Thursday, 25 February 2010, 05:18

S E C R E T SECTION 01 OF 04 BAKU 000127

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EO 12958 DECL: 02/24/2020

TAGS ECON, EINV, EIND, ETRD, KCOR, PINR, PGOV, RS, KS, IR,

TU, AJ

SUBJECT: AZERBAIJAN: WHO OWNS WHAT VOL. 2 - THE MINISTER OF

EMERGENCY SITUATIONS, BELUGA CAVIAR, AND FRUIT JUICE (C-RE9-02494; C-RE9-02493; C-RE9-02492)

REF: BAKU 54

Classified By: Charge d'Affaires Don Lu, a.i., for reasons 1.4(b) and ( d).

1. (S) SUMMARY: This cable is the second in a series that profiles the most powerful families in Azerbaijan, both in terms of economic and political power. This issue features Minister of Emergency Situations Kamaladdin Heydarov and his family. Heydarov was previously Chairman of the State Customs Committee, and his hand-picked successor now operates that agency, one of the most corrupt operations in Azerbaijan. The Heydarov family, which controls a business empire in Azerbaijan ranging from fruit juice production to real estate development, is the second most powerful commercial family in Azerbaijan, after the Pashayev family (into which President Aliyev married). End Summary.

The Man Behind the Power

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2. (S) Kamaladdin Heydarov is the most powerful member of this family, and some observers have said he might be even more powerful than the President himself. (COMMENT: Post does not believe this is true, although Heydarov controls more visible assets and wealth within the country than the President. End Comment.) His father, Fattah Heydarov, is a Member of Parliament from the mountainous Qabala district, which serves as a home base for the family outside Baku. Fattah was Secretary of the Ordubad (and later Julfa) District Party Committee during Soviet times, and served as Minister of the Welfare Service of Nakhchivan from 1976 to 1978 and later as Nakhchivan's Minister of Culture from 1983 to 1995.

3. (S) Kamaladdin Heydarov was Chairman of the State Customs Committee for nine years, and since 2006 has been head of the para-military Ministry of Emergency Situations (MES), which acts as a super-Federal Emergency Management Agency, Fire Marshall, health and safety inspector, and overall regulator of many aspects of the economy. Born in 1961, he holds a degree in Geology and International Law from the Azerbaijan State University. He held executive positions in a number of private and public enterprises prior to his appointment at the ripe old age of 35 as Chairman of the State Customs Committee (SCC), an agency that is notoriously corrupt, even by Azerbaijani standards. Heydarov's rise to power was partly a result of the strong relationship between his father Fattah and former President Heydar Aliyev (also from Nakhchivan), but also partly a result of Heydarov's strong management skills. As he gained wealth for the ruling party, Heydar Aliyev's respect for him grew, until finally he was entrusted with the valuable role of Chairman of the SCC.

4. (S) The State Customs position allowed him to gain his massive wealth, as significant illicit payments were paid "up the food chain" in an elaborate and well-orchestrated system of payoff and patronage. Heydarov likely still enjoys a sizeable income from the SCC, as it is controlled by his loyal successor. When President Ilham Aliyev appointed Heydarov as Minister of Emergency Situations in 2006, he was replaced at the SCC by his Deputy Aydin Aliyev. Aydin Aliyev is not related to President Aliyev, and Heydarov is Aydin Aliyev's sole benefactor, a symbiotic relationship in which Aliyev presumably gives undying loyalty (and a hefty cut) to the powerful Heydarov in order to retain his position. When Charge first met Heydarov in 2007, the Minister had been in office for less than a year but had a chest full of military ribbons that would rival the U.S. Chairman of the Joint Chiefs. Presumably he transferred them directly from his old State Customs uniform.

The Ministry of Everything Significant (MES)

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5. (SBU) The Ministry of Emergency Situations (MES) has consistently proven itself to be one of the most powerful ministries in Azerbaijan. It is suspected to have the largest revenue of any Ministry. It even has its own para-military unit, consistent with other such ministries in the CIS. Heydarov mentioned to a visiting Washington VIP in 2008 that his ministry had recently taken control of an anti-aircraft battery near Baku in which he had served as a young conscript during Soviet times. The Ministry now controls the fire departments and other emergency services, fire code inspections, state grain reserves, and construction licensing. This last area of responsibility (perhaps the most important for foreign entities operating in Azerbaijan) also covers building inspectors who can interfere with, delay, or stop any construction project they declare to be "unsafe." In fact, MES staff have previously warned American and other foreign businessmen that their purview covers anything that is associated with temperature, pressure, or isotopes -- categories broadly interpreted to include just about everything under the sun.

