Congress Must Investigate U.S. Loans To Secretive Azeri Silk Way Airlines

Last year, I wrote an article reporting that the Silk Way Airlines of Azerbaijan made 350 secret flights to transport hundreds of tons of weapons from Bulgaria to ISIS terrorists in Syria and other Middle Eastern countries between 2014 and 2017. We now have a new surprising revelation that Silk Way received $419.5 million of loans from the U.S. Export-Import Bank (EXIM) to buy three 747-8 cargo planes from Boeing to continue its sinister operations.

The disclosure was made by a reporter for the Organized Crime and Corruption Reporting Project (OCCRP) by filing a Freedom of Information Act (FOIA) request with the U.S. government in 2016. It is noteworthy that Silk Way, “owned by a company with past ties to Azerbaijan’s Aliyev family, won some lucrative contracts from the U.S. military,” according to FOIA documents. In fact, “Silk Way was given contracts worth more than $400 million with the U.S. Defense Department’s Transportation Command for more than decade,” according to Devansh Mehta of OCCRP. Silk Way transported “ammunition and other non-lethal materials” to Afghanistan as of 2005. “In addition to its relationship with the U.S. government, Silk Way Airlines has also worked as a subcontractor for the Canadian Department of National Defense, the German armed forces, and the French army,” Mehta revealed.

In April 2017, Silk Way increased its purchases from Boeing, signing a $1 billion deal for 10 new 737 MAX passenger planes, according to reporter Mehta. However, it is not known how the new acquisition was financed. Last October, Silk Way announced plans to buy two more 747-8 cargo planes.

Mehta disclosed that “the airline is owned by Silk Way Group, which, at least at one point, was closely associated with Azerbaijan’s ruling Aliyev family (which has used its planes for private trips) and has benefited from benevolent state deals. Information obtained through FOIA shows that Silk Way Airlines took steps to conceal its owners’ identity, perhaps to improve its chances of winning the valuable U.S. loan guarantees and military contracts.”

Mehta added that “Azerbaijan ranks 122nd out of 180 countries in Transparency International’s corruption perception index, while President Ilham Aliyev’s family owns luxury properties around the world worth over $140 million. The Panama Papers and other leaks have implicated the country’s first family as being involved in nearly all sectors of the Azerbaijani economy, from luxury hotels to mining to banking.”

According to the terms of the Export-Import Bank’s $419.5 million loan to Silk Way, in case of default the loss would be repaid by the state-owned International Bank of Azerbaijan (IBA). The problem is that IBA has been “implicated in the Azerbaijani Laundromat, a massive scheme that pumped nearly $3 billion out of the country through various shell companies,” Mehta wrote. Furthermore, IBA is not in a position to guarantee the Silk Way loan, as the IBA itself declared bankruptcy in 2015, unable to pay its $3.3 billion debt!

Nate Schenkkan, project director of the Nations in Transit report at Freedom House, a US-based nonprofit that monitors democracy and human rights around the world, questioned the wisdom of EXIM Bank’s loan to Silk Way: “In Azerbaijan, where one family dominates economically and politically, and is then using state institutions to back its economic projects, there’s an obvious conflict of interest.”

Arzu Aliyeva, Pres. Aliyev’s 21-year-old daughter in 2010, was one of the three owners of Silk Way Bank, the financial arm of Silk Way Holding. Since 2017, her name is no longer mentioned as an owner. “Silk Way Holding, also referred to as Silk Way Group (SW Group) on its website, is a conglomerate that has currently listed 11 companies in its portfolio, including the airline,” according to Mehta. Silk Way Holding dominated Azerbaijan’s aviation sector after the state carrier AZAL airlines was privatized in a highly secretive manner without any bids and tenders. Mehta wrote that “a similar privatization of the telecom sector ended up with the [Aliyev] family earning about $1 billion in bribes in cash and share value, according to an earlier OCCRP story. The investigation also found that the money was funneled to the first family through various secret offshore companies. These companies have enabled the Aliyevs to control stakes in gold mines, telecommunications and construction businesses in Azerbaijan.”

According to a filing in 2006, Silk Way Airlines was owned by IHC (International Handling Company), an offshore entity based in the British Virgin Islands. In a 2017 filing, Silk Way Airlines stated that 40% of the company was owned by IHC, while 60% was owned by SW Holding, “effectively controlled” by Zaur Akhundov, an Azerbaijani citizen. Mehta stated that “IHC is linked to the Aliyev family through its director Jaouad Dbila who reportedly served as a proxy for the first family’s business interests in the past.”

In 2011, a Russian-born manager, Grigory Yurkov, was given power of attorney for both Silk Way Holding and IHC, according to Luxembourg’s official gazette. This appointment was used as a means to conceal the true owners of IHC.

Meanwhile, Zaur Akhundov had mysteriously become the 100% owner of the entire Silk Way Group in 2014. By that time, the firm and its many holdings were already worth billions of dollars, Mehta declared, based on the company’s loan guarantee application. Akhundov, 50, had held several official positions in Azerbaijan. “It is unclear how Akhundov became the owner of a billion-dollar conglomerate with more than 10 aircrafts, an insurance company, a construction company and an aircraft maintenance company, to name a few of the enterprises in the Silk Way Group,” Mehta wondered.

According Schenkkan of Freedom House, “Azerbaijan can be described as a centralized, vertical pyramid where the benefits go to one family that collects rents throughout the economy. This includes all sorts of transactions, not only official state transactions that might involve taxes and public funds, but also things that involve what we normally consider the private sector: import-export, consumer goods, transport—any area of the economy, the family has a stake in it and receives a cut on what takes place.”

The U.S. Congress should hold a hearing to investigate the appropriateness of EXIM Bank’s $419.5 million loan guarantee to Silk Way Airlines, its arms shipments to terrorist groups in the Middle East, and its hidden ownership by the ruling Aliyev family. After all, why should Azerbaijan, a country with billions of petrodollars, be given a U.S. loan?