Scandal Pops Up In The Usa In Distorted Form

As known and report­ed on repeat­ed­ly in these columns, among Mukhtar Ablyazov’s fund embez­zling deals was the sale of a num­ber of ura­ni­um mines in the south of Kazakhstan to one of his off­shore firms for a cou­ple of hun­dreds in dol­lar. The new, a Canadian tycoon who also hap­pens to be a close pal of Bill Clinton, was to pay hun­dreds of mil­lions in green­backs for the assets – which he lat­er man­aged to re-sell to a sub­sidiary of Russia’s state nuclear cor­po­ra­tion. The affair has popped up once more in an attempt by right-wing pro­pa­gan­dists to throw mud at the Clinton cou­ple pend­ing elec­tion cam­paigns in which Hillary Clinton appears as a front-run­ner. The true affair in its real pro­por­tions, how­ev­er, comes out in a blurred and mis­lead­ing manner.

Ablyazov’s Kazakh nuke deal: scan­dal pops up in the USA in dis­tort­ed formA recent arti­cle in The New York Times  relates “…how the Russian atom­ic ener­gy agency, Rosatom, had tak­en over a Canadian com­pa­ny with ura­ni­um-min­ing stakes stretch­ing from Central Asia to the American West. The deal made Rosatom one of the world’s largest ura­ni­um pro­duc­ers and brought Mr. Putin clos­er to his goal of con­trol­ling much of the glob­al ura­ni­um sup­ply chain. But the untold sto­ry behind that sto­ry is one that involves not just the Russian pres­i­dent, but also a for­mer American pres­i­dent and a woman who would like to be the next one. At the heart of the tale are sev­er­al men, lead­ers of the Canadian min­ing indus­try, who have been major donors to the char­i­ta­ble endeav­ors of for­mer President Bill Clinton and his fam­i­ly. Members of that group built, financed and even­tu­al­ly sold off to the Russians a com­pa­ny that would become known as Uranium One.

window.tgpQueue.add('tgpli-64a8a1214eeda')Bill Clinton met with Vladimir V. Putin in Moscow in 2010. Credit Mikhail Metzel/Associated Press

Beyond mines in Kazakhstan that are among the most lucra­tive in the world, the sale gave the Russians con­trol of one-fifth of all ura­ni­um pro­duc­tion capac­i­ty in the United States. Since ura­ni­um is con­sid­ered a strate­gic asset, with impli­ca­tions for nation­al secu­ri­ty, the deal had to be approved by a com­mit­tee com­posed of rep­re­sen­ta­tives from a num­ber of United States gov­ern­ment agen­cies. Among the agen­cies that even­tu­al­ly signed off was the State Department, then head­ed by Mr. Clinton’s wife, Hillary Rodham Clinton. As the Russians grad­u­al­ly assumed con­trol of Uranium One in three sep­a­rate trans­ac­tions from 2009 to 2013, Canadian records show, a flow of cash made its way to the Clinton Foundation. Uranium One’s chair­man used his fam­i­ly foun­da­tion to make four dona­tions total­ing $2.35 million.”

The arti­cle seems to be based on dodgy sources, the main one of which is a yet unpub­lished book by a far-right war fanat­ic called Peter Schweizer, “a for­mer fel­low at the right-lean­ing Hoover Institution and author of the forth­com­ing book Clinton Cash,” in the newspaper’s words. The book-in-the-mak­ing seems lit­tle more than an effort to throw mud at Democrat can­di­dates for the upcom­ing pres­i­den­tial elec­tions – Hillary Clinton in par­tic­u­lar. “The path to a Russian acqui­si­tion of American ura­ni­um deposits began in 2005 in Kazakhstan, where the Canadian min­ing financier Frank Giustra orches­trat­ed his first big ura­ni­um deal, with Mr. Clinton at his side,” the arti­cle reads fur­ther down. “The two men had flown aboard Mr. Giustra’s pri­vate jet to Almaty, Kazakhstan, where they dined with the author­i­tar­i­an pres­i­dent, Nursultan A. Nazarbayev. Mr. Clinton hand­ed the Kazakh pres­i­dent a pro­pa­gan­da coup when he expressed sup­port for Mr. Nazarbayev’s bid to head an inter­na­tion­al elec­tions mon­i­tor­ing group, under­cut­ting American for­eign pol­i­cy and crit­i­cism of Kazakhstan’s poor human rights record by, among oth­ers, his wife, then a sen­a­tor. Within days of the vis­it, Mr. Giustra’s fledg­ling com­pa­ny, UrAsia Energy Ltd., signed a pre­lim­i­nary deal giv­ing it stakes in three ura­ni­um mines con­trolled by the state-run ura­ni­um agency Kazatomprom. As if to under­score the point, five months lat­er Mr. Giustra held a fund-rais­er for the Clinton Giustra Sustainable Growth Initiative, a project aimed at fos­ter­ing pro­gres­sive envi­ron­men­tal and labor prac­tices in the nat­ur­al resources indus­try, to which he had pledged $100 mil­lion. The star-stud­ded gala, at a con­fer­ence cen­ter in Toronto, fea­tured per­for­mances by Elton John and Shakira and celebri­ties like Tom Cruise, John Travolta and Robin Williams encour­ag­ing con­tri­bu­tions from the many so-called F.O.F.s — Friends of Frank — in atten­dance, among them Mr. Telfer. In all, the evening gen­er­at­ed $16 mil­lion in pledges, accord­ing to an arti­cle in The Globe and Mail.”