6. (SBU) It is often said mockingly that in Azerbaijan's judicial system, one can only win a case if one is friends with the judge - or if introduced by Benjamin Franklin (read: significant cash). Of course being known to the judge as politically powerful is another path to courtroom victory. The path to certifying a building's safety is likely similar, and the true structural integrity of Baku's recent construction boom is suspect. In 2007, a multi-story high-rise under construction crashed to the ground, killing several workers. In January 2010, three workers were killed when they fell from a building under construction on high-rent Neftchiler Prospect (reftel). Suspect construction is widespread in Baku, as new, speculative real estate ventures in central Baku (including high-rise buildings) are largely vacant, while practical buyers bid up the prices of flats in "Stalin-ka" buildings that pre-date independence. These older buildings, which tend to be low-rise, are thought to have had higher construction standards and generally be safer and more dependable.

7. (S) These types of market developments do not bode well for the reputation of MES, which is widely viewed as a cash cow for Baku's elite, and the Heydarov family in particular. If an event such as an earthquake led to widespread destruction of property, it is assumed that outrage would be private, rather than public, and would not boil over into attacks on contractors or corrupt bureaucrats, as was the case after the 1999 earthquake in Istanbul. Some less powerful contractors would become easy targets, but the true architects of disaster such as Heydarov's MES would find a way to use its resources and the tools of the state to escape any reprisal.

His Boys and Their Toys

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8. (S) Kamaladdin's two sons, Nijat Heydarov and Tale Heydarov, have recently expressed a desire to purchase two Gulfstream jets, valued at $20 million each. The family also owns an Airbus A319 corporate jet that is presently undergoing cabin completion in Basel, Switzerland. According to initial reports, ownership of the Gulfstreams would be shared between "Shams al Sahra FZCO" (registered in Dubai to Tale and Nijat) and Mr. Manouchehr Ahadpur Khangah, with Shams al Sahra and Kangah each holding 50 percent of each jet. Khangah was not previously known to the Embassy, but according to information from Gulfstream appears to be a citizen of both Iran and Azerbaijan (unclear if he also holds other passports). Purportedly as part of Patriot Act compliance, Gulfstream asked the Heydarovs for information that would confirm the lawful sources of their wealth. The

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Heydarovs provided Gulfstream an overview of their family holdings, and it appears they own more businesses than any other Azerbaijani family, including companies in food canning, construction materials, concrete, asphalt, chemicals, bricks, textiles, CD and DVD production (since licensed CDs or DVDs are generally unavailable on the local market, these are certainly all pirated), milk processing, tourism, gypsum materials, leather, agriculture, pianos, alcohol and spirits, juices, banking, insurance, and construction.

9. (C) One Embassy contact, XXXXXXXXXXXX referred to Khangah as the Chief Executive Officer or "front man" of a substantial portion of the Heydarov family conglomerate. This contact noted that while Khangah is listed as the official owner of various businesses, they are very much Heydarov-owned operations in which Khangah functions more as a manager. This source added that Khangah's role was mirrored by an unnamed Turkish citizen who controls another segment of the family businesses.

10. (C) Many of the family,s operations are part of the "Gilan," "Qabala," "Jala," or "United Enterprises International (UEI)" family of companies. Gilan Holdings is omnipresent in Baku, as the company is one of several major real estate developers and has been in the forefront of Baku's highly speculative real estate market. Observers compare Gilan to Dubai World or Nakheel, although admittedly on a smaller scale. The Heydarovs have largely cornered the fruit juice market in Azerbaijan, maintaining extremely high prices for locally produced juices and watered-down juice drinks, while making life difficult -- with the help of State Customs -- for cheaper competitors from Turkey, Ukraine and Russia. When USAID tried to support the production and distribution of pomegranate products in Azerbaijan, they quickly learned that no one sells pomegranate juice, concentrate, or derivatives from Azerbaijan without Heydarov's permission. Azerbaijan's economy is largely dominated by monopolistic interests, and observers suggest that the Heydarovs are at the top of this mountain of non-competition. It is rumored that the Heydarovs also have interests in the local Pepsi bottler, the local license for Red Bull, British American Tobacco, Japan Tobacco, and Imperial Tobacco. Heydarov has readily admitted to visiting U.S. delegations that he owns and operates the Caspian Fish Company which controls the lucrative (and previously Russian Mafia-controlled) Beluga Caviar production in Azerbaijan.

