Risky Business
Risky Business
Risky Business
WHO BENEFITS
FROM THE
SOUTHERN GAS
CORRIDOR?
A Bankwatch Report
RISKY BUSINESS
WHO BENEFITS
FROM THE
SOUTHERN GAS
CORRIDOR?
AUTHORS
Lorenzo Bagnoli
Claudia Ciobanu
Apostolis Fotiadis
G.T.
ACKNOWLEDGEMENTS
Pippa Gallop
Elena Gerebizza
Sven Haertig
David Hoffman
Ido Liven
Anna Roggenbuck
Regine Richter
Xavier Sol
EXECUTIVE SUMMARY
16
30
48
66
CONCLUSIONS
78
REFERENCES
82
slovakia
austria
ukraine
russia
hungary
caspian sea
moldova
slovenia
romania
croatia
bosnia &
herzegovina
georgia
black sea
serbia
montenegro
azerbaijan
armenia
bulgaria
kosovo
macedonia
albania
italy
iran
turkey
greece
iraq
mediterranean sea
syria
cyprus
EXECUTIVE SUMMARY
Executive Summary
The results of our research are startling. We found that many of the
companies contracted to build sections of the pipeline have a history
of corruption, often proven by ocial investigations and convictions.
In Greece, a state committee in charge of competition accused several
of the companies hired to build the pipeline of being members of a cartel
operating in the construction sector for decades, allegedly taking turns in
winning public bids, potentially inating prices and passing on the costs to
the public. In response to the accusations, the European Commission this
year threatened to suspend its funds for Greece pending further investigation
into the activities of the cartel. One CEO of a Greek company contracted
for the project is the subject of a European Arrest Warrant for corruption
and recently paid 1.8 million to Greece in order to escape jail time for tax
evasion and money laundering. He remains on the Lagarde list, a notorious
compilation of 2,000 Greeks with deposits in Switzerland, including
many tax evaders.
In Italy, three of the companies hired to build the pipeline have had
connections to maa groups in the past, according to investigations by
Italian prosecutors. Another company has been repeatedly convicted for
corruption by courts in Italy and abroad and is under investigation for
corruption in several other countries.
In Turkey, the main company responsible for the Turkish section of
the pipeline, the state-owned Botas, has been over time linked to major
corruption schemes. The owner of one of the private companies contracted
to build a section of the pipeline and the chairman of the board of another
were convicted for corruption (at times in connection with the same scandals
involving Botas). Most of the convictions have been reversed by the Turkish
Supreme Court, though some of the evidence remains in the public record.
The records of the companies surveyed give pause to consider what kind
of reality the EU dream of energy security is turning into. Are these
companies able to deliver on such a highly-sensitive project? What risks
is the European Commission taking by supporting a agship energy project
whose construction has been entrusted to companies accused and at times
convicted of corruption, acts which have lead the Commission itself to
threaten suspension of payments to a country in question? If in the past
some of these companies haverepeatedlypaid maa taxes or corrupted
ocials, what kind of mechanisms will the public banks nancing the
pipeline put in place to ensure their biggest ever loans do not get into the
wrong pockets? Can Europeans, in whose name this pipeline is built, accept
that it be constructed by companies that have in the past impoverished state
coers at home or abroad?
10
Executive Summary
I
WHAT IS THE
SOUTHERN GAS
CORRIDOR?
ote
intracom
cooperativa
29 giugno
siemens
technical
olympic
j&p
avax
aegek
terna
aktor
adt
aktor
vinci
corinth
pipeworks
ellaktor
group
viohalco
spiecapag
stasinopoulos
group
elval
tolfa
care
edilperna
sudelettra
nuova
ghizzoni
renco
bonatti
gener 2
sicilsaldo
tap
unaoil
eni
sonatrach
snamprogetti
saipem
saipem do
brasil servis
de petrleo
saipem
contracting
algrie
petrleo
brasileiro
world
bank
adb
eib
tanap
ebrd
aiib
ezgi
insatt
botas
fernas
group
limak
holding
16
The rst gas via the pipeline is planned to arrive in Turkey in 2018 and in the
EU by 2020.7 Work on the separate elements of the pipeline has already started
this year. The pipeline is meant to carry at least 16 billion cubic metres [bcm]
of gas annually, with the possibility of increasing capacity if needed.
