On Guard for Vitol. Whose interest is in the Stati case?

In the legal war between the Ministry of Justice of the Republic of Kazakhstan and the family of Moldovan businessman Anatolie Stati, there exists a third party — international corporation Vitol. It has managed to not only join Stati’s business «off the radar» but preserve the de-facto incognito status over the course of the entire trial that has lasted for almost ten years.

The top-management of the Ascom company believes that Vitol’s successes are linked to its ties to Kazakhstan’s KazMunaiGas NC JSC. And, historically, both companies have been affiliated with the business of the First Kazakhstan’s President’s son-in-law billionaire Timur Kulibayev.

Vitol has managed to achieve something that is almost impossible — to keep the very fact of its involvement in the projects that are at the heart of the Kazakhstan/Statis war in the shadows. Now the time has come to fill the lacuna in the national information field. Especially since the history itself allows us to understand how the oil business actually operates in the country.

The Valuable Confession of Victor Lungu

First, a few words on the Vitol corporation.

Vitol is the biggest private oil trader in the world is also Switzerland’s second largest company; in 2017 its revenue was US181 $ billion.

Comfortably housed in Geneva, this business giant has never shied away from going after markets where corruption is endemic — be it in Iraq, Libya, Nigeria, Serbia or Venezuela. As of today, Vitol practically owns the entire Kazakh market together with Chinese companies leaving little of it to other players.

From 2015 to 2018, Vitol achieved a masterstroke by winning two tender processes to provide a total of US5.2 $ billion of pre-financing (loans) to KazMunayGas, the national oil company. Vitol will be refunded over a five-year period through shipments of oil from the country’s two giant fields, Tengiz and Kashagan, in which KazMunayGas is a shareholder. This contract, known in industry jargon as a ‘cash for crude deal’ guarantees privileged access to Kazakh crude and excellent long-term relations with the state.

Click here to learn more about Vitol’s operations

Officially, Vitol has never been a shareholder of the companies engaged in the development of the oil, gas and condensate fields Borankol and Tolkyn. Due to their small size, they were of no particular interest to serious investors and, it is believed, it was because of this circumstance that both fields ended up in the hands of the local Mangistau clans.

The licenses for their exploration were given to two companies — Tolkynneftegas and Kazpolmunai. Then, both firms were sold to the Stati family, and the Statis integrated them into their holding Ascom. Anatolie Stati (the head of the family) owned Tolkynneftegas that belonged to Cyprus company Terra Raf Trans Traiding Ltd. Anatolie Stati and his son Gabriel had the equal shares of the company.

How Vitol got involved in this business became known later — from the testimony of Victor Lungu, the Executive Vice President of Ascom Grup S.A., given on October 11, 2013.

Despite the rather successful oil business, the Statis had encountered the «gas problem» — they couldn’t export the gas via the pipeline (due to the state monopoly) but did not want to sell it on the local market — due to the artificially low price. To solve this problem, the Statis decided to build a gas processing plant to extract LPG products and export them via railroads. The planned capacity of the plant would have allowed the Statis not only to solve their own gas problem but to ensure the profitable sale of the gas condensate to the owners of the neighboring regions.

At that point, the Statis acquired an advantageous partner. As Victor Lungu states in his testimony, in 2004, the Ascom representatives started the negotiations on forming a strategic alliance with the Vitol corporation. In exchange for the right to sell different Ascom products. Vitol took the responsibility of funding the half of all the expenditures for the gas processing plant’s building.

In 2005, the negotiation ended with the founding of what can in fact be called a joint venture between Vitol and Ascom Grup structures. However, in the legal domain, this venture was «virtual» since it existed only in the form of several agreements on joint operation that determined the rights and responsibilities on the operational level.

Each of the parties was to ensure the funding of the half of the plant building expenditures. However, if Ascom as the plant’s owner committed itself to debt, then Vitol paid its share of the expenditures by means of prepayments for future deliveries of oil and gas condensate from the Tolkynneftegas fields that belonged to the structures of the Stati family.

In the information disclosure, these agreements were reflected in no way — officially, the plant had to belong to the Statis’ structures.

This agreement is an excellent example of how business-process can be structured in Kazakhstan. In the economy oriented towards exporting raw materials, the only thing that any Western player has to do is to find a Kazakh partner capable of providing him with the exporting right that may be registered in the Western judicial system. Then, the sales structure of the Western corporation becomes a strategic partner of the owner of the Kazakh business.

Since, for this partner, export is the main condition of his survival, he gets the right of the verdict — he can decide the fate of his Kazakh partner at any given point without being officially involved in the Kazakh business.

The Vitol Kingdom

The choice of Vitol by the Statis is extremely indicative. The thing is that this company had become the sales syndicate not only for the Statis business but for the entire Kazakh oil sector that, in its turn, had been transformed into a unified corporation managed by the representatives of Nursultan Nazarbayev’s family.

An investigation published on the website of Swiss NGO Public Eye whose task is to control the political and business activities of Switzerland’s representatives in poor countries demonstrates with excellence how these ties were formed and how they are functioning in reality.

The authors of the investigation concluded that Vitol’s main partner in Kazakhstan was no other than Nursultan Nazarbayev’s son-in-law Timur Kulibayev who had managed the Kazakh oil sector from 1997 to 2011. At that point, according to the authors of the investigation, the line between the private and the state economy sectors became blurry and unrecognizable. It was this that attracted the attention of Vitol that managed to establish relationships with Timur Kulibayev and kept in touch with his circle.

