Swiss oil trader accused of profiting from ties to elites in Kazakhstan

The NGO Public Eye has accused Vitol, the sec­ond largest com­pa­ny in Switzerland, of using a dis­creet joint ven­ture to con­ceal links to pow­er­ful elites in Kazakhstan, help­ing the com­pa­ny win lucra­tive con­tracts in the coun­try. Public Eye has called on the Swiss Federal Council to strength­en stan­dards for trans­paren­cy and due dili­gence in com­mod­i­ty trading.

In a report released on Wednesday, Public Eye claims that Vitol, the world’s largest pri­vate oil trad­er and a major play­er in the Kazakh oil export indus­try, relied on an opaque and intri­cate web of busi­ness rela­tion­ships with sev­er­al key fig­ures in the Kazakh petro­le­um sec­tor to help expand its oper­a­tions in the coun­try. In a state­ment to swissinfo.ch, Vitol said it has a rig­or­ous com­pli­ance frame­work to ensure that it com­plies with anti-cor­rup­tion laws.

The report is based large­ly on emails and doc­u­ments hacked from the inbox­es of top-lev­el Kazakh man­agers, which were divulged by the anony­mous plat­form Kazaword. In 2015, the plat­form also revealed that Thomas Borer, a for­mer Swiss ambas­sador, sought to lob­by the Federal Council and the Swiss judi­cial author­i­ties on behalf of the Kazakh government.

Friends with indirect benefits

At the cen­tre of the affair is a joint ven­ture called Ingma Holding NV, which was set up by Vitol’s Dutch sub­sidiary, of which it retains 49% own­er­ship. Vitol Central Asia is also a sub­sidiary of Ingma accord­ing to Public Eye.

Registered in Rotterdam in 2003, Ingma Holding has no web­site and is not men­tioned in any Vitol cor­po­rate mate­ri­als, mak­ing it dif­fi­cult to con­firm the reports from Public Eye. According to the report, Ingma, with only 11 employ­ees, post­ed rev­enue of US$93.9 bil­lion and net prof­its of US$1.1 bil­lion between 2009 and 2016. It also has ten sub­sidiaries, four of which are reg­is­tered in Switzerland – in Geneva, Baar and Lausanne.

Public Eye’s inves­ti­ga­tion claims that Kazakh pres­i­dent Nursultan Nazarbayev’s son-in-law, Timour Koulibayev, indi­rect­ly ben­e­fit­ed from the joint ven­ture. Koulibayev and his wife also own a house in Anières in Canton Geneva that they bought for CHF74.7 mil­lion in 2009.

Ingma dis­trib­uted more than $1billion in div­i­dends to its share­hold­ers, includ­ing Vitol and its part­ners, which includ­ed three polit­i­cal­ly exposed per­sons (PEPs) with ties to Koulibayev.  One of the men is Arvind Tiku, an Indian busi­ness­man and share­hold­er of Ingma through his com­pa­ny Oilex NV, which owns 51% of Ingma.

In 2010, a court case in Switzerland against Koulibayev and Tiku for mon­ey laun­der­ing, filed in 2013 and even­tu­al­ly closed, revealed that the two men were co-ben­e­fi­cia­ries of a trust at Credit Suisse. Between May and August 2006, this trust received near­ly $600 mil­lion from com­pa­nies accord­ing to Public Eye’s inves­ti­ga­tion. In 2007, $283 mil­lion emerged from the trust in the form of inter­est-free loans to Merix International Ventures, which belongs to Kulibayev.

Vitol told swissinfo.ch that it is unaware of any ben­e­fit that Kulibayev received from Ingma.

Vitol’s ascent in Kazakhstan

Corruption is a major hur­dle to doing busi­ness in Kazakhstan accord­ing to the 2017 OECD anti-cor­rup­tion net­work report. It found that glob­al com­pa­nies believe cor­rup­tion is wide­spread among the country’s polit­i­cal cir­cles where net­works of patron­age and crony­ism under­mine busi­ness envi­ron­ment. Kazakhstan ranks 122 out of 180 on Transparency International’s Corruption Perceptions Index.

The oil indus­try is the back­bone of the econ­o­my, con­tribut­ing 50% of GDP and $23 bil­lion to export rev­enue. Kazakhstan is Switzerland’s sec­ond largest sup­pli­er of crude oil exports behind Nigeria. The Extractives Industry Transparency Initiativeindi­cates that the coun­try has made progress in dis­clos­ing oil and gas rev­enue but gaps remain regard­ing state-owned oil com­pa­nies, licens­ing process­es, and ben­e­fi­cial ownership.

The world’s largest pri­vate oil trad­er has been a major play­er in Kazakhstan’s oil export sec­tor for the past decade. By 2014, Public Eye reports, Vitol was respon­si­ble for the sale of near­ly a quar­ter of the country’s crude oil for export. The Financial Times report­ed that in 2017 Vitol was award­ed a six-year loan-for-oil deal with state-oil com­pa­ny KazMunaiGas called a pre-financ­ing agreement.

In a response to swissinfo.ch, Vitol said that “Ingma had noth­ing to do with the pre-financ­ing arrange­ments with KMG.”  It added that its two pre-financ­ing trans­ac­tions in Kazakhstan – in Tengiz and Kashagan – were award­ed to Vitol SA after open and com­pet­i­tive ten­der processes.

Familiar story

This is the sec­ond rev­e­la­tion in one week of major Swiss com­mod­i­ty traders’ involve­ment in activ­i­ties that present high risks of cor­rup­tion. Last Friday, Public Eye and Global Witness alleged that three major com­mod­i­ty traders with head­quar­ters in Switzerland, Glencore, Trafigura, and Vitol, worked with inter­me­di­aries accused or con­vict­ed of bribery in Brazil’s “Car Wash” scan­dal, one of the largest cor­rup­tion scan­dals in the country.

Under cur­rent Swiss law, com­mod­i­ty traders are not required to con­duct in-depth screen­ing of PEPs as banks are under the Money Laundering Act. In the case of Kazakhstan, Public Eye argues that Vitol part­nered with PEPs in a joint ven­ture, which car­ries high risks of corruption.

However, in a state­ment, Vitol not­ed that com­mod­i­ty traders are sub­ject to strin­gent laws in their deal­ings with PEPs includ­ing those relat­ing to anti-bribery and anti-mon­ey laun­der­ing. This includes oblig­a­tions under the EU’s 5th Anti-Money Laundering Regulations and the UK Bribery Act 2010. The com­pa­ny said that “it already imple­ments all the mea­sures sug­gest­ed by Public Eye and is already oblig­ed to imple­ment robust due dili­gence and anti-bribery pro­ce­dures under the UK Bribery Act 2010 and oth­er sim­i­lar legislation.” 

The NGO calls on the Swiss Federal Council to man­date due dili­gence of busi­ness part­ners and trans­paren­cy in pay­ments to gov­ern­ments. It also rec­om­mends that Switzerland estab­lish a Commodity Market Supervisory Authority to reg­u­late the sector.

By Jessica Davis PlüssNov

Swiss oil trad­er accused of prof­it­ing from ties to elites in Kazakhstan