Since the turn of the century the World Bank and the International Monetary Fund have been driving a rampantly corrupt agenda in the Republic of Armenia. This was exposed in 2004 by an Armenian Parliamentary Commission, which found that several tens of millions of dollars worth of World Bank credits were being misappropriated and the IMF was failing in its duty to stop the theft of valuable state assets.
By March 2007, the Bank and the IMF had made no effort to resolve the problems, so Americas leading human rights and freedom of speech organization, the Government Accountability Project (GAP), submitted the details to the Bank’s watchdog body, the Department of Institutional Integrity (INT), and GAP has since been pressing for a full investigation. Throughout 2007, the INT ignored repeated requests to investigate the problems, so in February 2008 GAP submitted a petition to Robert Zoellick, World Bank President, asking for his support. By the end of May, the INT was still not cooperating, so GAP submitted a full report to members of the U.S. Congress, who are now looking into the matter.
Today, Khosq provides the opportunity to bring this information to the attention of a new Armenian internet community.
In 2004, Vahan Hovhanissian’s Parliamentary Commission found corruption estimated to be in the region of two hundred million dollars, a massive amount for Armenia which at the time had a state budget of about four hundred million. The problems were associated with the World Bank’s Municipal Development Project, designed to improve Yerevan’s water utility, and the ‘Government’s Integrated Finance Rehabilitation Plan’, a devious mechanism to eliminate hundreds of millions of dollars worth of old electricity debts, supported by the Bank and under IMF ‘Surveillance’.
The Commission concluded that the Bank and the IMF were clearly in cahoots with the Armenian authorities, depriving Armenia’s under-privileged of tens of millions of poverty reduction dollars and using them for state-backed profit-making activities, and illicitly transferring hundreds of millions of dollars worth of state assets to corrupt state cronies and their partners-in-crime.
Roger Robinson, the World Bank Country Manager at the time, initially reacted to the accusations with anger, but he later backed down and paid lip service to the claims. The IMF’s Permanent Representative in Armenia however had a more philosophical view of the affair. When asked: Should he not be stopping a One Hundred Million Dollar scam, as he was meant to do in accordance with his IMF technical assistance agreement? He replied ‘That depends”. When asked: On what does it depend? – He answered – “My Conscience”.
It turned out that Jimmy McHugh’s conscience was not all it could have been and a worthless document, which the Armenian authorities had valued at $107 million was used to privatize Armenia’s Kajaran molybdenum factory.
Jimmy McHugh was later asked to comment on why the $100 million Sevan – Hrazdan Hydro-Power Cascade was transferred to ‘Russian Companies’ at a reduced value of $25 million in 2002, and then in 2003 the newly privatized Russian owned Sevan – Hrazdan Hydro-Power Cascade received a 15 Billion Dram ($30 million) donation from the state budget. He declined to answer that question.
These two scams totalling about $140 million were used to ‘privatize’ two of Armenia’s most valuable state assets, which had a total book value of more than $200 million. Today, more than a billion dollars would be needed to build the five hydro-power stations which make up the 400+ megawatt Sevan – Hrazdan Hydro-Power Cascade, including the man-made reservoirs, kilometres of water channels, and all the electricity generating, transformation and distribution systems! But the entire system was transferred to Russian companies at virtually no charge, in the same way as the molybdenum factory was transferred to a German company – at virtually no charge!
How many other of the billions of dollars worth of state assets must have been ‘Privatized’ in this criminal way?
Vahan Hovhanissian promised to report the details to the people of Armenia in 2004, together with another $60 million dollars worth of corruption and embezzlement his Commission found in the World Bank financed Municipal Development Project, which accordingly failed to bring the significant improvements to the Yerevan water system the Bank had promised. But he chose the more attractive option of keeping the information to himself. Then in October 2007, Prime Minister Serge Sargsyan said he was ready to re-look at the matter, but that also turned out to be empty words.
The UK’s Serious Fraud Office continues to monitor the INT response to GAP’s request for an investigation, the Armenian opposition press has covered the campaign in a string of articles, the Armenia chapter of Transparency International has added its support, the Institute for Democracy and Human Rights (IDHR) has published an article on this scandal in its quarterly journal, and today readers of khosq can see the details for themselves by applying to the writer of this article for copies of documents.
Bruce Tasker
Senior Specialist
Armenian Parliamentary Commission (2003/4)
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