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Corruption Watch: November 21, 2006

November 21, 2006, Volume 6, Number 7
By Ahto Lobjakas

From the minute you arrive in Baku, you can smell the oil. In a glass jar it looks nothing like the black viscous substance one would expect, but more like petrol. Experts praise Azerbaijani oil as among the best in the world.

Overheat Concerns

But the oil does have a dark side. According to a recent report by the European Bank of Reconstruction and Development (EBRD), Azerbaijan is one of the world's fastest-growing economies with over 26 percent growth.

However, local officials admit the economy could "overheat." Azerbaijan remains an economy in transition whose long-term future can only be secured by means of a viable non-oil sector. And the question many are asking is how, in a country where corruption is so rampant, is that money going to be spent?

Clare Bebbington, a spokeswoman in Baku for multinational oil company British Petroleum (BP), which is Azerbaijan's main partner in tapping the oil wealth, describes managing this wealth as an "enormous opportunity," but also an enormous challenge.

"In 2006, the government of Azerbaijan will receive around $3 billion in oil revenues from our projects. At $60 a barrel, the full-cost revenues are actually around $230 billion. That is an unprecedented shock for any economy, it's also many, many times the current levels of GDP," Bebbington says. "Now, it's impossible to predict the oil price, what the oil price will be in the future and BP doesn't make a prediction. But what we have tried to do is to be as open as possible in terms of making some sort of projection about the likely level of receipts so that people can begin to understand what will happen over the next decades."

Apart from oil, Azerbaijan is also betting on gas. The Shah Deniz gas field in the Caspian Sea southeast of Baku is estimated to contain some 50 to 100 billion cubic meters of gas.


One of Azerbaijan's potential pitfalls is lack of economic diversification. Mikayel Jabbarov, Azerbaijan's deputy economic development minister, says his government is aware of the dangers.

"We're planning well enough against any severe shocks. Our non-oil economy is growing very fast, in fact last year, data which analyses non-oil economic development in Azerbaijan for the years 1999-2005 indicates that the non-oil sector in Azerbaijan on the average has grown faster than in CIS [Commonwealth of Independent States] countries, in EBRD countries, and also in Black Sea and Caspian Sea countries," Jabbarov says.

The government has set up what Jabbarov calls a "hydrocarbon fund" of $1.5 billion to stabilize the economy. In March, a state-run investment company with an initial budget of $100 million was created to give loans to small- and medium-sized companies working outside the oil industry.

However, within Azerbaijan there is much criticism of the government's oil fund. Its critics have said there is little to no oversight of the body. And corruption is still cancerous in Azerbaijan. The country languishes near the bottom of the annual corruption perceptions index drawn up by Transparency International.

Energy Hub

Jabbarov says that Baku also has clear ambitions to become a transit hub for Central Asian oil and gas.

"What we would like certainly to see, is the continued increase of transit, [the] continued increase in shipping, in transportation of hydrocarbons, and in other products as well," Jabbarov says.

Oil tankers already cross the Caspian Sea to feed the Baku-Tbilisi-Ceyhan pipeline to Turkey. Hopes for a trans-Caspian gas pipeline to supply Turkey and the EU further down the line are receding, however, despite Baku's lobbying.

Energy experts in Baku say Western multinationals do not believe there are sufficient gas resources available cheaply enough in either Turkmenistan and Kazakhstan to justify such an investment. This augurs well for Russia's drive to dominate the transit market from Central Asia.

Problems With Democracy

Azerbaijan's democracy is still weak, with restrictions on media and dubious electoral practices. Recently, an Azerbaijani court gave police the right to detain two journalists for two months for publishing an article allegedly insulting Islam.

And on November 16, Azerbaijani police broke up an opposition rally demanding an end to pressure against independent media. Critics say the EU has turned a blind eye to Azerbaijan's nastier democratic practices largely because it is interested in Azerbaijani oil.

Frozen Conflict

Then there is the unresolved issue of Nagorno-Karabakh, a region inside the internationally recognized borders of Azerbaijan, but occupied by Armenian troops together with seven neighboring districts since a 1994 cease-fire ended fighting.

The war with Armenia has bequeathed Azerbaijan more than 800,000 refugees, most living in bleak conditions in and around Baku.

Azerbaijan's government says it wants the conflict resolved by peaceful means, but has not ruled out war. According to Deputy Minister Jabbarov, the defense budget accounts for 15 percent of all government spending in 2006, and exceeds $1 billion.

