Recently, articles on what Jahangir Hajiyev, chairman of the board of the International Bank of Azerbaijan (IBA), has done are published in the media. It is emphasized that the former banker has embezzled billions of dollars, damaged Azerbaijan as the First Garabagh war at least.

So what does Jahangir Hajiyev think about this?

Written responses to the letter I sent to the ex-head while trial proceeding shed some light on this subject. We feel pleasure to submit this written interview to discussion of the Ovqat.az readers, which I couldn’t manage to, find time to publish before:

“IBA has funded a number of foreign projects”

- The Banking system of Azerbaijan has been shaken out and that’s just the way it goes for two years. After cancellation of 11 banks licenses and other banks can face the same threat as well. Bank sector is being blamed for breakdown of economics and the scandals circulated about IBA. Do you hold similar view about that and what else do you think?

- As you know, the economic system has own specific rules. The banking sector has always been the mother lode and the mirror of country’s economy. That system in question is being degraded now and I would like to touch upon two main reasons of the system distortion. First, reckless currency devaluation at its highest rate among Commonwealth of Independent States, without establishing a sound banking system and increasing its capital accordingly. Secondly, unprecedented interventions by law enforcement agencies which never witnessed in any country before. Today, law enforcement agencies manage almost the entire banking system by returning loans through a collector function. However, these functions, namely related to the disputes with economic subjects, are solved in only courts through redirecting all debts claims to loan collateral and personal properties etc. Thousands of businessmen, bankers, and their family members have been banned from leaving the country. Practitioners and prisons are full of businessmen. Believe me, I myself witnessed such situation as well, getting off one’s business has become ordinary activity, the base of it has already been formed. These statistics formed by not only relevant articles about embezzlement of the Criminal Code.  Businessmen are “offloaded” the blame to for the drugs and weapons articles. Most of them are kept in jail without court judgment until all these issues “solved”. Due to these reasons, Azerbaijan ranks third with 246 prisoners per 100,000 populations in 46 European countries according to the research conducted by the University of Lausanne, which the Council of Europe required. However the average number was only 131 prison convicts.

These are all factors that make the banks – mother lode of economics, be the verge of bankruptcy. The banking system merely reflects the reality as a mirror and exposed to the effects mostly as the one of the most sensitive sector. Nevertheless, there are relevant decrees by national leader Heydar Aliyev to improve the business environment so that no-one could interfere with the work of entrepreneurs and they are still governing law, not abolished yet. The banking sector should be governed through economic rules, the intervention of law enforcement agencies, to take a “serious” measurement as issue a warrant for the arrest of entrepreneurs and imprisonment inflict heavy damage to the economics, including banking sector. This explains the reasons obviously why developed countries act responsibly towards to these economic issues and businessmen are not arrested in such situations at least before the court order. The defendant should be punished only by the court. We are arrested before, and then they start investigations.

To give an instance, according to the Criminal Code of the Russian Federation, the proceedings are terminated if the accused is fined for the preliminary investigation. However, in our case, if the material damage is paid during the trial, even there is no plaintiff’s assertion, the fate of the accused is left to the jurisdiction of the judges and becomes their source of income by time. By and large, the lawyers know it well; our Criminal Code is in urgently needed of decriminalization among all post-soviet countries.

All I mentioned only the minor part of all existed problems that businessmen struggling. The banking system gets into these troubles as they provide companies with business loan. On the ground that, the underlying reasons of devaluation, dollar loans, pricing and other problems should be investigated in the business regulator state bodies, but in the first place in the factors affecting the financial and banking system.

- Various views are voiced by parliamentarians and economic experts about the return of capital from Azerbaijan recently. What could you say about it?

- I keep myself up-to-date with the recent writings; Deputies Yevda Abromov and Vahid Ahmadov raise urgent issues. Regarding the billions of dollars as a capital outflow from the country, I want emphasize that on this matter we need to distinguish between two problems; overseas investments and legalization of dirty money.

On the website of former speaker of Finance Minister, fraudulent representation has been published about the source and use of the billions of dollars. Unfortunately, in spite of all the explanations we have made so far, this lie is sometimes demonstrated as a stamp to the bank. This is absolutely true that, IBA has financed several projects in Russia, Kazakhstan, and UAE and European countries. Among them, we can find not only successful ones, but also struggling with problems due to market conjuncture. Other organizations in Azerbaijan - SOCAR (State Oil Company of Azerbaijan Republic) and private holdings also carry out this activity. In its turn, it is a process goes through in the scope of globalization, integration into the world market and divarication. These projects are well-known and are still available regardless of who asked for it.

“Taxes are collected a few years in advance ”

Other types of money are the funds acquired and withdrawn from the country both in an illegal way. There are two ways to bring these funds back to the country: first, administrative, and secondly, to create favorable conditions for the country's economy, stimulatory measures. If looking through the experiences of other developed countries, the first solution given is slow and ineffective in terms of time. However, the second is capital amnesty. As you know, at the end of last year, the Bill on Amnesty was adopted at the Milli Majlis. I can’t give you an accurate prediction of the future of this action taken and how efficient it would be, but each taxpayer of the country know well, taxes are collected a number of years earlier ( to fill out current year’s tax plan) irrespective of business future plan, even without knowing about whether this company will run or not. It is necessary that to make use of neighboring CIS countries’ experience leastways, - in Russia, Georgia and Kazakhstan, if I’m not mistaken, the capital amnesty was granted two times, revenues were legalized and transferred to the bank’s turnover after paying the capital tax on dirty money. It brought additional capital inflow to the country's economy and accelerated process itself.

