eye to the country’s human rights abuses and offer loans of millions of euros to a massive gas infrastructure project that would fill the pockets of the Azerbaijani corrupted elite.

Such a position indicates a concerning trend in the EU’s energy choices, increasingly dictated by the questionable need for gas, for which even the most fundamental European values can be sacrificed.

Xavier Sol, Director of Counter Balance, claims: “these revelations come at a time when the European Union is strengthening its ties with the Azeri regime. First of all, the EU is currently negotiating a comprehensive agreement with Azerbaijan to replace the existing Partnership and Cooperation Agreement. Secondly, the European Commission is heavily supporting the Southern Gas Corridor, a chain of pipelines aiming to channel gas from Azerbaijan to Italy”.

He continues: “European public banks, both the European Investment Bank (EIB) and the European Bank for Reconstruction and Development (EBRD) are considering huge loans for the Southern Gas Corridor – that are to be approved in the coming months. Such loans would send a worrying signal of political support to the Azeri regime despite ongoing human rights violations in the country.”

Anna Roggenbuck, EIB campaigner at Bankwatch adds: “The EU energy diplomacy is currently leading to a concerning neglect of human rights and democracy in so-called partner countries. Therefore, we call on the European Union to uphold its values and not to provide a blank check to the Azeri regime by feeding it with public money. No section of the Southern Gas Corridor should be financed by European public banks.”

[1] The EIB Board of Directors will discuss a EUR 1 billion loan on its upcoming meeting on 19 September 2017. The EBRD USD 500 million loan is scheduled for discussion on 18 October 2017

Image: Azerbaijan’s president Ilham Aliyev with the EU’s High Representative of the European Union for Foreign Affairs and Security Policy Frederica Mogherini (Photo by European External Action Service – CC BY-NC 2.0)

The Guardian

Southern Gas Corridor is the missing piece of Azerbaijani Laundromat puzzle

The Guardian’s Azerbaijani Laundromat investigation (UK at heart of $3bn secret payments by Azerbaijan, 5 September) has uncovered thousands of covert payments as part of a European lobbying effort. But the article doesn’t mention the elephant in the room. Azerbaijan is particularly keen to present a positive image in Europe because it needs significant European support for its flagship project – the Southern Gas Corridor – despite the regime’s serial human rights abuses, systemic corruption and election rigging.

The corridor, one of the biggest infrastructure projects undertaken by the fossil fuel industry with a total cost of about $45bn, will carry gas from Azerbaijan to Europe. Powerful interests from fossil fuel corporations to European governments are pushing through this unnecessary project against the will of communities and threatening human rights and a safe climate.

The Southern Gas Corridor and its importance to the Aliyev regime is the missing piece of the puzzle and partly explains why the Azerbaijani regime is so heavily involved in lobbying at the European level and related money-laundering activities.

Sarah Shoraka Platform, Elena Gerebizza Re:Common, Xavier Sol Counter Balance, Anna Roggenbuck Bank Watch


• Perhaps the most concerning aspect of the latest fraud scandal to hit Britain is that it comes despite repeated government promises to crack down on those who exploit weaknesses in tax and governance laws. In 2013 David Cameron, then prime minister, pledged to put an end to tax avoidance through tougher transparency rules in the UK and our overseas territories. Yet more than four years on, the government has still not managed to fully close loopholes that enable wrongdoers to hide money and multinationals to avoid paying their fair share of tax.

Oxfam pushed for a review of Scottish limited partnerships and they are now required to publish details of company ownership, but these rules must be closely scrutinised and enforced to ensure there is no misuse of the system.

UK-linked tax havens such as the British Virgin Islands are still sheltering corrupt money and untaxed profits by refusing to make public registers of company ownership. Tax avoidance – often through tax havens – costs developing countries billions of dollars each year that could pay for schools and life-saving healthcare. Until politicians take decisive action on these issues, the world’s poorest people will continue to pay the price.

Rebecca Gowland
Head of inequality, Oxfam