The Southern Gas Corridor is one of the so-called clusters of Projects
of Common Interest,8 which the European Commission deems crucial
for completing an integrated and secure European energy market. The
projects on this list benet, among others, from faster and easier permitting
procedures as well as more and quicker access to European public funds
17
( both from EU funds and via EU banks) which should in turn make private
nancing more likely.
With an estimated cost of $45 billion (about 40 billion), the Southern Gas
Corridor is set to receive some of the largest loans in the history of European
public banks.
The European Investment Bank (EIB) is currently assessing a loan of
2 billion, the biggest loan in its history, for the Trans Adriatic Pipeline (TAP),
the western branch of the Southern Gas Corridor starting from the TurkeyGreece border, crossing Albania and nishing in Italy.9 The European Bank
for Reconstruction and Development (EBRD) is set to provide another
1.5 billion for TAP, half a billion from its own money and the rest via a
syndicated loan from private banks that the EBRD is arranging.
TANAP, crossing Turkey, is likely to get loans of 1 billion each from the EIB
and the World Bank,10 and an as yet unspecied amount from the EBRD.11
The EBRD, together with the Asian Development Bank and the Black Sea
Trade and Development Bank, are arranging $1 billion of nancing for the
development of Shah Deniz 2, with the EBRD and ADB each granting loans
of a quarter billion and the remainder to come from a syndicated loan of
private banks arranged by the international public lenders.12
18
19
20
21
THE COMPANIES
TAP AG, the consortium in charge of building TAP, is registered in Baar, Zug
canton, the most secretive tax jurisdiction in Switzerland. According to TAP
AG, its shareholders are major energy companies, but on a closer look,
many of them are limited liability companies whose main activity is energy
trading and whose ultimate beneciaries are not always clear. Shareholders
of TAP AG are Axpo Trading AG (registered in Dietikon, Switzerland), BP gas
marketing Ltd. (registered in Belgium, part of BP Gas marketing Ltd.), Fluxys
Europe B.V. (registered in Rotterdam, The Netherlands), Enagas Internacional
S.L.U. (holding company registered in Madrid), Snam SpA and AzTAP
GmBH (registered in Zug).23
The Southern Gas Corridor Closed Joint Stock Company, controlled by the
Azeri government,24 owns 58% of shares in TANAP, with Turkish state energy
company Botas owning 30% and BP the remaining 12%.25
Beyond the main shareholders of the consortiums, hundreds of other
companies are benetting from the pipeline deal, as contractors to build
segments of the pipeline and other related infrastructure, supply materials,
access roads, or provide nancial services.
METHODOLOGY
Our report focuses on companies contracted by the TAP and TANAP
consortiums to build the two pipelines on the territory of Turkey in the
case of TANAP, and Greece and Italy in the case of TAP.
22
We have chosen to leave aside the known names in the consortiums, like Socar
and BP, not because they are uninteresting but because their proles are better
known or at least more easily accessible. We wanted to look beyond the obvious.
We have chosen to focus instead on the companies contracted at the local
level in Turkey, Greece and Italy. Promoters of the Southern Gas Corridor
boast about the fact that local companies and local labour are used to build
the pipeline system, bringing signicant benets to national economies.26
We wanted to see who those locals are.
Three journalists in each of these countries along the routes of TAP and
TANAP looked into the companies contracted by the consortium to build
the pipelines in their countries. Each conducted interviews and researched
public documents and media articles to check the records of these enterprises.
This paper looks at the main contractors hired directly by the TAP and TANAP
consortiums. These companies usually received contracts for engineering,
procurement and construction (EPC), which means contractors have the
right to subcontract various parts to smaller, local sub-contractors.
This is not an exhaustive study. Researching all the contracted companies
would be an enormous task that is beyond the scope of this paper. But
researching the sub-contractors and their connections to the main contractors
is likely to bring further interesting results, and we can only encourage others
along the route of the pipeline to look into this.The results of our research
were startling. We found that some of the companies selected to build TAP
and TANAP have a history of corruption, proven by ocial investigations
and resulting in convictions.
23
24
II
ote
intracom
siemens
renco
technical
olympic
j&p
avax
aegek
terna
aktor
adt
aktor
vinci
corinth
pipeworks
ellaktor
group
viohalco
spiecapag
stasinopoulos
group
elval
bonatti
tap
eib
ebrd
On 4 March 2016 the TAP consortium awarded two contracts 27 for the
construction of approximately 760km of a cross-country, onshore pipeline
in Greece and Albania. A joint venture of Bonatti S.p.A (Italy) and J&P Avax
S.A. (Greece) won the contract for building two sections of the pipeline in
northern Greeceabout 360km of pipe between Kavala and Ieropigi at
the Greek and Albanian borders. Spiecapag (France) won a deal for another
185km in Greece, between Kipoi (at the Greek-Turkish border) and Kavala,
as well as two 215km long sections in Albania. Spiecapag will also carry
out the pipeline river crossing at the Greek-Turkish border, where TAP
will be connected to TANAP.