Compared to Azerbaijan's neighbors, that's a huge sum that's likely to be sustained. But in the military, as in every other sector of public life, a problem remains: where exactly is that money going?

Sometimes the answer to that question is visibly evident. On the outskirts of Baku, palatial villas perch on hillsides overlooking the Caspian Sea. Fancy restaurants are packed with foreign and local oil executives.

But there is another Azerbaijan of rural poverty and refugee camps, of post-apocalyptic vistas of oil-polluted wastelands -- an omen perhaps of what could happen when the oil runs out. (Originally published on November 21.)

By Bill Samii

Antonio Maria Costa, executive director of the United Nations Office on Drugs and Crime (UNODC), announced a $22 million contribution to Iran during his November 7-9 visit to that country. Iran is a global leader in drug seizures, and senior officials frequently decry what they see as insufficient international support and a lack of recognition of their counternarcotics efforts.

Iran's president has called for greater attention to the treatment of addicts, but bureaucratic competition among Iran's numerous drug-control agencies could hinder that country's fight against drugs. Iranian officials reportedly used Costa's visit to urge UN action to counter increased cultivation of opium poppies in neighboring Afghanistan, according to official Iranian Mashhad radio's November 9 Dari-language newscast.

A number of them complained that Iran's drug-fighting effort gets too little help from the rest of the world.

The leader of Iran's judiciary, Mahmud Hashemi-Shahrudi, called his country "the main path for drug transit from Afghanistan to Europe," Mehr News Agency reported, citing their meeting on November 7. He said international bodies fail to appreciate Iran's role in stopping the drugs and warned that if international assistance is not forthcoming, Tehran will have to reconsider its interdiction efforts.

The same day, a deputy speaker of parliament, Mohammad Reza Bahonar, told Costa that UN financial assistance to Iran's antidrug program is negligible, IRNA reported.

President Mahmud Ahmadinejad claimed in his discussion with Costa on November 9 that "[certain] arrogant powers are supporting the drugs trafficking and distribution gangs with the intention of harming independent states and nations," IRNA reported.

Sealing The Border

Costa arrived in the southeastern Sistan va Baluchistan Province that borders Pakistan on November 8. After meeting with the Iranian Drug Control Headquarters secretary-general, Fada Hussein Maliki, Costa announced the UN's $22 million contribution to help Iran combat drugs, IRNA reported. He said the funds are intended to strengthen the eastern border against drug traffickers and for intelligence activities by police in that part of the country.

Costa's choice of venues for his announcement was significant. Sistan va Baluchistan Province is bedeviled by smugglers and insurgents. Costa met with Maliki at the Rasul-i Akram base in Zahedan, which was created in April to coordinate the efforts of police, military, and other security agencies.

The base's deputy commander, Islamic Revolution Guards Corps' Brigadier Qassem Rezai, said in early August that stopping drug smugglers is one of the facility's main activities.

Rezai noted that the base tracks developments in eastern parts of Hormozgan Province, in Kerman Province, in South Khorasan Province, and in Sistan va Baluchistan Province, according to Kerman's "Rudbar Zamin" weekly on August 9. Rezai said steps related to the drug-interdiction effort include blocking a 70-kilometer stretch of the border with Pakistan with a trench that is five meters wide and four meters deep, with electronic monitoring, and with armed patrols. Rezai said forward operating bases have been established in the region, paramilitary (Basij) camps are being set up, and friendly tribes will be used. He stressed that authorities "have strengthened the intelligence system of the region."

Iran's southeast was not always the destination of choice for smugglers. But trafficking routes for drugs originating in Afghanistan have changed. The traditional route was from southern Khorasan to Isfahan, Kerman, Tabas, or Yazd, then up to West Azerbaijan Province into Turkey. This pattern changed with the creation of the Mohammad Rasulallah Central Headquarters in eastern Iran in the early 1990s and affiliated operations by the IRGC. Creation of a national police force in 1993-94 and establishment of the Mersad military base in the southeastern Kerman Province effectively ended use of the traditional route.

The alternatives for traffickers moving drugs from Afghanistan are a northern route through Central Asia to Russia and then the Balkans, or a southern route from Pakistan to Sistan va Baluchistan Province and then to the Sea of Oman and the Persian Gulf.

International Cooperation

Despite Iranian officials' dissatisfaction with the international community's support, the country participates in a number of multilateral counternarcotics programs. During his visit to Iran, UNODC head Costa met with envoys from the mostly Western Mini-Dublin Group.

