Azerbaijan, along with Panama, has become the most talked about foreign country in the wake of allegations by journalist Daphne Caruana Galizia that the South Caucasus country has been funnelling money, through a company owned by the dictator’s daughter Leyla Aliyeva, to companies owned by Minister Konrad Mizzi, the Prime Minister’s chief of staff Keith Schembri and the Prime Minister’s wife Michelle Muscat.

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But while these allegations have yet to be proved true or otherwise, there are a number of hard facts about Malta’s seemingly increasingly cosy relationship with the faraway country known best for its oil and gas exports, as well as for its corruption.

These include an Azerbaijani state company’s involvement in the new Delimara power station, the government’s 18-year obligation to purchase natural gas to fuel it from an Azerbaijani state owned entity, the visit Prime Minister Joseph Muscat, his chief of staff, his communications coordinator Kurt Farrugia and Minister Mizzi made to the country in December 2014, and the dictator’s daughters’ dubious company in Malta that was used to rake in funds from the Azerbaijani telecommunications market.

PM Muscat leading a Maltese delegation in a meeting with Azerbaijan President Aliyev

That contentious trip to Azerbaijan

In December 2014, Prime Minister Joseph Muscat, his chief of staff Keith Schembri and then Energy Minister Konrad Mizzi paid a somewhat dubious visit to Baku. No section of the press was invited to attend, an oversight that the Prime Minister later said had been a mistake.

The trip had raised eyebrows, both before and after.

The government’s own sparse report on the visit confirmed that Dr Mizzi signed two memoranda of understanding during the visit: one with his Azerbaijani counterpart on strategic cooperation in the field of energy, and the other with SOCAR, the state oil company, to plan and implement this cooperation.

According to the government statement, the two countries agreed on “collaboration in the exploration and production of oil and gas, the trading and distribution of petroleum, the trading of energy commodities in the Mediterranean, the possibility of new infrastructure and innovative services of LNG among others.

“This agreement will lead to our country cooperating with one of the greatest energy centres to continue developing the foundations of a regional energy hub,” the government said.

Minister Konrad Mizzi signing an agreement in Azerbaijan

But beyond the vague statement on possible areas of cooperation “with one of the greatest energy centres”, there is little indication of what the agreement was intended to lead to.

What it led to was apparently a loss of millions of euros on a fuel hedging agreement with SOCAR.

In 2015, the Auditor General reported that a lack of documentation led his office to question the way fuel-hedging agreements with SOCAR were signed last year based on "ministerial direction".

That “ministerial discretion” led to Enemalta losing over €14 million on fuel hedging, according to the National Audit Office, although it did recoup nearly €8 million through currency exchange hedging.

However, in comments made to The Malta Independent at the time, then Energy Minister Konrad Mizzi defended his involvement, pointing out that it was simply limited to suggesting SOCAR as a possible supplier at a time when fuel prices were set to go up.

The minister insisted that the agreements with SOCAR led to a €0.02/litre reduction in the price of petrol and the price of diesel remaining stable, at a point when the price of both was set to increase by €0.02 a litre.

Dr Mizzi maintained that his involvement was limited to suggesting that Enemalta keep trying to get a better deal and eventually to suggest that it should consider SOCAR Trading, and not impose an agreement with the Azerbaijani oil trading company.

The fact that the trip had been made with no accompanying media present had also raised eyebrows, and resulted in accusations that kickbacks on the deals had been offered.

Adding to those concerns is the fact that Azerbaijan is hardly a beacon of transparency and democracy, but rather the opposite.

In an interview with this newspaper last year, Dr Muscat insisted that the suggestion of kickbacks had not even been tabled during discussions.

Here is a section of the transcript:

Let us talk about the secret Azerbaijan deal. Can you confirm that no kickback offers were made?

Of course not! Absolutely not! I deny that most categorically.

I am not asking if you took kickbacks, but if you were offered any.

