Azerbaijanis at the Czech sea: Not all that glitters is democracy (note: as in not all that glitters is gold)

Wealthy and well connected Azeri investors are happily pouring billions of Czech crowns into luxurious properties located in well known Czech tourist destinations, even though the Azeri community doesn’t seem to be a prominent one among other foreigners living in the Czech republic. The father of the vice president of Azerbaijan owns a grand hotel near the centre of a spa town of Karlovy Vary, while Aliyev’s daughter used to own a villa there, which she later transferred to a loyal MP. Azeri investments of unknown origin made its way to other Czech cities as well, even to the capital, Prague. Reporters from Czech investigace.cz now found another nest of Azeris with money to spend in the region of South Bohemia. 

Family is the building block for Azerbaijani people, which is why it can be expected that once a family member gets a good, influential, job, this individual will then serve as a stepping stone for all the other folks and will work for the good of the clan. The family solidarity even crosses borders. “If, for example, there is a trustworthy and skilled person living in the Czech republic, it is only natural that their know-how quickly reaches potential investors, or anyone, who needs help,” explains Slavomir Horak, expert on the countries of Central Asia and an associate professor at the Charles University in Prague. Therefore, it can be expected that if one investor buys a hotel with the help of this “fixer”, others will soon follow. Regardless of where the money for intended investments came from. 

The Azeri investments in the Czech region of South Bohemia are quite enigmatic, at least to the general public. It is important to note that any investment from Azerbaijan can be problematic, specifically in case of unknown origin of the funds used. It is quite common for people connected to azerbaijani politics to spend small fortunes on real estate or luxurious good, even though their official salary would never allow them such expenses. The country’s government suppresses human rights, persecutes any form of opposition and usurps the riches coming from oil for only the selected few. The catch is that even the favoured ones never know when will their spot in the sun come to an end and how long will the regime itself last. Which is the reason for necessity to hide their assets abroad - abroad being for example London or a small spa town in the Czech Republic. 

What makes the Czech Republic so attractive for investing both legal and illegal money? First of all, its geographical position, in the centre of Europe. Secondly, its political stability - it is very unlikely that there will be a revolution or a major crisis. Czechia has the reputation of a calm and friendly country, ideal for a vacation. The fact that some of Czech highest ranking politicians have a very friendly attitude towards Azerbaijan also doesn’t hurt - this includes the Czech president Miloš Zeman. The fact that the country is popular among Azeri elites, is also visible on the amount of direct flights from Baku to Prague and even the small spa town of Karlovy Vary. The tickets for business class are in both cases usually sold faster than for economy. If you shake and mix the stability, friendly politicians and competent fixers, you get a cocktail ideal for those who want to invest money, often acquired from unknown or questionable sources.   

The International Monetary Fund report from 2019 pointed out specifically the increase in real estate in Czech Republic owned by alien investors and called for strict anti-money laundering measures to be followed in the real estate market. The head of Czech Financial Analytical Bureau (Finanční analytický úřad - an investigative unit under the Ministry of Finance), Libor Kazda, explained that running background checks on all alien investors is not as easy as it looks. “There are cases in which the concrete financial institution has no means to audit the money source. If the bank only gets an affidavit from its client, saying that the money was obtained legally, what can they do?” he asks. “This doesn’t mean that there is no further scrutiny. In fact, only handing in an affidavit can be suspicious.” However, Kazda also notes that in the Czech Republic handing in an affidavit is often enough to explain the sources of money or their owner. 

The region of South Bohemia is often associated with a picturesque town of Český Krumlov or the water reservoir Lipno, nicknamed the Czech sea. An ideal setting to own a restaurant or a hotel - which was also the thinking of several Azerbaijani investors, who trusted in their business plans so much that they didn’t hesitate to invest hundreds of millions Czech crowns (1 mil CZK = approx. 48 000 USD). Yet, one of the plans turned out to be a bureaucratic nightmare and remains a demolition site on the banks of the Lipno lake, and the other plans involve more closed than open restaurants and hotels, which the investor abandoned. 

“There were huge plans, they (the investors) came here every day, some big name from Prague did the construction plans… They even wanted to buy our family company. And then suddenly, they were gone. They disappeared and the projects stopped,” explains one of the small business owners from the Lipno area. “I heard that locals didn’t want them here, they had a problem with the big money.”        

The mayor of the small village, where there is a demolition site instead of a beautiful hotel in the shape of a ship, mainly shrugs his shoulders: “Well, you can see what came out of those big big plans. A big mess and a pile of rubble. At least they put up a fence around it, so no one can get hurt.”

The small village is called Hůrka and is one of several surrounding the Lipno water reservoir, which is one of the big tourist destinations in the region of South Bohemia. The “lake” lies near the borders with Austria and is famous for attracting rich foreign and local investors. The road to Hůrka is surrounded by water on both sides and offers a beautiful view of the reservoir and the surrounding nature - except when you get to the village itself. The first thing in sight is the fence surrounding what looks like a construction site - except no one has worked there since the original building was torn down in 2018. By now there was supposed to be a luxurious wooden and glass welness hotel in the shape of a large ship. The project is halted by bureaucracy and current covid-19 restrictions - at least that’s what the investors say. The land is owned by ALPS s.r.o., a company which also owns another piece of land in a fast growing satellite town near the region’s capital city - České Budějovice. But nothing is happening there either. 