On 4 May 2016 TAP awarded 28 another contract to a joint venture of
Renco S.p.A (Italy) and Terna S.A. (Greece) for building the projects
compressors, which refers to one compressor station at Kipoi in Greece,
a compressor station at Fier, in Albania, and a metering station at Billisht
in Albania.
During the second half of 2015 TAP awarded three basic contracts for the
supply of crucial mechanical parts of the pipeline as well as the pipes
themselves. These include:
30
VINCI-SPIECAPAG-ELLAKTOR-AKTOR
According to its website, Spiecapag 32 is a fully-owned subsidiary of Entrepose,33
which in turn belongs to Vinci France,34 a major global player in construction
and infrastructure.
Spiecapag will build its section of the pipeline together with Aktor,35 a member
of the Ellaktor Group,36 a Greek global construction giant active in 22 countries.
Ellaktor is partly owned by the Greek oligarch family Bobolas, which is very
active in various aspects of Greek economic and political life (more on the
Bobolas family below).37
31
32
Three of these companiesEllaktor, J&P Avax and GEK Terna, are among
those responsible for building TAP in Greece.
According to the same draft report of the Competition Committee, Vinci and
Siemens (Vinci subsidiary Spiecapag and Siemens also got deals for TAP) also
occasionally participated in manipulated tenders as part of the cartel. Inside
Story reported that important ndings became available after Technical
Olympic, one of the constructors, cooperated with the Greek authorities,
providing information about how the cartel functioned in exchange for
privileged treatment.42
At the date our own (Bankwatch) study is going to print, the plenary of the
Competition Committee is discussing the draft report, including holding
hearings with heads of companies accused of being members of the cartel.
On 18 September national paper Kathimerini reported that companies may
be oered settlements in exchange for nes.43
The director of the European Commissions DG for Regional Development
took notice of the draft report and, according to a document leaked to
European media,44 warned in June of his intention to suspend further funding
to Greece given that many of the projects that would have been targeted by
the cartel had used EU structural funds. Funding to Greece for 20142020
would be suspended, wrote the director in the leaked letter, printed in full by
New Europe,unless there is assurance on the legality and regularity of the
certied expenditure.
According to the Committee draft report, as reported by Inside Story, most of
the major companies in the Greek construction sector allegedly participated
33
in the cartel, which appears not to have been centrally-managed. The usual
practice appeared to be that one of the companies would oer the best price in
a tender with the agreement of the others, who would then refrain from bidding
or would knowingly oer a worse price. In exchange for being allowed to win
the tender, the winning company would oer guaranteed kickbacks to the
others through a variety of nancial and economic instruments.
Some of the major construction projects allegedly aected by this practice,
according to the Committees draft report, are the Athens metro, the
Thessaloniki-Alexandroupolis road Egnatia Avenue, projects of the
national railway company and the construction of a network of highways
on the Greek mainland.
In early 2001, Greece issued ve tenders for the construction of major
highways in the country. The Committees draft report wrote that the
tenders for these projects have been manipulated and distributed among
the participating construction companies. According to Inside Story, the
Committee is in possession of evidence about the coordination between
companies on how the cartel submitted oers. The head of the cartel would
guarantee to someone withdrawing from a tender participation in another of
the ve projects. Cartel members would have been guaranteed certain market
shares. According to the Competition Committee report, Vinci, Terna, Avax
and Aktor were partners in some of the consortiums at the time.
According to statistics in the Committee report, in 2004, Aktor ATE,
Terna ATE and J&P Avax together had a market share of 60.6% in the Greek
construction sector (Aktor 30.8%, Terna 14.8% and Avax 15%). By 2011, that
total had increased to 81%.
34
35
The construction of the road began in September 2012 after Aktor won
the contract.47 This is a project that was co-nanced by both the EIB and the
EBRD as well as from the EUs Instrument for Pre-Accession Assistance.
