Arm’s-length: Uzbek tycoon with links to Putin pal and sanctioned Russian bank grabs strategic assets in Europe

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LONDON–Eriell Group is the top oil and gas services company in Uzbekistan, but until recently, its corporate headquarters was in Jersey.

The firm’s chairman continues to do multi-million euro deals in Europe despite Eriell’s close ties to sanctioned Gazprombank and, allegedly, Gennady Timchenko, a sanctioned oligarch and personal friend of Vladimir Putin.

The Eriell parent company moved to Hong Kong in November 2023 from Jersey, where it was registered with the financial services commission.

Eriell, whose activity relies on lucrative access to the oil and gas sector in Uzbekistan, continues to operate as sanctions restrain Gazprombank, whose senior managers have also acted as top Eriell executives.

Kremlin-controlled Gazprombank, which financed and co-owned Eriell at least until November 2023, is one of Russia’s largest banks and was placed under partial sanctions in 2014 by the EU and UK, with the US and Canada following suit in 2022. The bank is not under so-called full blocking sanctions in the West due to its key role in Russian gas exports, which the West still needs. Dealing with the bank and its subsidiaries remains legal under certain conditions.

This year, Bakhtiyor Fazilov, Eriell’s principal, has been shopping in Western Europe for industrial assets that happen to be in severe shortage in Russia’s war economy, while Gazprombank has co-financed another Italian deal with his group.

Eriell Group International Limited “has transferred all of its assets and corporate registration to Hong Kong, which helps Eriell work more closely with Chinese companies for the procurement of raw materials, equipment and construction materials, and to work more efficiently with the Asian investors and financial institutions,” a spokesman for Mr. Fazilov’s group of companies told Reporter. “Neither Mr Fazilov nor any of his companies have business links with Gennady Timchenko.”

“Gazprombank owns no equity stake in any of Mr Fazilov’s businesses. While the bank was an early partner in Eriell Group, it began divesting shares in 2018 for commercial reasons, and completed this process at the beginning of 2022,” the spokesman added.

Reporter.London has seen a suspicious activity report (SAR) filed to the Jersey financial services commission in 2023, saying Eriell may have been breaching sanctions due to its extensive connections to Gazprombank and Gazprombank executives who were individually sanctioned outside the UK. Reporter could not establish if the UK sanctions regime was indeed breached at the time and the question has become moot since the changover to Hong Kong. “Mr Fazilov’s businesses operate in full compliance with all applicable laws and regulations in every jurisdiction where they are present,” said the spokesman.

Reporter is not naming the company that filed the SAR with the Jersey Financial Intelligence Unit, due to the sensitivity of the matter. Its representative said under protection of anonymity that it waited more than six months for an official reaction before contacting Reporter to share the allegations. The suspicious activity report alleged that Gazprombank had at least partial “control” of Eriell, although Reporter could not independently establish the degree of control Gazprombank has over Eriell due to the complexity of the ownership structure.

Gazprombank did not reply to a request for comment.

The Jersey company in question continues to appear as active on the Jersey public registry. The Jersey financial services commission did not reply to a request to comment.

Teachable moment

One academic also found Eriell to be sailing close to the wind of sanctions.

Kristian Lasslett, a professor of criminology at Ulster University in the UK and world-renowned expert on economic crime, told Reporter that he had also notified the Jersey financial regulator about Eriell in September 2023 but received no follow-up.

Lasslett connects Eriell to sanctioned Russian oligarch Gennady Timchenko, a well-known friend and member of Vladimir Putin’s inner circle, who has been under sanctions since 2022 in the UK, 2023 in the EU and 2014 in the US. “I think it’s clear [that] Gazprombank, and by extension therefore the Kremlin, have exerted significant influence over the Eriell group,” Lasslett told Reporter. “It is also likely that sanctioned businessman and close Putin ally Gennady Timchenko also exerts significant influence over Eriell. So as Russian tanks moved into Ukraine, Russian influence pulsed seemingly carefree through Eriell, a group ultimately administered [at the time] from the British Crown Dependency of Jersey.”

