Rixos Beldibi intrigue. Kazakhstan sells state stake in Turkish hotel

Translated into English using Google Translate

In March, the Kazakh gov­ern­ment began the process of prepar­ing for the sale of the Rixos Beldibi hotel on the Mediterranean coast in Turkey. The val­u­a­tion of the hotel should be ful­ly com­plet­ed by the end of the month, and in May the gov­ern­ment of Kazakhstan will put shares of the lux­u­ry hotel up for sale.

Information about this appeared on the state elec­tron­ic trad­ing plat­form. The chic Rixos Beldibi hotel is list­ed on the bal­ance sheet of Kazakhstan’s Alatau Hotel JSC, which is almost 70% owned by the Fund of the First President of Kazakhstan, and the rest, just over 30%, belongs to the State Property Committee.

The share of the lat­ter will be put up for sale.

We pre­vi­ous­ly wrote that Kazakhstan has owned this lux­u­ry hotel in Turkey for 17 years. About 1.7 bil­lion tenge ($11 mil­lion at the rate of 150 tenge per dol­lar) was invest­ed in its con­struc­tion. However, the five-star hotel did not bring prof­it to Kazakhstan — only loss­es, that is, it was not pos­si­ble to return or increase invest­ments. Therefore, appar­ent­ly, the hotel and decid­ed to sell.

Now it is very impor­tant to ensure that the state’s share in Rixos Beldibi is not giv­en away for next to noth­ing. Kazakhstanis have already spent too much on it.

How the Kazakhs built a hotel in Turkey

Let’s remem­ber why the gov­ern­ment of Kazakhstan decid­ed to build a lux­u­ri­ous hotel, how the own­ers of real estate changed and what agree­ments had to be made with Turkey in order to legal­ize Rixos Beldibi in for­eign territory.

27 years ago, an agree­ment was signed between Turkey and Kazakhstan on the trans­fer to use of a land plot in the Kemer dis­trict of Antalya province. The pro­to­col was signed in Ankara on December 13, 1993. In 1996, the agree­ment was approved by Parliament. According to the agree­ment, Kazakhstan must return this land to Turkey 49 years after the entry into force of the deal.

We are talk­ing about five hectares of land.

In the pub­li­ca­tion of the Turkish jour­nal­ist Yusuf Yavuz, it is not­ed that the active devel­op­ment of the Kazakhstani sec­tion took place between 2001 and 2006.

The munic­i­pal­i­ty of Beldibi approved the project for the con­struc­tion of a five-star hotel in February 2001. Information about this can be found in the tran­script of the par­lia­men­tary hear­ings, which is pub­lished here. It should be not­ed that there were heat­ed dis­cus­sions in the Turkish Parliament on this issue.

As soon as the hotel project was approved in Beldibi, a doc­u­ment was born in Kazakhstan that allows financ­ing the con­struc­tion. In the pub­lic domain, you can find Government Decree No. 935 dat­ed July 10, 2001 “On the estab­lish­ment of a closed joint stock com­pa­ny” Hotel “Alatau”.

The con­struc­tion bud­get can be judged based on the size of the ini­tial autho­rized cap­i­tal of the Alatau Hotel com­pa­ny, which has always had only one asset — a hotel on the Turkish coast. This is about 3.3 bil­lion tenge. The State Property and Privatization Committee of the Ministry of Finance of Kazakhstan owned 55% of the shares, which in mon­e­tary terms is slight­ly less than 1.7 bil­lion tenge (more than $11 mil­lion at the rate of 150 tenge per US dollar).

On the gosreestr.kz web­site, we see fig­ures relat­ed to Alatau Hotel JSC since 2003, and audit reports, which clear­ly show how the own­ers of real estate in Turkey have changed. And we can com­pare these events with the doc­u­ments signed lat­er between Kazakhstan and Turkey, and also make sure that the Rixos hotel in Beldibi does not bring div­i­dends to Kazakhstan.

Judging by the move­ment of finances and some pub­li­ca­tions in the Turkish media, the hotel began oper­a­tion in 2005, and in 2006 brought in an income of 181.9 mil­lion tenge (1.4 mil­lion US dol­lars at the rate of 125 tenge per dollar).

In the next four years, the hotel in Turkey oper­at­ed at a loss (in the audit reports, the asset was called Rixos in Beldibi). The loss exceed­ed half a bil­lion tenge (about 1.7 mil­lion US dol­lars at the rate of 150 tenge per dollar).

In 2011 and 2012, the hotel in Turkey showed a small prof­it — about 33 thou­sand US dollars.

Then the com­po­si­tion of share­hold­ers changed at the hotel, and the state’s share became notice­ably small­er. Here is what the 2012 audit report says about this. As of December 31, 2011, the share­hold­ers were: the State Property Committee — 55.026% of the shares, the transna­tion­al com­pa­ny “Kazchrome” — 22.4% of the shares and “Enrichment” LLP — 22.4% of the shares.

But by October 17, 2012, two pri­vate com­pa­nies trans­ferred their stakes to the pri­vate Fund of the first President of the Republic of Kazakhstan.