As reported by BIRN, the case came to light in March 2014 when Macedonias
opposition Social Democrats alleged that at least 3.5 million from the sum
paid by Macedonia for the construction of the highway had gone missing
through questionable cash withdrawals. The opposition presented what
it claimed were bank documents showing several cash withdrawals of
signicant sums from the bank account of the Skopje branch of AKTOR AD
Greece, BIRN said in its report. The cash withdrawals, the opposition
claimed, were made by several Greek citizens from a Macedonian bank
in Negotino, near the border with Greece, last May, June and July. 48
Cyprus waste management plant
Another case documented by the same OECD report of paying bribes
to foreign ocials occurred in Cyprus at the Paphos waste management
facility. The OECD report says that several Greek nationals allegedly paid
bribes in 2007 to Cypriot public ocials in connection with the construction
of a 78 million waste treatment station (according to the report, by the time
of its publication in March 2015, two Cypriot ocials had pleaded guilty for
bribery and other crimes, and Greece had opened an investigation into its
own citizens for bribery).49 In 2016, a year after the OECD report, the waste
scandal broke in full.
On 28 March 2016, the general prosecutor of Cyprus issued a European arrest
warrant for the CEO of Ellaktor, Leonidas Bobolas, in relation to alleged
36
bribes and the overpricing of services in the Paphos landll case. Cypriot
authorities claimed that Bobolas was aware of the bribes and knew about the
project being over-invoiced (Ellaktor allegedly reported higher waste volumes
thus resulting in higher charges to local authorities and consumers).50
The March arrest warrant for Bobolas was soon after cancelled because of
new evidence emerging. A second European arrest warrant was issued for
Bobolas by the Cypriot prosecutor on 4 May 2016,51 the same day that TAP
awarded the contract to Spiecapag, with the full knowledge that the French
company would execute the contract in cooperation with Ellaktors Aktor
( this had been announced by Spiecapag in early 2015 at a TAP Greece
supplier networking event).52
The scandalwhich has been a major aair in Cyprushas resulted in
more revelations, including allegations of a donation to a party previously
in government (AKEL) by a company that then set the tender conditions in
a way suitable to Ellaktor.53 Arrest warrants, inquiries and arrests of various
employees of Ellaktor in Cyprus as well as Cypriot ocials followed the
breaking of the scandal.54
37
38
39
40
41
GREECE CONCLUSIONS
According to a draft report by a public body responsible for business
conduct, whose investigation was completed in 2015, three Greek and two
international companies that received deals for TAP were at various points
part of a construction cartel that since 1989 is alleged to have schemed to
win and divide among themselves major public contracts. The companies
are Ellaktor (its subsidiary, Aktor, was subcontracted by the main
contractor Spiecapag), J&P Avax and GEK Terna, the French company
Vinci whose subsidiary Spiecapag is contracted by TAP, and the German
Siemens, who is a TAP supplier in Greece. The cartels alleged dealings
led to the European Commission threatening to suspend structural funds
from Greece until the workings of the cartel are claried and guarantees
are made that no European money will be further wasted because of
cartel activities.
In 2015, Leonidas Bobolas, the CEO of Ellaktor, the parent company of
Aktor, paid 1.8 million to the Greek state to escape jail time for tax evasion
and money laundering. His name is on the Lagarde list of Greeks with
deposits in Switzerland, which includes numerous tax evaders, whose
activities have led to the emptying of Greek state coers.
Currently Cypriot prosecutors have issued a European Arrest Warrant
for Bobolas, on the same day that the TAP consortium oered a deal to
42
Spiecapag, which had announced a year earlier that it would work together
with Aktor on its section of the pipeline.
Siemens Germany won a contract in 2015 for TAP despite its long history
of corruption in Greece and having agreed to pay a third of a billion euros to
the state in 2012 to avoid further litigation. The black cash of Siemens has
been a regular source of anger for the Greek public against politicians from
the two main political parties, PASOK and New Democracy. A case against
Siemens ocials is still pending in Greek courts.
43
III
cooperativa
29 giugno
tolfa
care
edilperna
sudelettra
nuova
ghizzoni
renco
bonatti
gener 2
sicilsaldo
j&p
avax
terna
tap
unaoil
snamprogetti
eni
sonatrach
eib
saipem
saipem do
brasil servis
de petrleo
saipem
contracting
algrie
petrleo
brasileiro
ebrd
48
49
SAIPEM
Saipem81 is a subsidiary of Eni, the largest oil and gas company in Italy.
Saipem is active in 60 countries.
