South Caucasus Confronts Challenges of War and Corruption

For many years Europe has lived with the hope that Armenia and Azerbaijan would one day resolve their differences. The Organization for Security and Cooperation in Europe (OSCE) Minsk Group, which consists of the U.S., Russia, and France, has spent thousands of hours mediating between the parties since its inception in 1994. 

In an upcoming summit the OSCE and its Minsk Group co-chairmen aspire that the two post-Soviet countries will come to a final status agreement and settle the territorial and ethnic conflict over the disputed region of Nagorno-Karabakh and the seven surrounding districts. These are de-facto controlled by the self-declared “Republic of Artsakh” (known as Karabakh), but are internally recognised as a de jure part of Azerbaijan.

With great power support and a new government in Yerevan, some are approaching the summit with cautious optimism. Armenia’s Prime Minister Nikol Pashinyan and Azerbaijan’s President Ilham Aliyev are set to meet later this spring, though a date has not yet been announced.

However, both parties took steps that threaten to derail the summit before it even begins.  Armenia may have contributed to tensions by announcing its Security Council meeting in the Nagorno-Karabakh together with that Republic’s own National Security Council, having Prime Minister Pashinyan visiting the self-proclaimed republic. Armenians decided to conduct the joint meeting in Karabakh, although the body routinely meets in the capital Yerevan. 

Not to be outdone, Azerbaijan has commenced large-scale military maneuvers ahead of a meeting between President Aliyev and Prime Minister Pashinyan. Azerbaijan's Defense Ministry said on March 11 that up to 10,000 troops, 500 tanks, 300 missile systems, aircraft, and other military equipment will participate five-day exercises, Radio Liberty reported.

However, the problems in the South Caucasus go well beyond security. For decades, endemic corruption undermined economic development and the rule of law in the three republics: Georgia, Armenia, and Azerbaijan. Information about the Azeri abuses abounded: the Aliyev clan, ruling the oil-rich Caspian state, has amassed billions of euros in assets, including vast property holdings in Dubai by the Aliyev children.

Earlier this decade, while the Azerbaijani government arrested scores of activists and journalists, the country’s ruling circles used a secret slush fund – nicknamed The Influence Machine -- to pay off European politicians and other dignitaries who promoted the country and its regime.

Many of these efforts took place within the Council of Europe, which is supposed to uphold human rights, democracy, and rule of law, according to Organized Crime and Corruption Reporting Project. 

VIPs who received the “Azerbaijani Laundromat” funds included three former members of the Parliamentary Assembly of the Council of Europe (PACE): a German MP and a Slovenian politician who both went against international organizations to declare Azerbaijan’s elections fair, and an Italian politician already charged with bribery. The Bulgarian husband of the head of the United Nations Educational, Scientific and Cultural Organization (UNESCO), a high-profile supporter of Azerbaijan, also received Laundromat payments.

Information about Armenia was less readily available, but not less concerning. A recent Amnesty International Report revealed that: 

A particular feature of corruption in Armenia is the presence of so-called “oligarchs” who enjoy the fruits of a shadow economy estimated to account for around 35 per cent of Armenia’s GDP. Patronage networks and a lack of clear separation between private enterprise and public office act as an important barrier to effective anti-corruption efforts. 14 It is not surprising, therefore, that 82 per cent of people in Armenia believe that corruption in the public sector is a problem or a serious problem, with the judiciary and the civil service perceived to be the sectors most affected by corruption.

A classified report on corruption in Armenia was circulated in March this year in Brussels, the Russian Telegram channel Kompromat SNG revealed. The alleged corrupt officials are identified as Prime Minister Pashinyan and his wife Anna Hakobyan. The amount of the suspected bribery? €1.5 billion.



     Is Armenian PM’s wife Anna Hakobyan pulling off illicit financial schemes in Europe?

Armenia’s new government, which came to power under the slogans of the fight against corruption, has allegedly built its own corruption scheme.

The classified report focuses on funds and personal accounts allegedly managed by Anna Hakobyan, the wife of the current Prime Minister, the report claims. The Pashinyan government has jailed political opponents, sending a chilling message to current and potential foes. 

Robert Kocharyan

Vendetta: PM Nikol Pashinyan jailed a political opponent -- former President Robert Kocharyan

Under threats of criminal prosecution and business ruin through threats of judicial prosecution, former officials and oligarchs transfer huge sums of money to contribute to various funds.

It appears that in the days of the recent Davos Forum, Anna Akopyan was in Zurich where she was actively involved in the setup and management of these funds. A Swiss businessman, affiliated with one very influential Armenian official, is a facilitator for these activities.

As of March 1, the accounts directly or indirectly controlled by Ms. Hakobyan mushroomed to about €1.5 billion. 

The former officials transferred funds from their offshore and personal accounts:

- Mihran Poghosyan (Former Chief Compulsory Enforcement Officer of Armenia and Deputy of the National Assembly);

- Gagik Khachatryan (Former Chairman of the State Revenue Committee and former Minister of Finance of Armenia);

- Samvel Alexanyan (Major entrepreneur and former deputy of the National Assembly of Armenia);

- Gagik Beglaryan (Former Minister of Transport and Communications of Armenia);

- Vardan Harutyunyan (Former Chairman of the State Revenue Committee of Armenia);

- Gagik Tsarukyan (Entrepreneur and founder of the Prosperous Armenia Party, member of the National Assembly of Armenia).

The European political elite, the financial regulators and large businesses that hoped for a more transparent Armenia under Pashinyan are concerned that while personalities may change, systemic corruption will remain an obstacle.  

Even in Georgia, a regional leader in the anti-corruption efforts, there are still major problems in the areas of the transparency and accountability of companies, including the lack of effective mechanisms for identifying their beneficial owners, Transparency International revealed in its report. Effective integrity programs remain the exception in Georgian companies. Anti-corruption mechanisms in state-owned enterprises remain particularly weak.

True, the South Caucasus desperately needs peace, but without a crackdown on high level corruption first – in all three countries --  its economic and political future will remain bleak.

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Gary Cartwright

Gary Cartwright

Gary Cartwright is publishing editor and Brussels correspondent of EU Today.

An experienced journalist and author, he specialises in environment, energy, and defence.

He also has more than 10 years experience of working as a staff member in the EU institutions, working with political groups and MEPs in various policy areas.

In October 2021 POLITICO described Gary as "the busiest man in Brussels!"

He is a of member the Chartered Institute of Journalists, a professional association for journalists, the senior such body in the UK, and the oldest in the world having been founded in October 1884

Gary's most recent book WANTED MAN: THE STORY OF MUKHTAR ABLYAZOV: A Manual for Criminals on How to Avoid Punishment in the EU is currently available from Amazon

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