Yet fur­ther down, UrAsia’s expan­sion is being described in, as must be admit­ted, a rather fac­tu­al man­ner: “But what had been a string of suc­cess­es was about to hit a speed bump. If the Kazakh deal was a major vic­to­ry, UrAsia did not wait long before resum­ing the hunt. In 2007, it merged with Uranium One, a South African com­pa­ny with assets in Africa and Australia, in what was described as a $3.5 bil­lion trans­ac­tion. The new com­pa­ny, which kept the Uranium One name, was con­trolled by UrAsia investors includ­ing Ian Telfer, a Canadian who became chair­man. Through a spokes­woman, Mr. Giustra, whose per­son­al stake in the deal was esti­mat­ed at about $45 mil­lion, said he sold his stake in 2007. Soon, Uranium One began to snap up com­pa­nies with assets in the United States. In April 2007, it announced the pur­chase of a ura­ni­um mill in Utah and more than 38,000 acres of ura­ni­um explo­ration prop­er­ties in four Western states, fol­lowed quick­ly by the acqui­si­tion of the Energy Metals Corporation and its ura­ni­um hold­ings in Wyoming, Texas and Utah.”

What fol­lows brings us clos­er to home: “By June 2009, a lit­tle over a year after the star-stud­ded evening in Toronto, Uranium One’s stock was in free-fall, down 40 per­cent. Mr. Dzhakishev, the head of Kazatomprom, had just been arrest­ed on charges that he ille­gal­ly sold ura­ni­um deposits to for­eign com­pa­nies, includ­ing at least some of those won by Mr. Giustra’s UrAsia and now owned by Uranium One. Publicly, the com­pa­ny tried to reas­sure share­hold­ers. Its chief exec­u­tive, Jean Nortier, issued a con­fi­dent state­ment call­ing the sit­u­a­tion a com­plete mis­un­der­stand­ing. He also con­tra­dict­ed Mr. Giustra’s con­tention that the ura­ni­um deal had not required gov­ern­ment bless­ing. When you do a trans­ac­tion in Kazakhstan, you need the government’s approval, he said, adding that UrAsia had indeed received that approval. But pri­vate­ly, Uranium One offi­cials were wor­ried they could lose their joint min­ing ven­tures. American diplo­mat­ic cables made pub­lic by WikiLeaks also reflect con­cerns that Mr. Dzhakishev’s arrest was part of a Russian pow­er play for con­trol of Kazakh ura­ni­um assets. […] Three days lat­er, a whol­ly owned sub­sidiary of Rosatom [ARMZ – ChvdL] com­plet­ed more info a deal for 17 per­cent of Uranium One. And with­in a year, the Russian gov­ern­ment sub­stan­tial­ly upped the ante, with a gen­er­ous offer to share­hold­ers that would give it a 51 per­cent con­trol­ling stake. But first, Uranium One had to get the American gov­ern­ment to sign off on the deal.”