On the other hand, deputy V.Ahmadov repeatedly raises crucial issue about compensation of devaluation for depositors as an aggrieved party who has foreign currency loans on banks. Unfortunately, the Minister of Finance came out against and hinders the law adoption. However, the Minister of Finance is guilty of devaluation, not the banks. Once again, considering CIS countries’ experiences, we can obviously see observe that, for instance, in Kazakhstan before the day of devaluation, the damages of 1 million 700 thousand depositors with the deposits in the amount of 1 million tenge, were compensated. This made up 86% of country’s depositors. Similar decision was also made on currency loans. 

"Provocation, illiteracy, or both?" 

-Former Minister of Finance was accused of spying in three different countries, bringing crisis and a "black market" currency about to the banking system. You also have said this in court…

- Whether or not the country's Finance Minister is a subject of research by relevant authorities. In an interview with a former employee of the USSR State Security Committee, concrete facts, company names, and bank operations are mentioned. Apparently, these facts could be disclosed to the public by now. In this modern Internet and information age, journalists also conduct such researches. Looking into the professional activities of ex-Minister of Finance, we can see that he has no educational background related with economic, finance and banking either, while working in the Central Bank (Central Bank), he was the author of only one project - interbank payment system SWIPS. In accordance with this payment system, all manat payments transactions were carried out, for some reason, via the International SWIFT system, throughout the country. As appeared frequently on media, SWIFT is under external intelligence control. Suppose that, every single amount of money (even 10 manat) deposited by Azerbaijani bank payers went out the system and returned. As a consequence of banks objection, SWIFT- contrary to national security policy, more expensive to bank users and payers and absurd system for Azerbaijan, XOHKS was created for small amount of payments as an alternative. Since then, all payments have been made through the second system. The first one, Samir Sharifov put his signature under it, was failed and no longer to be in use. During the activity of the State Oil Fund of the Ministry of Finance, report about suspicious transactions with foreign banks was leaked to mass media. Once his doubtful movements were the subject for unofficial investigation within a country. In a kind of interesting way, the Fund was awarded an international transparency prize after the new head of the SOFAZ came to power. It has been widely discussed that, his “successful” operations to get all money back from Saving Bank while during his time in Kapital Bank, ruin the financial health with the bankruptcy, emblezzment of billions dollar from the state by misstatement of financial figures, the role of “black market” in rebuilding, he establishment of monopoly in the insurance sector. 

That is the answer to the question of how it can be possible that Azerbaijan’s rating (negative outlook) is worse than Armenia’s rating? If we focus on the overall performance of banks in the country, we will notice that indicators of Azerbaijan economy surpass the relative indicators of Armenia. To conclude, the Minister of Finance is held responsible for the country's sovereign rating. This points out leastways to the incompetence of negotiations with international rating agencies. I want to raise a question considering all the figures and facts mentioned: What can be said about what he has done? Provocation, illiteracy, or both? Find answers to these questions by yourself. 

-Back then former Minister of Finance issued several press statements about the problems that IBA has encountered…

-Do you know, talking behind one’s back is in our blood? Why the former minister stayed quiet on this topic, when the bank went through a trouble? The years he talked about were almost the most productive period of IBA. Increasing considerable amount in assets, revenues and capital, being a member in many international organizations, Establishment of IBA Moscow branch, International Insurance Company (which was closed today), holding a contest to choose best-performed bank each year, in a one word, economic growth was demonstrated in official financial statements. 

All this was personally confirmed by the Minister of Finance acting as Chairman of the IBA General Assembly and his deputy as head of the IBA Supervisory Board. Therefore, evaluate such statements yourself.

- But it's not just past or present ministers who are talking about these accusations. During the Government's report on the execution of the 2016 budget in the Milli Majlis, the Prime Minister also pointed out the actions of the former IBA leadership as the main prerequisite for the country's financial and economic problems. What can you say about it?

- I have been reared myself to live with respect to the elderly people at least. I left my post in 2015, I have no activity for 2 years. The report was issued in 2017. Older people are sometimes able to confuse the days, months, even years.

As far as my activities concerned, a number of  factories and plants were built and thousands of permanent jobs provided with IBA investments. Even the authorities responsible for the investigation admitted that 60-70% of the non-oil sector was created by us. In what years did the Cabinet of Ministers initiate the establishment of the enterprise? That`s a question. Because our economy is governed by the orders and programs of the Presidential Administration and the country's leadership. I have also witnessed an interesting fact; The most negative figures about ABB's past management are for some reason, those who ask and got for a large amount of loans from their bank and their business interests.

(to be continued)

Interviewed by: Heydar Oguz