Last week it was being hailed by the prime minister. This week Norway’s large industrial firm Hydro was confronted with suspicions that it has become the latest state-controlled Norwegian company to ignore numerous warnings and do business in a country known for high levels of corruption.
Newspaper Dagens Næringsliv (DN) detailed in a lengthy published report over the weekend how Hydro, for nearly 20 years, negotiated aluminum production and deliveries directly with Tajikistan’s controversial leader and members of his family whom he’d placed in positions of authority. Hydro, which just last week won kudos for an innovative new project in Norway, struck deals with so-called “shell companies,” the real owners of which were kept hidden. Companies involved in the deals, and to which Hydro made large payments, were based in tax havens including Guernsey and the British Virgin Islands.
Documents compiled by DN from courts in five countries, the companies themselves, copies of various agreements, import and export statistics, contracts and bank account statements revealed the scope of Hydro’s multi-billion-kroner business in a country ranked by Transparency International as being one of the most corrupt in the world. Despite warnings from the World Bank, the International Monetary Fund (IMF), Transparency International and other anti-corruption agencies, Hydro went ahead with its business in Tajikistan.
Through it all, Hydro seemed to have Norwegian government support from both ends of the political spectrum. Now, the government trade ministers and foreign minister at the time claim not to remember any details of Hydro’s involvement in Tajikistan. From Jonas Gahr Støre and Trond Giske of the Labour Party, to Børge Brende of the Conservatives (who was trade minister when Hydro was renegotiating contracts in Tajikistan), none had any information to offer. “It doesn’t ring any bells,” contended a spokeswoman for Støre, for example, using almost the exact same words as one of Labour’s former trade ministers, Odd Eriksen, did when contacted by DN.
In 2007, shortly after Hydro had renegotiated a deal to resume sales of metals and purchases of aluminum from the state-controlled smelter in Tajikistan, another trade minister from Labour, Dag Terje Andersen, decided to ask some questions. That came after website NA24 had written about Hydro’s business in the former Soviet republic run by an uncontested leader, his family and friends. Andersen called Hydro officials in for a meeting, but not only did nothing come of it, there’s not even any mention of a meeting in the ministry’s archive. Andersen also now says he “simply can’t remember” anything about concerns over Hydro’s business in Tajikistan.
Hydro itself communicated with DN only through email and, according to DN, wouldn’t grant any interviews with Hydro’s top executives about the company’s extensive engagement in Tajikistan. Hydro’s former chief executive, Eivind Reitan, told DN he didn’t remember “anything special” either about the company’s dealings with companies registered in the British Virgin Islands, even though “they certainly were subject to a thorough evaluation as to whether they were OK or not. The only reason I remember them at all is because thorough evaluations were made of all aspects of them.”
On Monday, the leader of the Norwegian Parliament’s disciplinary committee was once again demanding that the current government minister in charge of business and trade, Monica Mæland of the Conservative Party, “clarify” Hydro’s operations in the former Soviet republic of Tajikistan. Both Martin Kolberg of Labour and several other Members of Parliament on his committee want to know whether Hydro has done business in violation of the parliament’s declaration of zero tolerance for corruption.
Kolberg’s calls followed publication of the 10-page story in newspaper Dagens Næringsliv (DN) Saturday magazine that traced the history of Hydro’s 20 years of aluminum production, sale- and purchasing activity in Tajikistan. It began in 1993 and ran until 2012. Hydro claims it has had no deliveries or business connections with the TadAZ aluminum plant in Tajikistan since, although a double-digit amount in millions owed to Hydro still shows up on Hydro’s accounts. Officials in Tajikistan still claim they have a “successful cooperation” with Hydro, and that it has been a “strategic partner” for the country’s large aluminum plant.