What fol­lows is a lengthy hair-cleav­ing exer­cise over for­mal­i­ties con­cern­ing US gov­ern­ment per­mis­sion for the deal – but it leaves the basic ques­tion whether Clinton and Giustra had some­thing in com­mon in the process oth­er than their love of jazz (Clinton plays sax­o­phone and Guistra trum­pet). Moreover, the NYT in one its report’s upper para­graphs already had to admit that “…whether the dona­tions played any role in the approval of the ura­ni­um deal is unknown. But the episode under­scores the spe­cial eth­i­cal chal­lenges pre­sent­ed by the Clinton Foundation, head­ed by a for­mer pres­i­dent who relied heav­i­ly on for­eign cash to accu­mu­late $250 mil­lion in assets even as his wife helped steer American for­eign pol­i­cy as sec­re­tary of state, pre­sid­ing over deci­sions with the poten­tial to ben­e­fit the foundation’s donors.” In all: thin air. But the most impor­tant blun­der is that the paper com­plete­ly over­looked the real scheme behind the ura­ni­um deal – which brings in a more than famil­iar name, name­ly that of Mukhtar Ablyazov, the Kazakh banker who divert­ed an esti­mat­ed lump sum in the order between 6 and 12 bil­lion in US dol­lar from his bank to off­shore accounts the “ulti­mate ben­e­fi­cial own­er” of which point­ed at him­self. Ablyazov is now in a French jail wait­ing for his extra­di­tion to the Russian Federation, where most of the assets he bought with the mon­ey he stole are locat­ed. Another even more noto­ri­ous name involved in the case is that of Rakhat Aliyev, jailed in late sum­mer last year in Austria pend­ing his tri­al for kid­nap­ping and mul­ti­ple mur­der, who com­mit­ted sui­cide in prison on the event of the open­ing of the trial.

The names of the five urami­um upstream assets thus put into the shad­ow are known: Akdala, Southern Inkay, Central Mynkuduk, Kyzylkum and Khorasan. All of them were locat­ed in the deep south of Kazakhstan near the bor­der with Uzbekistan, and togeth­er they were thought to account for 60 per cent of Kazatomprom’s total asset val­ue. The real eye-open­er in the case came much lat­er, when in April 2009, short­ly after Ablyazov’s schemes had fall­en through and the cul­prit had escaped the coun­try, a mem­ber of Parliament used her immu­ni­ty to take a clos­er look at the books of KazAtomProm. In this way, Tatyana Kvyatkovskaya found out that Betpak Dala, an off­shore hold­ing alleged­ly per­son­al­ly con­trolled by the tan­dem Dzhakishev/Ablyazov, had been sold major stakes in the fields of Akdala, South Inkai and Khorassan for the hilar­i­ous total sum of 64,000 Kazakh tenge – or 426 US dol­lar at the time. She passed the infor­ma­tion on to the author­i­ties – but not with­out pre­sent­ing them at a press con­fer­ence in the process. The cur­tain fell for Dzhakishev in the last week of May the fol­low­ing year, when he was sacked as head of Kazatomprom and arrest­ed before he got a chance to flee from the country.

window.tgpQueue.add('tgpli-64a8a1214ef15')Kazatomprom work­er checks the radi­a­tion lev­el of ura­ni­um oxide at the East Mynkuduk PV-19 ura­ni­um mine in south­ern Kazakhstan in 2006

But only over the sum­mer, details about his clan­des­tine net­work of off­shore firms start­ed to come out in the open. Among the trans­ac­tions under inves­ti­ga­tion fig­ures the Central Mynkuduk deposit, esti­mat­ed worth in the order of 75 mil­lion US dol­lar in his­toric val­ue, which was trans­ferred to an off­shore shell com­pa­ny called Ken Dala Kz, run by Dzhakishev even though still lat­er it was to appear that the finan­cials were in the firm grip of Mukhtar Ablyazov. The same hap­pened with the near­by Kyzylkum deposit, which was even­tu­al­ly sold to a west­ern-held com­pa­ny called UrAsia for the equiv­a­lent of hard­ly more than a hun­dred thou­sand US dol­lar. UrAsia in turn was bought out by Canada-based glob­al ura­ni­um min­er Uranium One for $75 mil­lion. It was lat­er to be gen­er­al­ly assumed that UrAsia in real­i­ty paid a lot more for the assets, with the dif­fer­ence hav­ing been chan­neled out of the coun­try by Dzhakishev with the help of BTA’s Mukhtar Ablyazov and the latter’s asso­ciates. Following the trans­ac­tions, Uranium One was to own 30 per cent in the deposit which it bought through UrAsia for the men­tioned 75 mil­lion dol­lar. A Japanese con­sor­tium in the end owned 40 per cent with the remain­ing shares in the hands of Kazatomprom.