However, the state did not long con­trol the Alatau Hotel, and there­fore Rixos. On March 1, 2013, Alatau Hotel placed an addi­tion­al 2.6 mil­lion ordi­nary shares of one thou­sand tenge each for a total amount of 6 bil­lion tenge (about 40 mil­lion US dol­lars at the exchange rate of 150 tenge). After this oper­a­tion, the share of the pri­vate Fund of the first pres­i­dent increased to 69.36%, while the share of the state decreased to 30.63%.

Elbasy’s dear gift

How did the hotel, orig­i­nal­ly owned by the state, come under the con­trol of the pri­vate Foundation of the first President of Kazakhstan? We also told this curi­ous sto­ry in due time. Let us briefly recall the essence.

In October 2012, the Board of Directors of TNC Kazchrome JSC, which is part of the Eurasian Natural Resources Company (ENRC), with­out the con­sent of minor­i­ty share­hold­ers, decid­ed to donate to the Pavlodar — Our Common Home NGO its sol­id block of shares in Alatau Hotel JSC.

The trans­ac­tion for the trans­fer of shares worth 731.5 mil­lion tenge (at that time almost 5 mil­lion US dol­lars) was car­ried out as part of a mem­o­ran­dum of coop­er­a­tion between the Akimat of Pavlodar region and ENRC Kazakhstan LLP (also part of the Eurasian group).

On October 15, the Pavlodar pub­lic asso­ci­a­tion con­clud­ed anoth­er dona­tion agree­ment No. 57 with the Fund of the First President of the Republic of Kazakhstan, under­tak­ing to trans­fer the above shares to it free of charge. Which is what was done. That is, “Pavlodar is our com­mon home” in this scheme played the role of a tech­ni­cal intermediary.

Why the hotel was hand­ed over to the Nazarbayev Foundation, ERG co-own­er Alexander Mashkevich explained to jour­nal­ists dur­ing the sign­ing of a mem­o­ran­dum between the new­ly cre­at­ed Eurasian Resource Group and the aki­mat of Pavlodar region.

The oli­garch said that there was noth­ing doubt­ful about the donat­ed shares of the five-star hotel in Turkey. Overseas prop­er­ty worth almost $5 mil­lion was giv­en away because TNK Kazchrome JSC (part of the Eurasian group), which owned it, did not need it.

“This is not our core busi­ness, we do not deal with hotels. They (the fund) turned to us, we hand­ed them over, — Alexander Antonovich com­ment­ed on the deal with a straight face. — For us, it was a minor­i­ty stake, which did not give any prof­it, noth­ing. We hand­ed it over to peo­ple we thought would be bet­ter at man­ag­ing. It did­n’t mat­ter to us.”

For the debts of the hotel paid off with land

When the state lost con­trol of its asset in Turkey, Kazakh sen­a­tors approved a draft law that stip­u­lat­ed some changes to the signed pro­to­col between Kazakhstan and Turkey. This project was direct­ly con­nect­ed with the Kazakh hotel Rixos in Beldibi.

Under the project, Turkey gives Kazakhstan a for­est plot with a total area of 67,256 square meters, which is locat­ed on the ter­ri­to­ry of the vil­lage of Beldibi, Kemer dis­trict in the province of Antalya. It is stip­u­lat­ed that part of the plot of 44,954 square meters can be used for tourism pur­pos­es (we are talk­ing about the land on which Rixos stands). And the Kazakh side will pro­vide the Turkish gov­ern­ment with two land plots for use: in Aktau — with an area of 7,000 square meters and in Almaty — with an area of 1,500–2,000 square meters. The term of land use will be 49 years.

The Kazakh media dis­sem­i­nat­ed this news, but the gov­ern­ment of Kazakhstan kept silent about the fact that land in two cities of the coun­try is leased out of tax debts to Turkey aris­ing from the activ­i­ties of the Rixos hotel.

In the pub­lic domain, you can find the Turkish ver­sion of the pro­to­col*, which con­tains the details of the agreement.

Part of the land was exploit­ed for com­mer­cial pur­pos­es, as a result of which 9,483,000 liras were not paid tax­es between 2001 and 2010, which was report­ed to the Kazakh side …

Work to resolve the con­flict con­tin­ued for 7 years, and with­in the frame­work of nego­ti­a­tions with the Kazakh side, the cur­rent legal sta­tus of the part of the land allo­cat­ed free of charge was maintained.

(…) in Ankara on April 16, 2012, the issue of how part of the land exploit­ed for com­mer­cial pur­pos­es will be exempt­ed from diplo­mat­ic priv­i­leges and immu­ni­ties, and in exchange for the return debt asso­ci­at­ed with the oper­a­tion of the hotel, the Turkish side will be allo­cat­ed for 49 years for con­struc­tion of pub­lic build­ings and land in the cities of Aktau and Almaty…”, the agree­ment says.

This deal with Kazakhstan in March 2013 caused a big dis­cus­sion in Turkey. Some deputies open­ly said that the deal was unprof­itable for their coun­try, and did not under­stand on what grounds the Kazakhs built the hotel in Beldibi. But the agree­ment was still legal­ized on both sides.