Shareholders:82
Corruption in Nigeria
In February 2016, for the rst time in Italy, an international corruption
case reached a nal judgment, after an initial conviction of Saipem
in 201383 and several appeals by the company. In 2013, a Milan court
had ordered Saipem to pay a ne of 600,000 and seized a further
24.5 million from the Saipem subsidiary (Snamprogetti) that had
50
allegedly paid bribes in Nigeria. In 2016, the Italian High Court (a supreme
court) conrmed the initial 2013 ruling.84
Italian prosecutors showed that a consortium of companies named
Tskjmade up of Snamprogetti Netherlands Bv, Kellogg Brown & Root,
a Halliburton subsidiary at the time of the bribing, Japanese JGC and French
Techniphad paid over $182 million in bribes to Nigerian ocials to get
four deals for building LNG facilities on Bonny Island in southern Nigeria
between 1995 and 2005.85 Snamprogetti was taken over by Saipem in 2008.
Corruption in Algeria
In 2015, Milan prosecutors accused Saipem and some of its executives of
paying bribes to Algerian ocials to win contracts totalling 8 billion from
the Algerian state company Sonatrach. According to the prosecutors, the
bribes amounted to 198 million between 2007 and 2010.86
Tullio Orsi, the former director of Saipem Contracting Algerie, reached a
plea agreement with prosecutors to pay CHF1.3 million [Swiss francs] and
serve two years and ten months in jail.87 Other defendants in the corruption
case were Pietro Varone, the former executive director of Saipem,
Alessandro Bernini, a former nancial chief at Eni and Saipem, Pietro
Tali, allegedly responsible for collecting the bribes, alongside Algerian
ocials and businessmen.
Paolo Scaroni, Eni chief at the time of the bribes, will be tried for corruption
in a new case against Saipem and Eni (the companies themselves are on
trial too, alongside some of their executives, because Italian law makes
51
52
Iraqi oil
In 2011, Eni and Saipem, together with Bonatti and Renco and a few other
Italian companies, were put under investigation by Milan prosecutors
for international corruption related to winning contracts for exploiting
resources in Iraq (the Zubair oiled near Basra, one of the worlds biggest),
Kuwait (the Jurassic eld) and Kazakhstan (the Kashagan oileld).94
Renco, Saipem and ve other Italian companies (Tecnimont, Ansaldo Energia,
Elettra Progetti, Siirtec and Prysmian) were alleged to have helped Eni bribe
foreign ocials, according to prosecutors. As subcontractors, they were
alleged to have overinvoiced Eni, using the extra money later on to pay bribes.95
In 2016, a long-term investigation by the Hungton Post and Fairfax Media
showed how the Monaco-based company Unaoil and its chief lobbyist Basil
Al Jarah, allegedly xed deals for some of the worlds biggest corporations,
including Eni and Saipem, in the Iraqi oil sector by intermediating bribes
to well-positioned Iraqi ocials. In addition to the Italians, Rolls Royce,
Halliburton, Samsung and Hyundai and others are also alleged to have
benetted from the scheme, claims the investigation. The bribes are
reported to have been paid during 2002 and 2012, playing an important
role in how Iraqi oil wealth was carved up by foreign companies
following the invasion of Iraq and fall of Saddam Hussein.96
53
RENCO
Renco (http://renco.it/) has operations all over the world including Armenia,
Kazakhstan, Congo, Nigeria, Libya, Angola, Belgium, Switzerland, Colombia
and Qatar.
Maa Capitale
Taped conversations that were used by Italian anti-maa prosecutors in
Rome as evidence during their investigation into an organised crime network
in the Italian capital indicated that the current CEO of Renco, Giovanni
Rubini, had cooperated with a cooperative aliated to the maa. The
investigationnamed Maa Capitaleled to the rst arrests at the end
of 2014 and is the biggest Italian investigation to date into connections
between organised crime and politics.97
According to the evidence revealed during Maa Capitale, in the early 2000s,
Rubini worked as a special consultant for the Urbino municipality, with a role
in reorganising the regions welfare system. Rome prosecutors argued that in
this capacity, he had been corrupted by local entrepreneurs, including by the
owner of maa-related Cooperativa 29 giugno.
Among the local entrepreneurs close to Rubini mentioned by the Rome
investigators was Salvatore Buzzi, a businessman that owned a consortium
of cooperatives involved in social work called the Cooperativa 29 giugno
( Buzzi was jailed for maa activities).98 According to the prosecutors, this
cooperative was used to launder money for the benet of a crime syndicate
controlled by Massimo Carminati, nicknamed the last king of Rome and
54
55
BONATTI
Bonatti103 is one of the major energy companies in Italy, with extensive
operations in North Africa, mainly Libya, where it works in collaboration
with Eni. The chairman and CEO of the Bonatti Group is Paolo Ghirelli.