No way. And I think that we made a mistake by not taking journalists with us. At the time we were reviewing the system of taking (and paying for) journalists on government trips and we really thought that this was not that important. Again, let me be clear, nothing was offered and I cannot imagine a scenario where such an offer could be made. You have every right to ask. I have no problem with that.

A corrupt regime?

The Aliyev family has been a prominent feature of Azerbaijani politics for half a century – President Ilham Aliyev’s father Heydar was the leader of the Azerbaijani Soviet Socialist Republic between 1969 and 1982, before becoming First Deputy Premier of the Soviet Union.

He was forced to resign by Mikhail Gorbachev in 1987, but reinvented himself when Azerbaijan won its independence, becoming its third president in 1993 and stepping down a few weeks before his death in 2003.

Ilham Aliyev is his father’s handpicked successor, and has obtained over three-quarters of the national vote in three presidential elections, marred by allegations of irregularities and political oppression.

Mrs Michelle Muscat with Leyla Aliyeva, daughter of Azerbaijan's President

A cult of personality was created around the former president, which has continued under his son’s rule. The state news agency, AzerTAc, actually uses the appellation “Great Leader” – the same term that the North Koreans use to describe his counterpart Kim-il Sung.

The Memorandum of Understanding between Malta and Azerbaijan was itself signed underneath a massive bust of Heydar Aliyev, which overlooks a quotation of his that roughly translates as “all our efforts in the economic sector should be devoted to the welfare of our people”.

But various reports suggest that a sizeable part of the country’s economic efforts is devoted to improving the welfare of the Aliyev family itself.

While Azerbaijani law prohibits President Aliyev – whose annual salary is around €200,000 – from owning businesses, there are no such restrictions on his relatives, who appear to have amassed significant commercial interests across the globe.

Some time back, the Washington Post revealed that real estate in Dubai worth some $75 million was owned by the president’s three children: daughters Leyla and Arzu and son Heydar. The lion’s share of this real estate – nine waterfront mansions in the Palm Jumeirah land reclamation project worth $44 million – had been acquired by the president’s son, who was just 11 years old at the time.

PM Muscat leading a Maltese delegation in a meeting with Azerbaijan President Aliyev

The Washington Post also quoted an Azerbaijani Opposition leader as saying that Azerbaijan’s leaders faced no risk of consequences because the country’s judiciary, anti-corruption bodies and most of its media outlets were firmly under their control.

This and other revelations of the family’s business interests helped earn Mr Aliyev the dubious honour of being named ‘Person of the Year’ by the Organised Crime and Corruption Reporting Project in 2012.

The Panama Papers have also revealed that Mossack Fonseca helped the family of the Azerbaijan President Ilham Aliyev – whose dictatorial government controls at least a significant interest in SOCAR Trading SA – with hiding shares in mining companies and London property through Panama.

Malta shell company helps Azerbaijan’s ruling family gain millions

A Malta-based shell company has been linked to financial transactions which likely saw Azerbaijani President Ilham Aliyev and his family amass hundreds of millions of euros at the expense of the country.

FA Invest (Malta), which is held by a Maltese fiduciary firm, had been reported to have taken a 6.5 per cent stake in Azerbaijani telecoms company Azercell, while the Azerbaijani government transferred its own stake at highly discounted prices to a company which appears to be indirectly controlled by the Aliyev family.

FA Invest, it is alleged, was created in October 2011 to take over a 6.5% shareholding from a shareholding telecommunications company Azercell.

Prime Minister Joseph Muscat addressing a conference in Baku, Azerbaijan

The Malta link is one of many findings following a months-long investigation carried out by the Organised Crime and Corruption Reporting Project, Swedish Television’s programme “Uppdrag Granskning” (Mission Investigate) and the Swedish News Agency TT into Azerbaijani telecoms company Azercell, which is majority owned by Swedish-Finnish company TeliaSonera.