Lasslett pointed to the Russian lender’s annual report for 2020, which said “Eriell Group International Limited, Jersey” was an “affiliated company.”

Lasslett co-authored a June 2023 report examining Eriell for UzInvestigations, a website created by Ulster University and the Uzbek Forum for Human Rights, an NGO. The findings of his report, as well as searches by Reporter in Eriell’s public filings and other data sources, confirm longstanding and complex financial ties between Eriell and Gazprombank.

Aside from Jersey, companies in the Eriell group are active in Singapore, Hong Kong, the Netherlands and other jurisdictions.

“Given the close links that exist between Eriell and sanctioned individuals in Russia and politically exposed persons in Uzbekistan, alongside the critical role it has played in the concerning transactions, documented in this report, the Government of Jersey should conduct an inquiry into Eriell Group International Limited to determine compliance with anti-money laundering and sanctions rules,” the Lasslett report said, ahead of the restructuring. The UK, the US, EU and Switzerland should consider whether these connections “warrant placing new entities and individuals from the consortium in the current sanctions regime.”

Citing Eriell’s sponsorship of a Russian hockey team owned by Timchenko as well as other connections, such as common board members between Eriell and Volga Group, a Timchenko business, the report said that “ties between Eriell and Timchenko are a factor that must be weighed in light of the current international political environment”.

Two other Eriell board members were senior Gazprombank executives as of June 2022, according to the report. One of them, Alexey Matveev, was also sanctioned in the US.

Fazilov, the main shareholder of Eriell and chairman of the board, told Lasslett that the report’s findings were “grossly incorrect, inaccurate and incomplete. Any conclusions or analysis that is based on this information will be equally and increasingly inaccurate, misleading and incorrect.”

A Gazprombank spokesman told Lasslett that his report was “premised on [the] unsubstantiated assumption that Gazprombank is involved in economic projects in Uzbekistan on unfair and inappropriate terms,” according to coverage of the report by Radio Free Europe.

On his Twitter account, Lasslett documented the move Eriell made in November 2023 to shift headquarters from Jersey to Hong Kong, following an order by Putin to seize shares in a key Eriell subsidiary owned through a Cyprus shell company. The subsidiary was in charge of Eriell’s Russian unit. In a follow-up email to Reporter, Lasslett noted that the Russian units were given to a company with ties to Eriell, whose principal is an ex-board member.

Following this restructuring, Eriell Group International Limited from Jersey has been officially cut off from its Russian ties and replaced by a new Hong Kong entity, Magelan Limited, owned in turn by an Eriell executive, who is likely to be a “a nominee shareholder, behind who stands an opaque set of ultimate beneficial owners,” the academic wrote. He also noted that Gazprombank disappeared from the company’s ownership structure after the move, as did another company with links to Timchenko, AMGA Consulting.

This decision to seize the unit, Lasslett said, was either an attempt by the Kremlin to obscure Eriell’s ties to sanctioned Russian names, or a genuine rupture between Eriell and its longstanding associates and financiers seeking to prevent it from being affected by Western sanctions. In any case, Lasslett concluded over email, “that’s all you need to derisk re[garding] sanctions”.

Cyprus contact

Eriell and its shell company shareholders and affiliates were making full use of Cyprus, with multiple registered corporate entities connected to the group in this jurisdiction. The International Consortium of Investigative Journalists’ latest leak, Cyprus Confidential, shed light on some arrangements, and the types of financing Gazprombank provided.

For example, documents show, Gazprombank issued legal charges and received “pledges of surety” on various Eriell subsidiaries given as security for loans it gave the company. (These “charges” work similarly to mortgages and are not to be confused with allegations of wrongdoing.)

Not a year seems to have passed before 2022 without Eriell taking on money from Gazprombank, which it guaranteed with its own shares and subsidiaries.