The Dublin Group comprises the European Union, Australia, Canada, Japan, Norway, and the United States. It is an informal entity that meets to exchange views on counternarcotics, make recommendations on dealing with the problem, and coordinate cooperation between members and partner countries.

Drug control was also discussed at a late-October meeting in Tehran of interior ministers from Economic Cooperation Organization member states (Afghanistan, Azerbaijan, Iran, Kazakhstan, Kyrgyzstan, Pakistan, Tajikistan, Turkmenistan, and Uzbekistan).

Bilateral initiatives are important to Iran as well. In Damascus on November 3, the Iranian police chief offered advice to a Syrian deputy interior minister on using sniffer dogs and computer systems to combat drugs, IRNA reported. The same day in Tehran, the head of Iran's Drug Control Headquarters told Azerbaijan's visiting interior minister, Ramil Yusbov, that Iran is ready to share its experience, according to IRNA.

Camps For Addicts

Interdiction is the cornerstone of Iranian activities. But there appears to be a new emphasis on treatment of addicts. Drug-control chief Maliki has announced on October 26 the government's allocation of roughly $14 million to treat addiction, ILNA reported. He noted the creation of drug-information centers and treatment centers in the provinces, calling it the first time that provinces have dealt individually with those issues.

A total of 17 camps are being established to cure the addicts and methadone programs will be employed, according to the head of the Prisons Organization's health department, Parviz Afshar, quoted by "Hemayat" on August 17.

Addiction is illegal in Iran, and thousands of addicts are imprisoned. The head of prisons in Gilan Province says that one in three of the 4,500 prisoners there is guilty of addiction, trafficking, or related crimes, according to a quote in "Gilan-i Imruz" on August 7. He acknowledged that addicts are resourceful and can get drugs in prison.

A recent government report states that 56 percent of Iranians infected with HIV acquired it from sharing needles when using drugs in prison. The report goes on to say that nearly two-thirds of all HIV cases are drug addicts, "Aftab-i Yazd" reported on October 4.

Crystal And Ecstasy

The authorities in Iran must also contend with new forms of drugs entering the country. Lately, there is much focus on a highly concentrated -- and addictive -- form of heroin referred to as "crystal."

Counternarcotics experts believe the substance is smoked, and it is highly addictive because it is so concentrated -- 15 to 20 kilograms of opium are required for 1 kilogram of crystal, while the normal opium-to-heroin ratio tends to be 10:1.

Police in the northern Semnan Province said in early October that they had seized 132 kilograms of crystal in the first six months of the Iranian year, Fars News Agency reported. Seizures of crystal were reported in northeastern Khorasan Province in October, in Tehran in September, and in Kerman Province in August.

Other substances are abused as well, including methamphetamine and club drugs like ecstasy. Major Shahnam Rezai, a public affairs official with the West Azerbaijan Province police, said on October 22 that 400,000 hallucinogenic tablets were seized in the last month, Urumiyeh television reported.

Too Many Agencies?

For more than two decades, the Iranian government concentrated on interdiction as the preferred way to deal with drug abuse. Tehran insisted it was a supply-driven problem. Despite mounting anecdotal evidence, it dismissed suggestions that unemployment and a lack of constructive social outlets might be behind the demand for drugs.

It was only in the final years of President Mohammad Khatami's administration (1997-2005) that a greater proportion of the drug-fighting budget was earmarked for demand reduction.

The creation of new addiction-treatment camps suggests that the Ahmadinejad administration -- after some deliberation -- has decided to continue on that path.

This emphasis on the demand side could help curb Iran's drug problem, as might the United Nations' recently announced financial contribution.

But competition within the Iranian counternarcotics community could hinder success. A deputy national police chief, Colonel Seyyed Hassan Batouli, said recently that 13 organizations are involved in the drug fight, "Mardom Salari" reported on October 5. The state prosecutor-general, Qorban Ali Dori-Najafabadi, noted that each province is conducting its own campaign, Hemayat" reported on October 2.

Resolving those bureaucratic issues could be as important as any funding from the United Nations. But it is unclear whether UNODC chief Costa addressed these problems during his recent trip to Iran. (Originally published on November 13.)

By Golnaz Esfandiari

A judge in Argentina has issued international arrest warrants for former Iranian President Ali-Akbar Hashemi-Rafsanjani and eight other onetime officials over a deadly bombing on a Jewish community center in Buenos Aires in 1994 that killed 85 people and injured hundreds more.