In the early 1990s when Hydro got involved in Tajikistan, it had barter agreements with the plant, selling metals to and buying back aluminum, first through a Guernsey-based company called Ansol that had exclusive rights to handle all aluminum trade from the smelter that was a cornerstone firm in Tajikistan. At the end of 2004, deliveries ceased, however, and the plant’s agreement with Ansol ended. That led to a dispute among Hydro, TadAZ and Ansol, which was heard by the Court of Arbitration in London. Hydro claimed it had sold metals and failed to get back aluminum, and it led to a compensation award in Hydro’s favour of USD 150 million that proved difficult to enforce.
DN reported that Hydro then launched intense negotiations with those ultimately controlling the aluminum plant, including the brother-in-law of Tajikistan’s president, Emomalii Rahmon. In 2006, when Hydro wanted new deliveries of aluminum from Tajikistan, the president himself was involved, as was Norway’s ambassador in Moscow, according to DN. The Tajikistan officials set up new companies in the British Virgin Islands that were granted the exclusive rights to their aluminum plant. In the end, after Hydro started dealing with another company registered in the British Virgin Islands called CDH, a third company emerged called Talco Management Ltd (TML) also in the British Virgin Islands. The authorities in Tajikistan declared that it would have all rights to commercial operations for the smelter, and its owners have never been revealed.
“We have, in accordance with our agreement, no possibility to to reveal this information,” Hydro wrote to DN. The company was described as “open and transparent” by another top official in Tajikistan linked to the president’s inner circle, Sherali Kabirov, who’s also considered one of the wealthiest in the country. He would only describe TML, however, as beiing “70 percent owned by Tajikistan’s government and 30 percent by private investors from Tajikistan.”
On its own website, Hydro claims in connection with its involvement in Tajikistan that there were “arguments both for and against” doing business in the country, and that “meeting requirements for openness and transparency, and ensuring tha Hydro does not contribute to corruption are critical and non-negotiable pillars of our CSR (corporate social responsibility) effort.” Hydro also claimed it had “support of organizations knowledgeable about Tajikistan,” including the World Bank and Norway’s own foreign ministry.
“Hydro was encouraged to strengthen its involvement in the region to contribute to stability and positive development,” Hydro claims.
For Hydro’s own full account of its involvement in Tajikistan, click here (external link).
On Monday, Kolberg and members of his committee were clearly uneasy about Hydro’s history in Tajikistan and how the money flowed. “It’s necessary for us to ask about this, to find out what the ministry’s role has been,” Kolberg told DN. Michael Tetzschner of the Conservatives, deputy leader of the committee, is also concerned: “All sensible people … would sit with questions (after reading DN‘s report) … but I’m certain the trade ministry (now under his party’s political control) will take this up on their own.”
Trade Minister Mæland, who’s been busy dealing with another corruption scandal involving Telenor as well as corruption concerns at several other Norwegian companies, had no immediate comment. Other Members of Parliament did: Hans Fredrik Grøvan of the Christian Democrats told DN that the story about Hydro in Tajikistan reminded him of the corruption Telenor’s VimpelCom has admitted to in Uzbekistan, with an extra element of intrigue because so many government ministers and other Norwegian officials played a role in the concerns re-emerging over Hydro. That bothers MP Per Olaf Lundteigen, also a member of the disciplinary committee, as well.
“For me, this a clear case we need to take on,” Lundteigen told DN, adding that it’s about “a company in which the state is a major shareholder and it has activity in a corrupt country. Norwegian foreign ministry staff is deeply involved as are ministers … and they all have bad memories, in a case that was supposed to have been thoroughly evaluated.” He called it all “unreal,” adding that “closing your eyes” is also a form of leadership.
“What’s really serious here, is that there’s been close cooperation between Hydro, the government and foreign ministry staff,” Lundteigen said. “The operations are conducted through tax havens. Norge is often portrayed as a Sunday School in international context, but then it seems Norwegians behave just like everyone else when you can earn money on it and hope you don’t get caught.”
He added that he didn’t think the parliamentary committee “has the means to get to the bottom of this, but we have a responsibility under the constitution to enlighten the case as long as we have resources.” The committee is expected to pose questions about Hydro’s involvement in Tajikistan at its next meeting March 1.