These conclusions were made on the basis of a collection of the documents known as Kazaword that, among other things, contains a correspondence between the participants of this group.

The very title of the massage (Hey bro!) that Vitol’s Head of Central Asia and Russia sent to Daniyar Abulgazin who, at that time, held a strategic post in the Samrouk-Kazyna sovereign wealth fund shows the status of these relationships.

According to the investigators, the connection between Vitol and Arvind Tiku, a Singapore entrepreneur, who is known as Timur Kulibayev’s «right hand» (even though Tiku himself denies it) looks even more indicative.

As a result of these connections, company Ingma Holding BV appeared in 2003 in Rotterdam. 49% of the company belonged to Vitol FSU BV — the structure responsible for the business in Central Asia and Russia; the remaining 51% belonged to company Oilex what was controlled by Arvind Tiku. The new firm became the biggest transit point on the way of the export earnings from the sales of the Kazakh oil and gas. During the period from 2009 to 2016 (for which the investigators had managed to obtain the data) Ingma’s earnings constituted 93.3 $ bln.

The company became the crucial business element for Vitol, too. It is known that, in 2010 alone, the sales made through Ingma constituted about 10% of the trader’s entire earnings. Thus, the export contracts that had served as the guarantee for the gas processing plant construction were a part of the joint business of Tiku and Vitol.

 Vitol=KazMunaiGas=Kazakhstan

The history of the conflict between Kazakhstan and the Stati family looks completely different if we are to take out the fact of Vitol’s secret involvement in the projects.

The conflict began and developed between Vitol and Ascom. With that, its first signs manifested themselves already at the end of 2007 and were explained by the increase of the GPP construction estimations. The usual situation that may arise in any project, in the case of Vitol, turned into a problem since it demanded reviewing the second part of the agreements — on the prepayments for the oil and gas condensate deliveries.

In June 2008, the situation was complicated further due to the emerging drop of the oil price to which the estimations of the prepayments were tied. The project started experiencing money problems. Simultaneously, as Lungu states in his testimony, Ascom began to want to get rid of its Kazakh assets. The company had got new projects (for instance, in Kurdistan) that demanded attention and money while the price for oil was still high enough for selling the Kazakh assets. (One can easily find certain inconsistencies in Lungu’s testimony, however, in this case, it is not of the utmost importance).

The offers that Ascom got for its business in Kazakhstan did not satisfy Stati. And, in July 2008, the general drop of the oil prices began, so it became all the more difficult to receive a good offer. Nonetheless, one of the offers registered in September 2008 turned out to be an important signal since it was made by KazMunaiGas.

By the fall 2008, against the backdrop of the total oil prices collapse, the relationships between Vitol and Ascom seized to be friendly and legal professionals started attending the meetings of the secret partners. It was then — in October 2008 — when the Statis experienced a whole series of attacks against their business that were made by different state structures and agencies. Simultaneously, the holding’s companies were accused of all kinds of violations — tax evasion, operating the pipeline without a license and even fraud.

Lungu believes it was a coordinated attack whose goal was not to allow to sell Tolkynneftegas and Kazpolmunai to independent buyers and gain control over both them and (by that time) almost finished plant. Moreover, Lungu believes that the orchestrated harassment was but a conscious «bear campaign» necessary for the lowering of the price of Ascom’s assets.

Attractive buyers even started to receive direct warnings from the Kazakh government that one should not buy these assets. By the start of 2009, the intention to appropriate the assets became obvious to the Statis which resulted in shutting down the plant construction. This served as the reason for a new wave of discontent on the part of Vitol.

Then something very important happened that had seriously agitated Lungu. The representatives of one of the attractive buyers — company Starleigh — confessed that they had received insider information from Vitol on how the whole system of the plant construction funding was organized. Stati was even more surprised that, a little later, he received information that Starleigh belongs to Timur Kulibayev and is completely controlled by him. 

Kulibayev was also in charge of KazMunaiGas and, as it is said in the testimony, controlled the rest of the country’s oil sector.

Thus, the Statis had found themselves in the situation that may be described as «conspiracy theory in action» — when different players, seemingly disconnected with one another, are but a part of one whole.

It is hard to resist the all-out pressing. Nonetheless, the Statis tried to find the buyers for their assets from among other Kazakh influential players. The interest for Statis’ assets was shown by the Asaubayev family whose representatives, in November 2009, signed an agreement of intent and, in February 2010, signed the agreement of sale and purchase of Tolkynneftegas and Kazpolmunai. Then Aydar Asaubayev met with the head of Vitol where the latter was, basically, confronted with the accomplished fact. Such a development became possible due to the informal nature of the plant construction funding agreement.

However, it was the counter-party that had the last word. In July 2010, the authorities confiscated Statis’ assets in Kazakhstan. Who was doing this and in whose interests is hard to say, but the Statis ended up in the state of the two-front legal war — with Vitol and with the Kazakh authorities.

This war is still going on. And it is unclear where the line is drawn between the private and the state interests. Also, it is unclear who represents whose interests in this conflict and what these interests are. So far, it looks like the state is defending the interests of both Vitol and Timur Kulibayev.

 

The original investigation in Russian language is published in KZ.MEDIA.

 

More on the legal war between Kazakhstan and the Statis in our publications:

Kazakhstan Loses to Stati in the US Court  — text available in Russian, 

Akorda’s Failure in the Stati Case

What Marat Beketayev Isn’t TellingYou,

 The War against the Statis: Who Benefits.


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