The story was ultimately based on the work of Azerbaijani journalist Khadija Ismayilova, an OCCRP member who was later arrested, tried and sentenced to seven-and-a-half years in prison on what were widely perceived to have been trumped-up charges.

Their examination of countless business records, annual reports and internal documents uncovered a scheme to transfer Azercell shares into the hands of a “local partner” with numerous links to the Aliyevs, while TeliaSonera and its partners played down what was happening and often made misleading public statements. The Swedish company was actually found to have acted against its interest by allowing the deal to go through.

It is alleged that Azercell is linked to the two daughters of President Aliyev, Arzu and Leyla Aliyeva after it emerged that FA Invest purchased the 6.5% shareholding that Turkish company Cenay Inshaat held in Azercell and that two Panamanian companies connected to the Aliyeva siblings also purchased another Azercell shareholder, Cenay Iletishim.

The two Panamanian companies have the same signatory, financier Olivier Mestelan, as do three other Panamanian companies which hold the sisters’ 72% holding in another company, Azerfon.

Prime Minister Joseph Muscat with Azerbaijan President Aliyev (second from left front row)

“That means two out of the top three companies are closely connected to the Aliyev family… the proven paper trail links the family to nearly three-quarters of the mobile market, a commercial dominance that raises serious questions about Internet surveillance and communications security within Azerbaijan,” the OCCRP report stated.

FA Invest Malta was represented by a certain Hamzayev Rashad Firidunoglu, whose name is coincidentally identical to one of the President’s personal security guards, who was awarded the “For service to the motherland” medal from President Aliyev in 2010.

Only after FA Invest’s entry into the scene did Azercell receive its long-awaited 3G licence. A 4G licence soon followed.

Investigations carried out by The Malta Independent on Sunday in 2015 showed that FA Invest Malta was owned by two companies at the time.

One of them was Panama-based Stella International Services, which appears to be linked to the Aliyev family: it is based in the Morgan y Morgan offices in Panama City.

The other was Trident Trust Company (Malta) Ltd, whose directors are Maltese citizen Nissim Ohayon – who is also the company secretary of FA Invest Malta – Mark Wilson LeTissier from Guernsey, and David Hermanus Bester from the Isle of Man.

Trident Trust’s shares are owned by TTG (Malta) Ltd, which is based in the same Mosta office, but TTG Malta’s own shares are controlled by Binder Investments Limited, which is based in the British Virgin Islands.

This has now changed, and FA Invest Malta is now owned by Fides Fiduciary Limited, a Maltese fiduciary company that holds dozens of companies under its wing as shareholders. The ultimate beneficiary owners of these companies are unknown.

President Aliyez of Azerbaijan

Companies based in Malta linked to the Azerbaijani regime:

SOCAR Trading Shipping Limited

Owned by: SOCAR Trading Holding Limited

SOCAR Oil & Gas International Limited

Owned by: SACT Limited (Hong Kong – 49%) and State Oil Company of The Azerbaijan Republic (Baku – 51%)

SOCAR Oil & Gas International Holding Limited

Owned by: SACT Limited (Hong Kong – 49%) and State Oil Company of The Azerbaijan Republic (Baku – 51%)

SOCAR Investments And Finance Ltd

Owned by: SOCAR Overseas LLC

SOCAR Trading Shipping Limited

Owned by: SOCAR Trading Holding Limited

SOCAR Trading Holding Limited

Owned by: State Oil Company of the Azerbaijan Republic

UML Investments Limited

Owned by: Socar Trading Shipping Limited

UML Navigation 1 Limited *

UML Navigation 2 Limited *

UML Navigation 3 Limited *

UML Navigation 4 Limited *

UML Navigation 5 Limited *

UML Navigation 6 Limited *

UML Navigation 7 Limited *

UML Tugs 2 Limited *

UML Tugs Limited *

* Owned by: UML Investments Limited