The Bonatti group is currently made up of 14 companies around the world,
with most of its activity concentrated abroad. Bonatti is known for operating
in dangerous locations: in March 2016 two Bonatti employees were killed
after being kidnapped by a militia group in Libya.104
In 2010, a Bonatti subsidiary (Edilperna srl, based in Sicily) which had been
contracted to build a hospital in Verona was issued with an interdittiva
antimaa 105 by the Italian police, which means that the public contract with
the company was suspended because of its connection to maa clans.106
In 2010, as part of an investigation by Palermo prosecutors, maa pentiti
( individuals formerly aliated with the maa) gave testimony in which they
named Bonatti as one of the companies that they alleged had taken part in a
maa pact regarding construction of new buildings in Palermo in the 1990s.107
According to that testimony, the companies illegally split the construction
deals among themselves and ensured that some of the contract money was
paid as a maa tax.
Since 2011, the company has been investigated in connection to the Iraqi oil
scandal together with Eni, Saipem and other Italian oil and gas majors (see
the section on Saipem above). The trial is ongoing for Bonatti and others.
56
In 2015 two CEOs of other Bonatti subsidiaries in Sicily were sentenced to jail
for extortion and their association with maa clans.108
SICILSALDO
The current president of Sicilsaldo 109 is Emilio Brunetti,110 son of Angelo
Brunetti, who until 2008 ran the company since its founding in 1994 in Sicily.
Italian police describe Angelo Brunetti as completely subjugated to Cosa
Nostra Catania. 111 According to local media, Brunetti was never part of
Cosa Nostra clans, but he has always paid pizzo, the maa tax. Angelo
Brunetti could be considered an entrepreneur who has accepted the maas
presence and chose to pay the maa tax for security reasons (I paid in order
not to have problems are the exact words of Brunetti from a testimony
he gave in 2013 to Italian investigators).112
In 2007, Direzione investigativa antimaa (the anti-maa investigations
unit) of Caltanissetta investigated Brunettis Sicilsaldo for the illicit
concession of subcontracts which benetted the maa. The case was
archived in 2011.113
In 2013, Brunetti admitted during testimony to investigators to
working together with Franco Costanzo, a businessman linked to the
Bonaventura maa clan in Catania114 to win the contract to build an
aqueduct in Palagonia.
57
Nuova Ghizzoni
In October 2013, Sicilsado and Sudelettra formed a new company called
Nuova Ghizzoni spa. Today, Emilio Bonatti is in charge of Nuova Ghizzoni.
Sudelettra is headed by Lorenzo Marsilio, who has been involved in several
corruption cases linked to the maa. These are as follows.
Operation new bridge: Led by the FBI and its Italian counterpart
in December 2014, 26 people were arrested, including Francesco
Palmeri (alias Ciccio OAmericano) who was thought to be a main
gure in the US-based maa family Gambino.115 According to the
investigation, he tried to extort 1 million from Sudelettra.116 The
investigation also revealed that Lorenzo Marsilio already had links
to individuals in Cosa Nostra as early as the 1980s, when he saved
his business by using money provided by US-based maosi.117
58
SPIECAPAG
SPIECAPAG 119 (France) was awarded with contracts for building a 185km
lot of the pipeline in Greece, between Kipoi and Kavala, as well as two lots in
Albania (215km in total), stretching from Bilisht to Topoje. SPIECAPAG will
also carry out the pipeline river crossing at the Greek-Turkish border, where
TAP will be connecting to the Trans Anatolian Pipeline (TANAP).
According to Algerian media, which reported on court proceedings, Spiecapag
was allegedly involved in the Sonatrach scandal Saipem was involved in
Algeria (see Italy section). Findings of the Algerian investigation submitted
in the Alger court indicate that Spiecapag colluded with Saipem to get the
Galsi onshore pipeline deal from Sonatrach. According to the information
submitted by prosecutors to court, Spiecapag allowed Saipem to get the deal
despite its proposed price being higher than the market one (Spiecapag
submitted an even higher bid) while also being subcontracted by Saipem
to work on that same contract.120
In 2014, Spiecapag completed the construction of 450km of pipelines
over a distance of 300km in Papua New Guinea for ExxonMobil, a project
meant to supply China and Japan with liqueed gas for three decades.121
The project was marred with controversy, from complaints of expropriations
without proper compensation, to militarisation along the pipeline (the death
of an employee of Spiecapag by special police units nanced by ExxonMobil
was never independently investigated according to a Pulitzer Center
investigation)122 and protests turning violent by exasperated locals who
saw more losses than gains.