“Clinton had no role what­so­ev­er in this rela­tion­ship, which had been ini­ti­at­ed by London busi­ness­man Sergey Kurzin,” an arti­cle in Forbes dat­ed December 1 2009 refut­ing the link sug­gest­ed by the New York Times almost two years ear­li­er reads. “Clinton arrived in Kazakhstan late in the after­noon Sept. 6, 2005, […] four days after Giustra. By then Giustra was well on the road to final­is­ing a mem­o­ran­dum of under­stand­ing to acquire a 30% inter­est in the Kharassan project for $75 mil­lion; the state owned the oth­er 70%. Giustra’s rep­re­sen­ta­tives were also nego­ti­at­ing a price for the Akdala and South Inkai projects with rep­re­sen­ta­tives of Mukhtar Ablyazov, a wealthy oli­garch with bank­ing and real estate inter­ests, who years ear­li­er had been Kazakhstan’s min­is­ter of ener­gy, indus­try and trade. […] Giustra’s major deal for 70% of the Akdala and South Inkai ura­ni­um projects was not com­plet­ed until Nov. 7, two months after Clinton had left Kazakhstan. In fact, Ablyazov, the own­er, demand­ed a $100 mil­lion addi­tion­al pay­ment to the $350 mil­lion Giustra was will­ing to pay and had raised for the ven­ture. ‘Doing the deal with Ablyazov was the most stress­ful in my life,’ says Giustra. ‘I had to bluff him that I would give the investors back their mon­ey. Then he caved. Clinton had no role at all.’ ”

“The [New York] Times says Kazatomprom, the state-owned ura­ni­um com­pa­ny, con­trolled the prop­er­ties in which Giustra invest­ed,” Forbes not­ed in its con­clu­sions. “Not exact­ly true. In the major pur­chase (Akdala and South Inkai) that cost Giustra $350 mil­lion, 70% was owned by Mukhtar Ablyazov, a Kazakh banker; only 30% belonged to the state. Even as to the Kharassan prop­er­ty, which was 70% owned by Kazatomprom, the state com­pa­ny did not sign the agree­ment by which Giustra’s com­pa­ny, UrAsia Energy Ltd., acquired a 30% inter­est for $75 mil­lion. The sell­er in the Kharassan deal was Jeffcott Group Ltd., a pri­vate com­pa­ny incor­po­rat­ed in the British Virgin Islands.”

The next ques­tion raised here is: who was behind Jeffcott? “Uranium One owns a 30-per-cent stake in the Kyzylkum joint ven­ture, which was pur­chased for $75-mil­lion (U.S.) in 2005 from a pri­vate­ly held com­pa­ny, Jeffcott Group Ltd.,” a report by Canada’s lead­ing dai­ly The Globe and Mail pub­lished on May 29, 2009, would read. “But the Vancouver firm says the share­hold­ers behind Jeffcott were nev­er specif­i­cal­ly iden­ti­fied, nor does it know how Jeffcott ini­tial­ly obtained rights to the project.” The news­pa­per con­tact­ed Frank Giustra who react­ed in the form of a writ­ten com­ment in a man­ner that raised more ques­tions than it would answer. ‘The per­son who act­ed for Jeffcott was Eugene Charyshkin,” The Globe and Mail report’s quote from his e‑mail was to read. “That’s as much as I know.”

Ablyazov’s down­fall and Dzhakishev’s arrest gave the Kazakh author­i­ties a chance to cor­rect the sit­u­a­tion, with­out, how­ev­er, being able to recov­er the mon­ey lost on the “dis­count” trans­ac­tion. They did, how­ev­er, man­age to get asset val­ue for the ura­ni­um mines from Rosatom’s sub­sidiary ARMZ. “Uranium One has signed a defin­i­tive agree­ment to acquire a 50% inter­est in the Karatau Uranium Mine in Kazakhstan from ARMZ,” a press release dat­ed June 15 2010 was to read. “The pur­chase price will be paid by way of the issuance of 117 mil­lion com­mon shares of Uranium One and a cash pay­ment of $90 mil­lion (or equiv­a­lent promis­so­ry note). The agree­ment also pro­vides for a con­tin­gent pay­ment to ARMZ of up to $60 mil­lion, payable in three equal tranch­es over the peri­od between 2010 and 2012 sub­ject to cer­tain post-clos­ing tax relat­ed adjust­ments. The trans­ac­tion is val­ued at approx­i­mate­ly $451 mil­lion, based on the clos­ing share price of Uranium One on June 12, 2009. […] Upon clos­ing of the Karatau acqui­si­tion, ARMZ will hold an indi­rect 16.6% inter­est in Uranium One. ARMZ has agreed to a stand­still covenant under which it may not, with­out Uranium One’s pri­or con­sent, for a peri­od of at least five years from clos­ing acquire more than 19.95% of Uranium One’s out­stand­ing com­mon shares.” On November 16