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Kyrgyzstan: Banking Tussle Nearing Resolution?

A long-running conflict between Latvian banker Valeri Belokon and the government of Kyrgyzstan seems to be heading toward its denouement.

In an interview with EurasiaNet.org, Belokon said an arbitration hearing was scheduled for late December in Paris to resolve his dispute with Kyrgyz authorities. The legal tussle stems from the Kyrgyz government’s takeover of Manas Bank following the 2010 ouster of former Kyrgyz president Kurmanbek Bakiyev. “There should be a decision not too long after that,” Belokon said, referring to the hearing.

Belokon was the owner of Kyrgyzstan-based Manas Bank at the time of the 2010 Kyrgyz upheaval. Kyrgyz authorities who took over from Bakiyev subsequently took control of the bank and opened a criminal case against Belokon, alleging that he assisted the former president’s son, Maxim Bakiyev, in laundering money and improperly shipping assets out of the country. Belokon countered by seeking damages via international arbitration for what he contends was the improper seizure of his bank.

The Latvian banker vigorously denies the criminal allegations against him. He acknowledges that he had business relations with Maxim Bakiyev, but insists their dealings were confined to the operations of Latvia-based Maval Aktivi AS, a holding company in which the duo were partners. “I was open with everything we did,” Belokon said. He stressed that he and the younger Bakiyev did not have any offshore dealings.

Kyrgyz officials allege that Maxim Bakiyev, who fled Kyrgyzstan amid the 2010 upheaval, engaged in a variety of fraudulent business activities during his father’s tenure in power. He remains a widely loathed public figure in Kyrgyzstan.

While Belokon says the younger Bakiyev encouraged him to enter Kyrgyzstan’s banking sector, he insists the former president’s son did not improperly exert influence on behalf of Manas Bank. Independent monitors, including researchers from the watchdog group Global Witness, have noted that Maxim Bakiyev appeared to enjoy a great degree of sway over Kyrgyzstan’s banking sector during the period that Belokon owned Manas Bank.

Belokon said he first met Maxim Bakiyev prior to the 2005 revolution that toppled Askar Akayev’s administration and brought the elder Bakiyev to power. Belokon recounted that the younger Bakiyev made an immediate impression on him as someone with sharp business instincts. “He was a really quick learner,” Belokon said.

He declined to discuss the particulars of the arbitration case, or make any predictions about its outcome. The stakes would appear to be highest for the Kyrgyz government: an arbitration decision that goes against Bishkek could be economically and politically disastrous. According to some estimates, a loss could cost Bishkek tens of millions of dollars, money that the government can ill-afford to lose, given that annual budget revenue amounts to about $1.7 billion.

The stakes are not insignificant for Belokon either. An arbiter’s ruling against him would do significant damage to his public image, especially in England, where he is a co-owner of the Blackpool Football Club and is building a reputation for philanthropic activities. Efforts to date to reach an out-of-court settlement have fallen short.

Reflecting on his experiences in Kyrgyzstan, Belokon claimed that he was hesitant to enter Kyrgyzstan’s banking market back in 2008, when he established Manas Bank. In retrospect, he acknowledged making several misjudgments about the country’s banking environment. “I didn’t appreciate the ‘image factor’ properly,” he said. “And I didn’t appreciate how mass media worked” in Kyrgyzstan.

Kyrgyzstan: Banking Tussle Nearing Resolution?

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