How Bornbayev Deal Could Go Awry

Dariga Nazarbayeva's former in-law gave a company to the state. Its value is estimated at 35.4 billion tenge. The assets of the Phystech II enterprise include the Severny Karazhanbas oil field. The transfer of 100% of the shares took place after Kairat Boranbayev's sentencing. Orda.kz has learned the opinion of experts and why this deal may bring trouble in the future

Phystech II, whose shares are listed on the Kazakhstan Stock Exchange, published data on changes in the list of owners on October 3. Instead of KazTurboRemont Holding Company LLP, KazStroyProekt-A (99.28%) and Kairat Boranbayev (0.72%) became the new shareholders. They did not own the asset for long. On October 4, they held a meeting of shareholders or the board of directors, where they decided to give 100% of the shares to the state.

Journalists Should Have Been Invited

Lawyer Sergey Utkin told an Orda.kz correspondent that the procedure for transferring Boranbayev's company to the state should have been carried out openly in the presence of the media, a notary, and a lawyer.

In order to comply with this principle, the authorities should ensure maximum transparency when making a transaction: invite all Kairat Boranbayev's business partners, a notary, a lawyer, and provide Boranbayev with the opportunity to communicate with them alone to determine freedom of expression. It would also not hurt to invite journalists, in whose presence the transaction would be made, and then give Boranbayev and his partners the opportunity to answer all media questions, the lawyer explained.

Sergey Utkin

Utkin suggests that if Kairat Boranbayev suddenly wants to return his assets, the government of Kazakhstan will file claims on the issue of their acquisition.

There is, of course, a risk of future lawsuits. Although on the other hand, it is clear to everyone that Mr. Boranbayev owes most of his assets solely to his proximity to Nazarbayev's family, and not to his personal qualities as a businessman. Therefore, if such a process takes place in the future, then I think the state will also present to him a lot of claims regarding the fairness of the acquisition of these assets. In general, this is a logical result of the economy built by Nursultan Nazarbayev, where the right of ownership is not actually protected by the Constitution at all, but is guaranteed only by good relations with the authorities, Sergei Utkin summed up.

Same Mistakes

According to financier Rasul Rysmambetov, the High Court of London, for example, could perceive the gratuitous transfer to the state as raiding.

"It is best to transfer such assets, and there was also an oil field in Phystech II, not to the state in the person of the Committee on privatization and state property of the Ministry of Finance, but to sell them at auction. In general, a donation contract, when a person is in custody, is a dubious thing and not all lawyers will approve of it. The fact is that such a donation from a cell, can be perceived by a London court as raiding in the style of the case /claim of Anatoly Stati. Yes, Boranbayev is not a foreign citizen, but a knowledgeable lawyer can find some foreign money in investments for Phystech II", Rysmambetov told an Orda.kz correspondent.

The financier believes that Kazakhstan is creating future problems for itself. The question also arises, who was attracted as a consultant for the execution of this transaction. 

I don't know which English company advised the Ministry of Justice and the Prosecutor General's Office on this issue, but I hope they are not the ones who earned millions on a lawsuit against the state. It has been repeatedly said that foreign lawyers who advised the government on this case also financially "helped" crucial people in Kazakhstan. For such guys who charge 3-5 thousand dollars per hour of work, any claim for 2-3 years is a source of money. There is a high probability that we are laying mines for the future against ourselves. And if Phystech II has a foreign beneficiary for at least $2-3 million, or this Phystech II owes money to someone abroad, the lawsuits will definitely "go off". Let me remind you that the case of Stati began to bring trouble only a few years after the asset was taken away from him, concluded Rysmambetov

Rasul Rysmambetov/ photo from personal Facebook page

Economist Aidarkhan Kusainov believes that the term "greenmail" is more suitable for this transaction – something resembling corporate blackmail. Subsequently, there is a possibility that the affected party will suddenly appear and will defend the right to invalidate the transaction in court.

This is not the first such "gift to the country" and not the first donor. It is surprising that the country accepts such gifts with all the evidence of an "ambush". I disagree with the author only on one thing: it is not a matter of consultants, but of the state's logic. A "donation" from a pre-trial detention center is obviously not normal. Such mines can work without the participants of the transaction and even against their will, Kusainov said. 

Aidarkhan Kusainov / photo from his personal Facebook page

In 1999, Anatoly Stati's company Tristan Oil received a license to develop Borankol, Tolkyn and Tabyl block deposits in Kazakhstan. Nine years later, when the organization began to generate income, the Moldovan businessman began to have problems. Employees from various departments suddenly began to come to the Tristan Oil office on a regular basis with inspections. And then the company was issued fines and charges of non-payment of taxes. In 2010, Anatoly Stati's assets were nationalized. In 2013, the arbitration court in Stockholm sided with the businessman, but the foreign investor has not received compensation yet.

On June 14, the Supreme Court of Sweden shot down Kazakhstan and the National Bank of the Republic's appeal. Thanks to this, Anatoly and Gabriel Stati will receive 75 million out of 560 million dollars. In September, the Supreme Court of the Netherlands released the shares of the Samruk-Kazyna fund in KMG Kashagan in the amount of $4 billion.

Original Author: Maria Gorbokonenko

DISCLAIMER: This is a translated piece. The text has been edited, the content is the same. Please refer to the original piece in Russian for accuracy.