Accessibility links

Latvia: Probes Allege Illegal Operations At Moscow Embassy

  • Ron Synovitz



Latvia is launching an inquiry into charges by Russian officials that companies and banks have used the Latvian Embassy compound in Moscow to send money abroad illegally. Latvian diplomats in Moscow deny the charges. But a former Latvian ambassador to Russia admits he authorized space at the compound to be rented out commercially. Prague, 5 November 1999 (RFE/RL) -- The Latvian Foreign Ministry is launching an investigation into allegations that the Latvian Embassy in Moscow has served as a conduit for illegal money transfers. The Russian government on Monday informed Latvian Ambassador Imants Daudiss of what it called "established facts of illegal activity."

The Latvian government said yesterday that its embassy in Moscow has not been funneling money out of Russia. A Latvian Foreign Ministry spokeswoman (Liga Bergmane) acknowledged that a banking association did rent space in the embassy, but said it carried out market studies and did not engage in financial transactions. She said Latvia will nevertheless send an inspector to investigate the allegations.

Andris Vilcans -- the inspector-general at the Foreign Ministry in Riga -- says he will leave for Moscow next week to begin the inquiry.

The English-language daily "Moscow Times" reported last week that Moscow tax police and Federal Security Service (FSB) agents have seized thousands of dollars from businessmen leaving the Latvian Embassy compound in Moscow. The authorities were quoted as saying that the embassy shelters companies involved in illegal capital export and cash transactions.

The authorities also told Russian media they think that up to $2.5 million moves daily through firms that operate out of the embassy compound. They say as many as 20 firms and banks have been involved. The ITAR-TASS news agency reports that an offshore bank, Mosprom Bank, is among them.

Inspector-General Vilcans told RFE/RL that he has received no information from Russian investigators to support the allegations. Vilcans said he has no reason to doubt the denials by Latvian diplomats.

"On the premises of the Latvian Embassy in Moscow, there are only non-profit organizations. There is no question of business structures. The Latvian Embassy has lease agreements only with non-profit organizations. If any of those organizations have conducted any activities that are not in accordance with the law, this has happened without the knowledge of the embassy and most of the responsibility lies with those organizations."

But Janis Peters -- who was the Latvian ambassador to Moscow during the early 1990s -- admitted to RFE/RL that he authorized the renting of space at a former hotel on the embassy grounds around the time that the Soviet Union collapsed.

"When I took over the Latvian mission, its financial situation was worse than catastrophic. Those revenues [from the former hotel] were quite substantial. It was useful money for us. We could buy cars for the embassy. We could buy computers, washing machines. This money didn't come from Riga, from the state budget. We spent money from the income that we received from renting those premises. We were able to pay for the operations of the consular department from non-budgetary sources."

Aleksandrs Kirsteins, a parliamentarian who supports Latvia's governing coalition, says that the practice of renting space at an embassy compound to any commercial operation is clearly prohibited by the Vienna Convention -- the international treaty that also establishes immunity for diplomats. Kirsteins told RFE/RL:

"I'm surprised that we have to discuss this issue again today because back in 1997 a group of parliamentarians wrote a letter to the foreign minister asking for a list of the businesses operating from the premises of the Latvian Embassy in Moscow -- contrary to the provisions of the Vienna Convention. At that time, they assured us that this practice would be stopped immediately because this is an obvious violation of the convention."

Sheetal Radia is a senior economist and Russian specialist at the London offices of Standard and Poor's Money Market Services. He says it is highly unusual for an embassy to rent out space at its compound to any firm -- regardless of whether or not it has a non-profit status. Radia told our correspondent:

"I don't think embassies actually would want to rent out their space. I would consider any embassy in a foreign country as being the property of the country the embassy represents. For example, the Latvian Embassy should be considered Latvian territory."

But Radia said that -- given the enormous amount of Russian capital flight and tax evasion -- he is not surprised to hear allegations of illegal business activities at embassies in Moscow. He explained:

"As regards it being used for business purposes, that sounds very unusual to me. I wouldn't see what advantage there would be in terms of doing that on a general basis. But in Russia it's one of those things, given the amount of capital flight that you're seeing, or have been seeing. If you're looking at two-and-a-half million dollars a day [alleged to have moved through firms at the Latvian Embassy], that works out to nearly $900 million a year."

Radia also said he understands why Moscow tax officials would be eager to stop the practice -- particularly if Russian estimates of capital flight through the embassy compound are accurate. Depending on how long the practice may have gone on, Radia estimates the Russian state budget could have lost tax revenues from billions of dollars in business profits.

On the Latvian side, Foreign Ministry Inspector-General Vilcans says that he does not believe the Russian allegations are part of a more general political or economic attack on Riga. Vilcans says he sees the Russian investigation as standard practice, not any kind of provocation.

XS
SM
MD
LG