Tajikistan Says Rusal Backing Off $375m Claim
Talco, the company behind Tajikistan’s largest factory, is nearing a deal that would end an eight-year legal battle with the world’s largest aluminum maker, the company says.
The state-owned Talco aluminum smelter is controlled directly by Tajikistan’s strongman President Emomali Rakhmon, whose family has appeared to benefit disproportionately from the plant’s revenues.
But a history of troubled deals with Russia’s Rusal and its subsidiaries saw Talco lose in arbitration hearings in Switzerland and the British Virgin Islands in 2013 and 2014. According to Rusal, as of May 2014 the Tajik company owed $363 million, including interest. With interest accruing at nearly $45,000 per day, the total would be roughly $375 million today.
Now Talco says it has made a proposal that satisfies Rusal and that the two companies have signed off on a draft agreement, Radio Ozodi quoted Talco executive Igor Sattarov as saying on February 16. Tajikistan’s government and the Rusal board must still okay the deal, said Sattarov, who did not disclose any of the terms. Last week President Rakhmon replaced the company’s boss.
A Rusal spokesperson would not offer any details about the alleged deal, only telling EurasiaNet.org, “We can officially say that nothing has been signed yet and the agreement in question is pending approval of Rusal’s board of directors.”
Tajikistan does not mine alumina, but imports the raw materials and uses its cheap electricity to operate the smelter, which was opened in 1975 when the country was part of the Soviet Union. When the plant was functioning at capacity, it used 40 percent of Tajikistan’s electrical output, leaving much of the country in the dark.
“Talco's revenue does not contribute to development of the country; rather much of it disappears for off-budget activities and projects, such as palaces and lavish state entertainments. The people of Tajikistan effectively subsidize Talco, by living without adequate health services, education, or electricity,” then-US Ambassador Tracey Jacobson wrote in a 2008 cable published by Wikileaks.
Jacobson – who described Talco as Rakhmon’s “cash cow” – estimated that hundreds of millions of dollars have “disappeared” from the plant’s books since Tajikistan gained independence in 1991.
Instead of paying its electricity bills or updating its aging equipment, Talco has frittered money on vanity projects to please the president, such as what was once the world’s tallest flagpole (it was surpassed last year by Saudi Arabia). It has also been hurt by the plummeting price of aluminum on international markets. Output fell 48 percent between 2007 and 2013, according to the company, and another 37 percent last year.
Why a deal now? Russian-Tajik relations are probably the biggest factor. The Kremlin – which has bailed out Rusal in the past – has strategic interests in Tajikistan. For starters, it is pressuring Dushanbe to join its fledgling Eurasian Economic Union. Last year a source close to Rusal told EurasiaNet.org that the company would never back off its multi-million-dollar claim unless the Kremlin ordered it to do so.
David Trilling is Eurasianet’s managing editor.