The arrest order came two weeks after Argentinian prosecutors formally charged a number of former Iranian officials, including Hashemi-Rafsanjani, for their alleged roles in the bombing. Prosecutors say Hashemi-Rafsanjani and other senior officials commissioned the attack. They say that while it was carried out by the Lebanese Hizballah militia, the decision to target the Jewish center came from the "highest authorities" within the Iranian government.

Argentinian federal Judge Rodolfo Canicoba Corral issued the arrest order for what he called "crimes against humanity" and asked Interpol to arrest the suspects. "We activate the arrest warrant, on the one hand, with a request to Interpol requesting the capture of certain people -- and with an international exhortation that would be transmitted by the chancellery at the right time, soliciting that they proceed with the detention," Canicoba Corral said.

Hashemi-Rafsanjani, who served two presidential terms that spanned much of the 1990s (1989-97), currently heads the Expediency Council, an appointed body that among other things mediates between parliament and the Guardians Council.

Judge Canicoba Corral has also requested the arrest of a former minister of intelligence and security, Ali-Akbar Fallahian-Khuzestani, and of foreign affairs, Ali-Akbar Velayati, as well as onetime commander of the Islamic Revolution Guards Corps Mohsen Rezai and other former officials.

Tehran Shrugs Off Charges

Tehran has repeatedly denied any involvement in the deadliest terrorist attack ever on Argentinian soil. On November 9, Iran's charge d'affaires in Argentina, Mohsen Baharvand, dismissed the investigation as politically motivated. "Because of the shortcomings of Argentina to find the real perpetrators of this act and as a result of the seeds of 'Iranophobia' and 'Islamophobia' disseminated throughout the world by the United States and Israel, again, this [Argentinian] judicial system has accused Iran and Hizballah [of] something that has been done 12 years ago," Baharvand said.

Baharvand also said Iran will urge Interpol not to act on the warrants. But observer Dr. Abdolkarim Lahidji, deputy head of the Paris-based International Federation of Human Rights, said that Interpol acts based on judicial orders and not political appeals.

"Interpol cannot go to Iran and arrest them," Lahidji said. "But if any of these officials whose names are on the arrest warrant are seen in a country and the police in that country have a copy of the arrest order, then they can be arrested -- then it would be up to that country to extradite the arrested person to Argentine for questioning."

Justice Served?

The arrest order might have largely symbolic significance for the victims of the attack and their relatives, since it is highly unlikely that Tehran would place those former officials at risk of arrest.

Lahidji told RFE/RL that the arrest warrant suggests a body of evidence implicating those former officials. "If there were no such evidence, then an arrest order would not have been issued," Lahidji said. "Therefore [the arrest order] demonstrates that, despite what Iranian officials have said, the dossier is not empty."

No one has been convicted in connection with the July 18, 1994, bombing, which reduced the seven-story Argentine-Israeli Mutual Association (AMIA) to rubble. Local Jewish groups and some officials have long accused Iran and the Lebanese Hizballah of being behind the attack.

Officials Implicated

Iranian officials have been targeted by international authorities before over alleged roles in attacks in Europe on opposition members. In 1997, a German court issued a warrant for former Iranian Intelligence and Security Minister Ali Fallahian in connection with the 1992 murder of Iranian Kurdish opposition leaders at the Mykonos restaurant in Berlin. The court said the so-called Mykonos murders were carried out with the knowledge of Iran's supreme leader, Ayatollah Ali Khamenei, and former President Hashemi-Rafsanjani. Fallahian is among those targeted in the Argentinian warrants.

Lahidji noted that the warrants will limit travel options open to Iranian officials. "Since the issuing of the court order in the case known as 'Mykonos,' senior Iranian officials have not traveled to European countries, and, as far as I can remember, Rafsanjani has had several trips to Saudi Arabia and maybe to Syria," Lahidji said. "So merely the fact that the traveling [options] for the officials of a country are limited is like sanctions -- like the measures against senior Iranian officials that could be put in place regarding Iran's nuclear case."

In 2003, Iran's former ambassador to Buenos Aires, Hadi Soleimanpour, was jailed in London at Argentina's request but later freed for lack of evidence.

Prosecutors allege that Argentina's decision not to provide Iran with nuclear technology was the motive behind the 1994 bombing. Tehran has described the charges as a "Zionist plot" aimed at diverting attention from crimes it says Israel has committed against women and children in Palestine. (Originally published on November 10.)