Mozambique: Vtb Chairperson Denies Issuing Ultimatum

Maputo — The chairperson of the board of directors of the Russian bank VTB, Andrey Kostin, on Tuesday denied that he had ever issued an ultimatum to Mozambique over repayment of the money lent by VTB to security-linked companies and which form part of what have become known as Mozambique's "hidden debts".

After meeting with Mozambican President Filipe Nyusi in the Black Sea city of Sochi, where Nyusi is due to attend the Russia-Africa summit, Kostin, cited by the independent television station STV, said "we could never give an ultimatum to our friend that is the government of Mozambique. There is no way we would do that".

"Indeed, we had a good discussion", he continued. "There is no ultimatum on either side. We are willing to cooperate, and the idea is to work together and never to give ultimata".

Kostin's controversial remarks, which he is now denying, came when he was speaking to reporters at the Eastern Economic Forum in Vladivostok in early September. He was cited as saying "If our colleagues in Mozambique do not take steps to speed up this process (i.e. repayment of the debt), by the end of the year we shall have to declare that the country has defaulted".

"I hope our black friends in Mozambique are listening to this", Costin added. The VTB press service at the time did not deny that Kostin had said these things, but merely issued a statement that, by using the irrelevant term "black", Kostin "did not intend to offend anyone".

VTB and Credit Suisse are the two banks involved in the scandal of Mozambique's "hidden debts" - the loans of over two billion US dollars which these banks granted to the companies Ematum (Mozambique Tuna Company), Proindicus and MAM (Mozambique Asset Management). The loans were granted simply because the government of the time, under the then President Armando Guebuza, issued illicit loan guarantees. Those guarantees violated both the budget laws of 2013 and 2014 and the Mozambican constitution.

Neither Credit Suisse nor VTB bothered with any due diligence, of the sort that banks would normally do, as a matter of routine, if previously unheard-of companies ask for huge sums of money. They did not ask if there was any likelihood that these companies, established by the Mozambican Security and Intelligence Service (SISE), could ever repay the money.

VTB lent the entire 535 million dollars that went to MAM. According to former Credit Suisse banker, Andrew Pearse, a senior VTB banker, Makram Abboud, one of those handling the loan took a bribe to ensure that it went through.

Pearse was testifying last week at the trial in New York of Jean Boustani, a sales executive for the Abu Dhabi-based Privinvest group which became the sole contractor for the three Mozambican companies. American prosecutors regard Boustani as one of the masterminds behind the fraudulent scheme.

Pearse testified to the court that Boustani had told him Privinvest paid a bribe of two million dollars to Makram Abboud. VTB issued a denial, calling Pearse a "convicted fraudster", and claiming "We have seen no evidence that Mr. Abboud or any other VTB employee received improper payments of any kind".

In Sochi. Kostin told the press he wanted to discuss the future, not the past. He said the VTB wants to enter the Mozambican market and finance "structuring projects" in partnership with other Russian companies, and he had asked Nyusi for help.

"I asked the President to help us and if the government could suggest some opportunities, particularly in the areas of gas, LNG (liquefied natural gas), coal and agriculture", sad Kostin.

He said it was agreed that a VTB delegation should visit Mozambique before the end of the year "to continue discussing these matters with the Mozambican government".

As for the "hidden debts", Kostin said he had discussed the issue with Nyusi "and we decided we shall continue discussing the question, in an attempt to find the best solution".

The largest shareholder in VTB is the Russian government. Like many other Russian institutions, VTB is under sanctions imposed by the United States. The US sanctions against Russia were initially imposed because of the Russian occupation and annexation of the Crimean peninsula, which is legally part of Ukraine.

Nyusi also met with executives from other Russian companies interested in investing in Mozambique, including Rosoboronexport, the sole state intermediary agency for Russia's exports/imports of defense-related and dual use products, technologies and services, and Urakali, a fertiliser producer and exporter.

After the meeting with Urakali, Nyusi told Russian reporters "this is an opportunity for us to sell the image of Mozambique here in Russia, and to make use of this platform so that, together with other African countries, we can find more opportunities".

Meeting a fertiliser producer was important for Mozambican agriculture, he said, "and during my stay here, we shall meet with other companies with the aim of boosting our economy on the basis of mutual advantages between Mozambique and Russia".

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