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Aliyev's Azerbaijani Empire Grows, As Daughter Joins The Game

The daughters of Azerbaijani President Ilham Aliyev: Arzu (left) and Leyla in Baku last month

The daughters of Azerbaijani President Ilham Aliyev: Arzu (left) and Leyla in Baku last month

BAKU -- On the drive between Baku's international airport and the capital center, travelers are met by a brigade of sleek roadside signs advertising a company called SW Holding.

But as innocuous as the posters may appear, they represent a company that enjoys a near-complete monopoly over every aspect of airline service.

Mid-flight meals? Served by Sky Catering, which is owned by SW Holding.

Taxi service? Run by Airport Gate, also owned by SW Holding.

Technical upkeep of the national carrier's planes and helicopters? Silkway Technics. It -- and multiple other companies controlling everything from traveler assistance to ticket sales to duty-free stores -- are all owned by SW Holding.

The holding company is so expansive it even includes its own Silk Way Bank. According to an investigation by RFE/RL's Azerbaijani Service using documents obtained by the State Committee on Financial Securities, the bank's owners include two women with close ties to the country's leadership. One is Zarifa Hamzayeva, the wife of the president of Azerbaijan's AZAL state airline company. And the other is Arzu Aliyeva, the 21-year-old daughter of the country's president, Ilham Aliyev. (The remaining owner and current majority stakeholder is Silkway Airlines LLC, which is registered abroad.)

Azerbaijani President Ilham Aliyev
The rise of SW Holding, which has seamlessly absorbed many of AZAL's former businesses, has raised questions about dubious privatization practices in Aliyev's Azerbaijan. It also serves to underscore how the political elite continues to use close friends and family members to preserve its hold on the country's most valuable assets -- despite Azerbaijani laws that list nepotism by state officials as an offense punishable by up to 12 years in jail.

The Kids Are Alright

Ilham Aliyev likes to keep things in the family. It's a trend started by his father, Heydar, who ruled the country for 30 years before effectively handing the reins to his son before dying of a heart condition in 2003. Aliyev's wife, Mehriban Aliyeva, is a parliament deputy and a prominent political figure in her own right.

According to a report in "The Washington Post," the couple's preteen son, Heydar, last year became the legal owner of nine luxury mansions in Dubai purchased for some $44 million. Their daughters, Arzu and Leyla, also have Dubai property registered under the names. In total, the children's property holdings are estimated at $75 million.

As president, Aliyev earns an official salary of close to $230,000 a year. But Aliyev, who prior to office served as vice president of SOCAR, Azerbaijan's state oil company, has kept a tight grip on the resources of his oil-rich country, and his holdings are believed to be in the tens of millions of dollars. Neither he nor his wife have declared their net worth, in defiance of Azerbaijani law.

The law also prohibits public officials from owning businesses. Family members, however, face no such restriction. It is unclear where Arzu Aliyeva -- who until now was best known for her role in an Azerbaijani tourism ad aired on CNN -- may have acquired the estimated 6.4 million manats ($7.8 million) she used to acquire her initial stake of 29.08 percent -- or how she would pull together the additional 4.5 million manats that she and Hamzayeva would both need to achieve matching blocking stakes.

WATCH: A promotional video for Azerbaijan features Arzu Aliyeva:

Hamzayeva is the owner of Gazelly, a successful cosmetics business, but experts say it is unlikely her profits are large enough to allow multimillion-dollar bank investments.

In an interview with RFE/RL, presidential press secretary Azer Gasimov confirmed that Arzu Aliyeva was one of the owners of the Silk Way Bank. As an Azerbaijani citizen who had reached the age of majority, Aliyeva was fully within her rights to establish her own business, he said.

Dodgy Privatization

The rise of SW Holding and Silk Way Bank have raised questions about the privatization of AZAL, the state airline company, including its holdings, like AZAL Bank. The privatization process was launched in 2003 under a plan drafted by Azerbaijan's Ministry of Economic Development.

According to state law, the entire process was meant to be conducted by the State Committee on Privatization of State Property. But Gulu Khalilov, the committee's spokesman, told RFE/RL he had no information on who privatized AZAL Bank.

Anar Khanbeyli, a financial expert with Azerbaijan's Turan news agency, says the process was dodgy from the start.

"Normally, the state's share should be privatized through the State Committee on Privatizing State Property. And the privatization of the state's share in the bank was supposed to be conducted by the same committee," Khanbeyli says. "They're supposed to make an announcement, accept bids, announce conditions for participating in the tender, and then announce a winner. None of these procedures was followed. They bypassed them completely when they privatized the state's share."

Million-Dollar Contracts

In the meantime, SW Holding has slowly but steadily acquired nearly all of AZAL's former companies, including the insurance firm AZAL Sigorta, which is now co-owned by SW Holding and the two daughters of Jahangir Asgarov, the president of AZAL and the husband of Zarifa Hamzayeva, the current co-owner of Silk Way Bank.

The logo for Azerbaijan's AZAL state airline
SW Holdings has also been the sole contractor on a number of high-profile AZAL projects, including airport-construction deals in Lankaran, Ganja, and Zagatala worth a total of $150 million.

Neither side is eager to clarify the connection between the two entities. SW Holding referred an RFE/RL request for information to the AZAL press services, which responded that SW Holding was a private company and should be able to answer questions on its own.

Khanbeyli says all the parties supervising the AZAL privatization were negligent, from the privatization committee to the Central Bank, the Tax Ministry, and AZAL itself.

"AZAL was supposed to cry foul when it was deprived of its bank," he says. "I guess they didn't because the shareholders are the AZAL president's wife and the daughter of the president of the country."

This is not the first case where the head of state-run agencies have used close relatives to privatize the most profitable parts of their businesses. RFE/RL has previously reported on ZGAN Holding -- a private company run by Anar Mammadov, the son of Transport Minister Ziya Mammadov -- which was awarded several multimillion-dollar construction contracts with the ministry after a murky bidding process.

Questions have also been raised about Tale and Nijat Heydarov, the sons of Kemaladdin Heydarov, the current minister for emergency situations and the former head of the state customs committee. The Heydarov brothers are the owners of United Enterprises International, a group of companies engaging in everything from caviar sales to the ownership of the Gabala soccer club, which is peppered with foreign players recruited from abroad.

But their father, like Ilham Aliyev, has repeatedly refused to report his net worth, and the source of the Heydarovs' wealth has never been clarified.

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