Eriell also had longstanding deals with Velesa Trading, a Cypriot shell company owned by Gazprombank. Through Velesa, Gazprombank financed a long list of drilling equipment from China that would facilitate Eriell’s oil and gas extraction activity, the 2018 document shows.

Other documents from the International Consortium of Investigative Journalists as part of the Cyprus Confidential leak show that Eriell even pledged its current account balances to Gazprombank in 2018, in exchange for further loans.

On multiple years the shares of the parent company in Jersey as well as subsidiaries in other countries such as Germany and Russia, were pledged to Gazprombank as guarantee for loans, beginning as early as 2011.

Lubrication and invasion

Meanwhile, in Italy, Eriell’s chief, Fazilov, drew criticism this year by engaging in multi-million euro deals that take advantage of financial guarantees from the Italian government. According to ReCommon, an NGO, Fazilov will develop an oil and gas field in Uzbekistan with help from both Gazprombank and Italy’s top lender UniCredit. The project benefits from guarantees by the state-owned insurance company SACE, of as much as 51.4 million, the NGO said in a report published in February this year.

The main contractor in the project, Enter Engineering, has pledged shares to Gazprombank against loans, along similar lines to Eriell’s past financing model, according to the analysis. The Italian taxpayer, meanwhile, guaranteed services purchased by Enter Engineering from Italian suppliers, which means, in case the Uzbek side does not pay, the Italian Treasury will. This is a typical export finance arrangement practiced by governments around the world, but the criticism focuses on the politics of dealing with Russia. “SACE could now end up helping one of Russia’s most important banks,” the NGO said.

“Enter Engineering’s loan arrangements with Gazprombank are standard commercial arrangements facilitated by historical ties between Uzbekistan and Russia,” the Fazilov spokesman told Reporter. “Enter Engineering is a significant private investor contributing to Uzbekistan’s economic growth, and as such requires reliable credit which is not available through domestic banks. This business relationship is not subject to any international sanctions.”

Separately, Fazilov has used another Uzbek company he owns, Saneg, to acquire an Italian producer of industrial lubricants and greases, according to a press release from February, which said that, “Key parameters of the agreement include the exchange of experiences in the field of formulations and technologies” with the more technically advanced Italian company.

Coincidentally, lubricants and industrial greases are “essential for Russia’s war machine and the country’s petrochemicals industry is reliant on special additives, mostly imported, that give lubricants essential properties that allow them to work under punishing conditions,” according to a recent newsletter from the Dekleptocracy Project, a nonprofit in the US which tracks the impact of Russia’s invasion of Ukraine on the global economy.

Moscow is currently scrambling to increase its access to these products to compensate for the withdrawal of Western producers from the market and the surge in demand created by its armoured divisions barrelling across Ukraine, Dekleptocracy noted.

The Fazilov spokesman said that “Gazprombank had no involvement with Saneg’s recent acquisition of CGC Lubricants Italy S.p.A. As Saneg announced, the acquisition is designed to increase Saneg’s share of the Uzbekistan lubricants market and to form a basis for its sales to Western Europe. Suggestions that this acquisition is designed to cater to the Russian lubricants market amid existing sanctions are unfounded, defamatory and wrong.”

The Saneg lubricants deal may not be designed to cater to the Russian market directly but it comes at a time when Uzbekistan’s general trade exchanges with Russia are growing quickly, thanks in part to “parallel imports” of goods that — inadvertently or not — end up in the Russian market as a way to legally bypass sanctions and bad publicity amid the invasion of Ukraine.

Kristofer Harrison, the founder and president of Dekleptocracy and a former official at both the State and Defense Departments in the US, said the lubricants deal should be of concern to Ukraine’s Western allies despite no sanctions being violated.

“Since February 2022 Russia has really struggled to replace lubricant additives. It’s a big strategic vulnerability for them. The West needs to be paying attention to this deal precisely because it will build capacity and lessen Russian dependence on the West. Our inability to enforce the sanctions regime also prevents us from shaping the strategic picture,” Harrison told Reporter.

With thanks to B.M. for his help editing this article.