BELGRADE -- Against the backdrop of Beijing’s efforts to build influence in Serbia, the Chinese technology giant Huawei signed secret deals with people close to the country’s state-owned telecommunications company to allegedly win contracts, leaked documents show.
The first of those Serbian contracts was signed in 2007, the last one in January 2014, and they coincide with a period when Huawei was setting up its early business links in Serbia until the Chinese company became one of state-owned Telekom Srbija’s most important partners -- inking a $174 million (150 million euros) deal in 2016 to upgrade the country’s telecommunications infrastructure.
The shadowy payments made through offshore companies were revealed on October 25 as part of the Pandora Papers, a leak of nearly 12 million documents from 14 offshore service providers that were procured by the International Consortium of Investigative Journalists and reported by the Organized Crime and Corruption Reporting Project (OCCRP) and the Serbian-based Crime and Corruption Investigation Network (KRIK).
"I think this is the first time that we have discovered a system that shows how a large Chinese company operates in Serbia," Vesna Radojevic, a journalist with KRIK and one of the authors of the investigation, told RFE/RL.
The documents show secret offshore payments made to Igor Jecl, a former executive for Telekom Srbija, worth $1.4 million in contracts, loans, and consulting fees, as well as an apartment from an offshore company that was given by Huawei for “consultancy,” which financial experts told OCCRP “raises red flags for corruption.”
The Pandora Papers leak also shows that at least $1.16 million (1 million euros) went into offshore companies owned by Jecl and Milorad Ignjacevic, a prominent Serbian lawyer who had business ties to Telekom Srbija.
If you have consulting jobs from Serbia, then what's the problem with doing business from Serbia? Why would you have to hide in the British Virgin Islands or Panama?"-- Journalist Vesna Radojevic
According to the documents, Jecl was asked to assist Huawei in obtaining approvals and licenses, and “invite the customer (Telekom Srbija) to make payments to Huawei in a timely and prompt manner.”
Vuk Vuksanovic, a researcher at the Belgrade Center for Security Policy, told RFE/RL that while corruption in the Balkans is not unique to Chinese firms, “this episode shows that corrupt practices are one of the reasons why local elites are frequently receptive to Chinese projects.”
Huawei, Pandora Leak In Serbia
Although the OCCRP and KRIK report did not uncover explicit evidence of impropriety, analysts told RFE/RL that the offshore network and leaked documents offer insight into how Chinese companies gain influence in the Balkan nation through potentially corrupt business and political networks.
Stefan Vladisavljev, an analyst at the Belgrade Fund for Political Excellence, told RFE/RL that while a great deal of attention has been paid to Chinese activities and investments in Serbia, this case represents a rare example of evidence showing how influence is won.
“Chinese projects in Serbia have often faced questions because of a lack of transparency and not following procedures that would be in line with the competitive rules of the open market,” Vladisavljev said. “This is a clear sign that those concerns have not been without reason.”
In response to the implications of the Pandora Papers leak, a Telekom Srbija spokesperson told RFE/RL that it would take "all necessary actions" regarding the allegations made against it in connection to Huawei.
"Telekom Srbija operates in accordance with the law and according to the highest corporate standards. In this regard, we will take all necessary legal actions in cooperation with the competent authorities as soon as possible," the spokesperson said.
In Serbia -- where Beijing enjoys a close relationship with President Aleksandar Vucic and has been steadily deepening its ties over the last two decades -- growing cooperation with Chinese companies continues unabated.
Vucic has cemented relations with Beijing during his tenure, cooperating on infrastructure, tourism, and technology projects that have brought in more than $10 billion in foreign direct investment since 2005. Serbia is part of China's Belt and Road Initiative and one of the main cheerleaders of building strong ties with Beijing across Central and Eastern Europe.
Huawei is a giant of the global tech industry. While a U.S.-led sanctions and diplomatic campaign has recently cut into its market share, the Chinese firm is still the world's largest provider of telecommunications equipment and a leader in next-generation 5G technology.
The United States and other countries claim Huawei threatens their national security, saying the company is beholden to the Chinese government and could be used for espionage. Huawei has denied those accusations.
In Serbia, Huawei’s mobile phones are widely available with all operators in the country and the firm is involved in developing the country’s 5G networks and surveillance systems as part of a Chinese-backed “smart city” initiative.
In response to questions from RFE/RL, a statement provided from Huawei said the company “has always respected international and local laws, as well as the business ethics of the countries in which it operates.” It added that “all employees in the company must comply with local laws and regulations.”
When asked about Jecl and the contracts with Huawei connected to offshore entities, the Chinese company told RFE/RL that “they do not have such information in their files.”
Jecl's whereabouts are unknown. Repeated attempts by OCCRP to reach him for comment -- both directly and through businesses connected to his name -- received no reply. Records show he no longer appears to maintain an address in Serbia and his company registered in the British Virgin Islands has been closed. Attempts by RFE/RL to reach Jecl were also unsuccessful.
Beijing, Belgrade, And Unanswered Questions
The payments revealed by the OCCRP and KRIK report overlap with Huawei’s global rise and push into the European marketplace.
According to documents, one offshore company that was set up was supposed to work on behalf of the Chinese firm in both Serbia and Montenegro. Jecl's stated role was to work as a type of lobbyist to foster connections to the business and political elite and to "establish good relations with telecommunication operators in Serbia and Montenegro, but also with government representatives."
Additionally, Huawei was supposed to receive assistance in obtaining the necessary permits to operate in Serbia and help in fulfilling "the obligations from the contract that Huawei and [the telecommunications operator] will sign.”
“It’s important that it all went offshore," Radojevic said. "If you have consulting jobs from Serbia, then what's the problem with doing business from Serbia? Why would you have to hide in the British Virgin Islands or Panama? For Huawei and for the people we reported on, the other question is whether there were actually any consulting jobs at all and what these signed agreements actually mean.”
While the last leaked contract dates to early 2014, Jecl continued to file invoices through offshore companies into 2016.
Radojevic says this connects with Huawei’s growth in Serbia, having signed a contract to develop Internet television for Telekom Srbija in 2014 and a larger deal to upgrade the company’s telecom infrastructure in 2016.
"The last invoices are from 2016, and that is why we connected it with this great expansion of Huawei in Serbia from 2014 and 2016, when they got big deals,” said Radojevic. “It is up to Telekom Srbija itself, but also the Serbian prosecutor's office, to investigate what actually happened and what is behind these agreements.”
