The Armenian representation of the CIS intergovernmental bank is a closed system in terms of providing information.
The only authorized person who can answer our questions is Vahan Melkonyan, who visits and leaves Armenia quite often and doesn’t even realize that the laws are written for him too. Let’s mention that Melkonyan is the authorized representative of CIS Bank and director of the board of Nairit factory. We are really interested in how much the CIS Bank has invested in Armenia, besides in Nairit. In order to make it clearer, let’s mention that the CIS Bank was established in 2004, the goal of which was to provide credit for CIS projects. Last year the chair country of this bank was Armenia, through the rotation system. The county was represented in the person of the Central Bank chairman Tigran Sargsyan. The CB also refused to provide any information about the level of investment in terms of realization of projects in Armenia. Instead they offered to seek our answers in the representation of the CIS Bank in Armenia. As everybody refuses to give us any information, we will present our own research results. These are notes from the communication between the Russian Central Bank and the CIS Bank officials.
Correspondence of two Russian officials
We are presenting to you parts from the letter relating to the Nairit factory.
“In 2004 the RA government applied to the CIS Bank to participate in the recovery operations of Nairit Factory. In the first stage the bank has allotted 6 million USD credit to Armenia’s atomic station, and it was agreed to later finance Nairit factory. The Russian side was interested in the reconstruction of the factory because there are only seven such factories in the world and the Armenian factory occupies the 7th place. Besides that, after the flood in Louisiana, Dupont’s similar factory in the US was also destroyed, and is still not restored. In that same year the EU made a decision to close the “Europa-Italia Polimer” Factory because of ecological issues. Nairit factory is working with the technologies of Dupont, and could obviously become a leader in the rubber market. Interkauchuk company has made tremendous efforts to renovate Nairit Factory, which has recovered not only the Armenian market but also made several million-dollar agreements with foreign companies. However, because of unclear reasons, these deals were cancelled by the deputy director and director of CIS Bank, Vahan Melkonyan. In 2006 the government offered the CIS Bank to buy the stocks of Nairit, and this transaction be done in the name of the British Raynoville Property LTD, which with the recommendation Nairit receives a 70 million USD loan. A condition of the loan was that Raynoville, as a founder, was supposed to involve international companies, which would take the responsibility to acquit the loan and the acquirement of new financial means, which are quite necessary for the recovery of the factory. Willingness of cooperation was expressed by the Polish SAWEX, American INTERTEX and Russian Eurogaz companies. The latter has even shared its intentions with RA Minister of Energy. ” As the western methods of provision of stocks takes quite awhile, it was decided to conduct the Raynoville transaction through Melkonyan’s offshore company, “Otford”. However, right after receiving the loan for purchasing, Melkonyan, due to the pressure of the CIS Bank, returned the stocks to the real owner, deputy director of the CIS Bank S.V. Kulikov. The loan provision was done with a number of violations. An absurd situation was created. Nairit is responsible to creditors with all its property, but Raynoville is responsible for only the 20,000 USD founding credit. But in fact Raynoville received the whole amount -70 million USD. To the question of the Russian Central Bank about who the real owner of Nairit is, Kulikov said, “The real owner of the factory is the RA President.” This is quite far from reality. Eight months have passed since Raynoville bought the stocks of Nairit but nothing has been done so far. That’s the reason the factory is in such a critical situation. It has a debt of about 7 million USD for raw materials. Plus the huge amount given to Raynoville has disappeared. Part of it was spent for purchasing the stocks of the factory. To a certain extent, credit percentage was paid; about 1 million USD was invested in Russia in the branch office of Raynoville. The Central Bank of Armenia decided not to change the refinancing interest rate at the level of 4.5% annual interest rate. The CBA press service reported that this decision was made at the CBA Board’s meeting on May 2, 2007. Taking into consideration the development of macroeconomic environment of the first quarter of 2007 and the low inflation rate in April, the CBA Board confirms that compared to the previous period, inflation pressures are milder, despite the high global prices for oil products. The current tendencies in the economy, caused by developments of the aggregate demand, are also not a basis for intensification of inflation pressures. The CBA Board does not rule out a further review of interest rates in the case of newly received information about economic development tendencies. Compared to March, 0.1% inflation was recorded in April 2007. As a result, the annual inflation in April 2007 amounted to 4.2%. According to the state budget, 4% (±1,5%) inflation is planned by the end of 2007.
Both of them have taken rubber from Nairit at a very low price and they sell it at double price in the international market. With the same scheme Anoushik company has borrowed 7 million USD credit from ArmKapBank with 12-36 percent rates, which will go raise to 14 million in two years. This was an unprecedented business deal for the bank. This debt of course won’t be paid by Anushik firm; so won’t Raynoville. Thus, at the end of this story, ArmKapBank has become the owner of Nairit. The astonishing thing is that for Armenia the important thing was to save ArmKapBank, rather than Nairit Factory. Of course the bank is strengthened and now named “Ararat Bank”. Although Nairit remains in bad condition, it is still able to feed its 4000 workers.