59
ITALY CONCLUSIONS
Three of the companies awarded with TAP contracts in Italy (Sicilsado,
Bonatti and Renco) have had links to the Italian maa. In the case of Sicilsado,
prosecutors claimed that the companys former CEO was subservient to
Cosa Nostra. Bonatti subsidiaries were excluded from public contracts for
their maa links, while two other CEOs of Bonatti subsidiaries in Sicily were
jailed for their association with the maa. The CEO of Renco is also chief
executive of a company that is part of a cooperative empire controlled
by Italian maa.
Saipem, the ENI subsidiary hired by TAP, has undergone several trials for
corruption. Its Algerian subsidiary was ned for corruption, and Italian
courts convicted Saipem of corruption in Nigeria. Other corruption
investigations concerning Saipem are ongoing, including those
involving major contracts in Brazil and Iraq.
60
IV
world
bank
adb
eib
tanap
ebrd
aiib
ezgi
insatt
botas
fernas
group
limak
holding
TANAP is the longest section of the Southern Gas Corridor. Starting at the
Georgian border, the pipeline will transport natural gas originating from the
Shah Deniz 2 eld to Europe after passing through 20 cities in Turkey. It is
planned to start pumping an annual 6bcm of gas to Turkey from 2018 and
supply Europe with 10bcm of gas annually from 2020. The 1,850km pipeline
is expected to cost around $10 billion.123
The main constructor of TANAP is state-owned Botas,124 which then hired
four other companies to build various segments of the pipeline: Limak,
Yuksel, Tekfen and Fernas.
Limak Holding won the tender to construct the 459km stretch of the pipeline
between Eskisehir in northwestern Turkey and Erdine at the Greek border.125
Fernas will build TANAPs 375km section from the Georgian border city
Ardahan to Erzurum. Yuksel will build 450km between Erzurum and Sivas,
and Tekfen will build 500km between Sivas and Eskisehir.126
BOTAS
The main constructor of TANAP is Botas (the Petroleum Pipeline
Corporation), the Turkish state-owned crude oil, natural gas pipelines and
trading company. Established in 1973 for the purpose of transporting Iraqi
crude oil to Iskenderun Bay, Botas belongs to the Turkish Undersecretariat
of the Treasury and is an institution related to the Ministry of Energy
and Natural Resources.
66
67
68
Ibrahim Seluk initially received one year and ve months in jail as the
mediator of the scandal. He also played the same role in Operation
Blue Line detailed below.
Fuat Celepci served in Botas as the deputy general manager and a board
member between 1999 and 2005. Now he is the general manager of Zorlu
natural gas.
69
zbalc shot himself with his registered gun in his oce at Botas headquarters.
According to main Turkish daily Hurriyet, before his suicide, zbalc had
prepared a report about corruption within the company. The report, which
was submitted to the Ministry of Energy, wrote that Botas was selling
gas to specic companies below the actual market price. This practice
was estimated to cost Botas more than TEL 264 million [Turkish liras]
(80 million) in total. According to zbalcs report, Botas paid 160
employees retirement allowances three times higher than normal, with
those people reassigned in Botas even though they retired.135
In May 2008, the trial started for 77 defendants that include former Botas
deputy general manager Rza ifti, former deputy secretary in the Ministry
of Energy and Natural Resources Bekir Aksoy, and the current chairman
of Limak Holding (and former executive director of Fenerbahe Sports
Club) Nihat zdemir.136
The key name in Operation Blue Line is Ibrahim Seluk. Known for
his involvement in Operation White Energy, Seluk was a high-level
intermediary in corrupted deals that involved Turkish ocials and
Botas employees.
According to Turkish media reports, Seluk s strong connections with
politicians dated back from the early 1990s.137 In 1994, he became the rightwing Motherland partys deputy head for Ankara. In 2001, he set up his own
construction company Ezgi Insaat. He is also known for his relationship
with Kasif Kozinoglu, a senior Turkish intelligence ocial in the National
Intelligence Organization (MIT ), who died in 2011, and to Alaattin akc
who is currently in prison after being convicted of murder and organised crime.