11. (S) The Heydarovs are also active in cultural endeavors. Kamaladdin Heydarov is a composer and has written a song about former President Heydar Aliyev that was sung by Azeri singer Aghadadash Aghayev. His wife is ethnic Korean, and he himself is quite the Koreaphile; he is President of the Azerbaijan Taekwondo Federation and owner of the recently opened high-end Korean restaurant "Shilla." Korean diplomats have confirmed that Heydarov was the protector for several major business deals, but have complained that many of these deals have gone awry after the Korean firms refused to pay adequate patronage to Heydarov.

12. (C) Heydarov's son Tale is the President of The European Azerbaijan Society (TEAS), and has made rounds to U.S. embassies in European capitals from his London base. The "society" purports to be an independent advocacy group, but its talking points very much reflect the goals and objectives of the GOAJ. In recent meetings, Tale and his cohorts have raised "Armenian aggression" in Nagorno-Karabakh and "double standards" of U.S. human rights and democracy reporting in the region, and complained about efforts of the U.S. Congress to provide humanitarian assistance within the Nagorno-Karabakh enclave. Tale and/or Nijat also own the Qabala Football Club -- perhaps as a small-scale effort to replicate the Chelsea antics of Russia's Roman Abramovich. The Qabala squad is a virtual United Nations team, with

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players from across Europe, Latin America and Africa -- the best team money can buy, at least for central Azerbaijan. Both sons were educated in London and presently live there. Tale holds a B.A. in International Relations and History from the London School of Economics and an M.A. in Security and Global Governance from Birkbeck College, while Nijat holds a B.A. in Politics and East European Studies from University College London and an M.A. in Management, Organizations, and Governance from the London School of Economics. Some newspapers have reported that Tale might return to Baku to become a Member of Parliament later this year.

It's Good to Be King

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13. (C) The family's influence is strongest in the regions of Qabala, Masalli, and Lenkeran. Postsuspects that Heydarov continues to control the tate Customs Committee and wield influence over the Ministry of Taxes, the Ministry of Ecology and Natural Resources, and Ministry of Economic Development, which is now led by a former Ministry of Taxes official. Additionally, of course, Heydarov profits significantly from widespread activities of the Ministry of Emergency Situations. That ministry, according to observers, may be the most sought after employer in official Baku, as Heydarov has made a reputation for paying salaries on time and in full. Employees benefit from perks of MES employment, such as the ability to enroll children in one of Baku's best-looking and best-financed public schools. Measures like these, contacts report, create a loyal following for the minister among his minions.

Turf Wars: Don't Cross Kamaladdin

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14. (S) Embassy contacts note that Kamaladdin Heydarov is currently in a "fight over grain" with Minister of Agriculture Ismat Abbasov, and wants Abbasov replaced by Member of Parliament Eldar Ibrahimov. Historically, those who have fought with Heydarov have always fared poorly: Farhad Aliyev and Heydar Babayev were (in succession) driven out as Minister of Economic Development in part after falling on Heydarov's bad side. Both were billed as reformers, and the economic reforms they were seen to propose stood to hurt Heydarov's interests at the State Customs Committee and the Ministry of Emergency Situations. In addition, some opposition newspapers had begun to call them potential candidates for the position of Prime Minister. Feeling threatened by their reform activity and growing power, Heydarov allegedly put his foot down. Both were removed from government and their business interests were seriously damaged. Rumors circulated in 2009 that Heydarov may have even been behind the assassination of Air Force Chief and Deputy Defense Minister General Rail Rzayev. The rumors point to the widely-reported forced landing of Heydarov's helicopter after it took off without obtaining flight clearance.

15. (U) The next issue of "Who Owns What" will profile the family of Ziya Mammadov, the Minister of Transportation. With so much of the nation's oil wealth being poured into road construction, the Mammadovs also control a significant source of rent-seeking. His holdings extend to the buses that run throughout Baku. A recent television report asked if the Mammadovs controlled mysterious construction company ZQAN Holding; the reporter pointed out the letters of ZQAN matched the initials of father Ziya, mother Qanira, son Anar, and daughter Nigar. A ZQAN representative brushed this aside as innuendo. LU