From 2013 to the present, the com­po­si­tion of the share­hold­ers of the Alatau Hotel has not changed. The com­pa­ny is still con­trolled by Nazarbayev through his fund.

This is con­firmed by a recent inves­ti­ga­tion by OCCRP jour­nal­ists on the invest­ments of the first pres­i­dent of Kazakhstan, which was pub­lished imme­di­ate­ly after the events of January 2022.

Why did Nazarbayev create funds?

The Foundation of the First President of the Republic of Kazakhstan is the largest non-prof­it foun­da­tion in the coun­try, estab­lished in 2000 on the per­son­al ini­tia­tive of the first President of Kazakhstan, Nursultan Nazarbayev. Initially, it was a pub­lic orga­ni­za­tion, but in 2011 it became pri­vate, and Nazarbayev has since been list­ed as its founder.

In 2021, the fund was closed, and after the reor­ga­ni­za­tion, the shares of the Alatau Hotel came under the con­trol of the Nursultan Nazarbayev Fund.

According to the OCCRP inves­ti­ga­tion, the Elbasy found­ed the Nazarbayev Foundation and the Nursultan Nazarbayev Foundation as pri­vate foun­da­tions in 2009 and 2010 respec­tive­ly. And two more funds — “Demeu Fund” and “Elbasy Fund” were cre­at­ed in 2013 and 2021.

All of Nazarbayev’s funds have been active­ly invest­ing since he left the pres­i­den­cy. For exam­ple, the Nursultan Nazarbayev Foundation pur­chased a new Airbus ACJ320neo air­craft worth more than $100 mil­lion from a Swiss air­line and import­ed it to Kazakhstan. This fact itself is known only because the OCCRP jour­nal­ists had a doc­u­ment on the release of the air­craft from import control.

In August 2020, what Business Insider called a “fly­ing pent­house” plane depart­ed Indianapolis. After land­ing in Zurich and Malta, he arrived at his new base in Nur-Sultan. He is now in the fleet of Berkut Air, a state-owned air­line that reports to the Presidential Administration. And there is evi­dence that Nazarbayev uses it.

The move­ments of the air­craft are not dis­played in most spe­cial track­ers, but jour­nal­ists still man­aged to get some infor­ma­tion about his flights in the Open Sky Network, a non-prof­it orga­ni­za­tion that col­lects data on air traffic.

It is known that on June 30, 2021, the plane flew from Kazakhstan to Moscow. On the same day, the Kremlin announced that Nazarbayev had a “work­ing meet­ing” with Russian President Vladimir Putin.

The plane also made sev­er­al flights around Kazakhstan — jour­nal­ists found that two of them coin­cide in dates with Nazarbayev’s vis­its to the tourist hub and to the archae­o­log­i­cal site.

“Other pur­chas­es of Nazarbayev’s funds are no less lux­u­ri­ous. As with the air­craft, the source of most of the funds used to pur­chase them is unknown. However, sev­er­al times Nazarbayev’s funds were sold to com­pa­nies that had pre­vi­ous­ly received fund­ing from the gov­ern­ment of Kazakhstan – in fact, this means that state funds have flowed into pri­vate hands,” inves­tiga­tive jour­nal­ists write.

Among the most inter­est­ing assets of The St. Regis Astana is a hotel in the cen­ter of Nur-Sultan, which was opened in September 2017. It is part of the Marriott International group. Promotional mate­ri­als praise its “pres­ti­gious loca­tion in the cen­ter of the capital.”

St. Regis is owned by the Kazakhstani com­pa­ny Turion Investment Group — for the con­struc­tion of a hotel worth $189 mil­lion, it received a loan of $85 mil­lion from the Development Bank of Kazakhstan. This state-owned bank was cre­at­ed to devel­op non-resource sec­tors of the econ­o­my and at the same time repeat­ed­ly issued loans at the behest of the rul­ing elite.

President Tokayev also rec­og­nizes this prob­lem. On January 11, 2022, he stat­ed that the finan­cial insti­tu­tion “has turned into a per­son­al bank for a select cir­cle of indi­vid­u­als rep­re­sent­ing finan­cial-indus­tri­al and con­struc­tion groups.”

Among the share­hold­ers of Turion Investment Group was Timur Kulibayev, Nazarbayev’s son-in-law and one of the rich­est busi­ness­men in Kazakhstan. Less than a year after the open­ing of the hotel, Kulibayev’s share (it is not known how much he owned) was trans­ferred to the Demeu Nazarbayev fund.

For unknown rea­sons, in December 2021 they returned to the con­trol of Kulibayev and his wife Dinara, Nazarbayev’s daughter.

Other major assets of the Nursultan Nazarbayev Foundation, accord­ing to OCCRP, include hotels, a golf club, a bal­let the­ater and sev­er­al media outlets.

It also revealed that a land­scap­ing com­pa­ny owned by two of Nazarbayev’s foun­da­tions won $6.5 mil­lion in ten­ders between 2012 and 2018 when he was still president.

Original source of arti­cle: respublika.kz