70
During the 2008 the Operation Blue Line trial, police recordings of defendants
phone calls were brought as evidence, indicating that companies willing to
win bids bribed Botas bureaucrats, hosting them in luxurious hotels or
arranging sex workers for them.
On 9 February 2008, the Habertrk newspaper published a transcript of
one of Ibrahim Seluks phone calls during which he was trying to arrange a
Russian revue show for the former Botas deputy general manager Rza ifti.
Seluk called an individual by the name of Ercment Badoglu asking him for
a favour. We are from the AK Party. We cannot go to that kind of place,
Seluk said.You are a leftist. Can you host him tonight? 138
Initially, the court ruling over Operation Blue Line started in 2008 and handed
out sentences of a total 52 years and six months in prison for all the defendants
in the case. But in March 2016, the Turkish supreme court reversed the
judgement, arguing that the decision of the lower court was based on
insucient investigation and improper questioning of the witnesses.139
71
The projects that were subject to criminal charges during the Operation
Blue Line trial are:
72
LIMAK HOLDING
Limak Holding 140 won the tender to construct the 459km section of the pipeline
between Eskisehir in northwestern Turkey and Erdine at the Greek border.
The route will pass through Bilecik, Kutahya, Bursa, Balkesir, anakkale,
Tekirdag. Limak will partner with the Indian company Punj Lloyd to build
this segment.
Established in 1976 with Limak Construction, the Limak Group of Companies
has since added tourism, cement, energy, infrastructure, airport management
and operations, port management, food and aviation sectors to its operations.
Limak Energy is one of the biggest energy trading companies on the
Turkish market.141
Limak has lived its golden age since the AK Party came into power in 2002.
In 2004, Limak joined one of the biggest privatisation bids in Turkish history.
The company won a bid of $292 million for the privatisation of TEKEL, at the
time the sole manufacturer and distributor of alcohol and tobacco products
in Turkey.142 In 2007, Limak paid $3.1 billion to acquire the operating rights
at Sabiha Gken Airport for 20 years.143 In 2010, Limak became an energy
distributor, and in buying Iskenderun Marina, it stepped into port
management in 2011.144
In 2012, the consortium including Limak-Cengiz-Kolin construction
companies won the bid for the Yusufeli dam and hydroelectric power
plant, which when constructed will be the worlds third highest hydro plant.
Moreover the same consortium won the bid for a third international airport
project in Istanbul, one of Erdogans mega projects.Nihat zdemir, the
73
FERNAS GROUP
The Fernas Group145 is active in dierent sectors such as infrastructure,
industrial facilities, natural gas utilities, energy, mining, tourism and the
production of cement and gypsum. The company was established in Batman,
an eastern city known for oil extraction.
The owner of the company is Muzaer Nasroglu, the cousin of former
AK parliamentarian Nezir Nasroglu. Muzaer Nasroglu was one of the
defendants in Operation Blue Line. He was sentenced to two years and six
months, but as described above, charges were dropped by a 2013 decision
of the Supreme Court.
Muzaer Nasroglu was also a defendant in Operation White Energy
on charges of corruption and bribe. He was jailed on 15 February 2005
and released on 7 May 2005.
74
TURKEY CONCLUSIONS
The two major corruption scandals in the Turkish energy sector presented
above, Operation White Energy and Operation Blue Line, point to the
potential widespread use of bribery and corruption as a means for winning
tenders on state contracts. The two scandals overlap with some key players,
like Ibrahim Seluk, who organised revue shows for Botas employees.
High level ocials in the Ministry of Energy and Natural Resources, which
partly controls Botas, Botas former deputy general manager Rza ifti,
Limak Holdings current Chairman of the Board Nihat zdemir, and Fernas
owner Muzaer Nasroglu were initially convicted for corruption. The
Turkish supreme court subsequently cleared most of the defendants in
the two corruption scandals but much of the evidence, including transcripts
of police phone tapping that point to corrupted practices, remain in the
public record. Muzaer Nasroglu, who was convicted initially for
corruption in Operation White Energy, did serve a symbolic jail term.
All the main contractors for TANAP are companies (state or private) close
to the ruling AK party.
75
CONCLUSIONS
78
Conclusions
79
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This publication has been produced with the nancial assistance of the
European Union. The content of this publication is the sole responsibility
of CEE Bankwatch Network and can under no circumstances be regarded
as reecting the position of the European Union. This text was closed in
October 2016.
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