A second ambitious Azeri project began by buying two buildings in a favourite tourist town Český Krumlov and one in a small town which lies on the banks of the Lipno reservoir, Frymburk. Yet, the big plans mostly remained just that. In Český Krumlov, one restaurant never opened, even after costly renovations, the second investment, a hotel, worked somewhat fine, but is now run by someone else. The restaurant with accomodations in Frymburk ran for two seasons (two summers and a winter), and closed in 2018. The owner disappeared. “I haven’t seen him in over a year for sure,” says one of the hotel owners from Český Krumlov. “He just appeared one day, and then he was gone.”  

The company ALPS is owned by Juma Ahmadzada, an Azerbaijani living in a luxurious London apartment with unknown owner. In a curious series of events, the apartment was bought by the same offshore company, which was contracted for consultation by a Turkish investor, who a few months later won a very lucrative government contract. The person overseeing the contract was none other than Ahmadzada’s father, who is incidentally also a good friend of the Turkish contractor.

Ahmadzada senior was recently dismissed from his position in Azerbaijani government. 

There is another firm, with the same Czech address, registered in the regional capital České Budějovice - LECO-CB. It’s owner is Zamira Hajiyeva, the wife of the former head of IBA London office. Hajiyev is currently in Azerbaijani jail for fraud and embezzlement of money from the bank. He was sentenced to 15 years. Hajiyeva’s London residence is worth about 11,5 million pounds. The house stands next to a luxurious shopping centre Harrods, where she reportedly spent more than 16 million pounds over 10 years, nearly 6 million of that using credit cards issued by the bank, where her husband worked. British authorities are currently investigating the source of the family’s wealth and in the meantime keep their assets frozen.           

“It is necessary to understand the mentality of Azeri elites. All of the state-owned businesses - which also means the national bank - are considered to be a piggy bank for the ruling class. Therefore, if someone well connected needs money, for example a relative of the bank’s CEO, there will always be some way to get it,” explains Horak. However, from his point of view, it is not something entirely unique or only typical for Azerbaijan.

Between the years 2012 and 2014, approximately 3 billion USD was funneled through bank accounts in the Estonian branch of Danske Bank - the branch was since shut down by the Estonian regulators following the branch’s involvement in a massive money laundering scandal. Today, you could buy two private islands in the Bahamas for the sum. The money of unknown origin went on through British offshore companies towards anything the Azerbaijani ruling elite desired. It could turn into bribes for european politicians, who, in turn, praised the Azeri government, or into a football club, real estate, fancy cars and vacations. The leaked bank documents, which prove these transactions, became known as the Azerbaijani Laundromat. Large sums also made their way into bank accounts of government officials, for example of the family of the country’s vice-prime minister or the man in charge of the anti-corruption agenda. Where the 3 billion came from is unknown, mainly because it was washed through a series of anonymous shell companies. Yet, some traces lead to the accounts of president Alyiev’s family in the Central Bank of Azerbaijan, others to different ministries or to a Russian arms manufacturer. 

On the other hand, those with no connections in higher places suffer for it. Generally, any country, where the government elites siphon money from the state treasury, is prone to feel the disparity in other fields - be it hospital care, education, social care. Corruption and  mobster-like practices are also noticeable in politics. When an economic crisis caused by the decline of oil prices hit Azerbaijan in 2017, president Alyiev began to pursue any form of opposition even harder than before. He also made efforts to consolidate his power, for example by appointing his wife as the VP, which makes her his successor.

From the perspective of a country’s individual and political freedoms, Azerbaijan scores very badly, as evaluated by the international NGO Freedom House.

 Even though the government permitted the release of tens of political prisoners in 2019, it imprisoned others at the same time. The concentration of power in the hands of president Alyiev and his closest family poses a major problem. “Power in Azerbaijan’s authoritarian regime remains heavily concentrated in the hands of Ilham Aliyev, who has served as president since 2003, and his extended family. Corruption is rampant, and the formal political opposition has been weakened by years of persecution. The authorities have carried out an extensive crackdown on civil liberties in recent years, leaving little room for independent expression or activism.” explains the Freedom House’s annual report Freedom in the World 2020. According to Transparency International, Azerbaijan ranks 129 out of 180 countries in terms of corruption. 

“Even though Azerbaijan is officially a republic, it runs on the basis of clan ties. The presidential post goes even further - it’s hereditary. In other words, if you are born into the right family, you automatically have the upper hand,” says Horak. “When the current president - and with him his wife - came to power, the whole Baku region (note: not sure about the translation here) rose to favour, because it is the home of the Pashyiev clan, the family of Mehriban Alijeva. This shift in power brought down the old prime minister and some other government officials from the previously favoured Nakhichevan clan.”

In the freedom of press ranking World Press Freedom Index 2021, published annually by Reporters without Borders, Azerbaijan landed 167. place out of 180 countries evaluated. “President Alyiev waged a war on independent journalism in 2014,” reads the report. “Those who do not succumb to the pressure and blackmail - or don’t get bought off - end up in jail.” 

The extent the government is willing to go to when journalists get too nosy can be illustrated by the horrifying experiences of the OCCRP reporter Khadija Ismailova. In 2005, five gunshots forever silenced her colleague Elmar Huseynov, many Azerbaijani journalist kept silent for a while - but not Khadija, the assassination motivated her to keep digging into the Alyiev family business. Since 2009, she cooperated with big international media on publishing stories on corruption and the ruling family’s mysteriously obtained possessions. The blowback didn’t take long, first in a form of defamation in the state owned media, then blackmailing phone calls. When Khadija refused to step back, her apartment was broken into and cameras were installed there. The cameras also recorded intimate moments she shared with her boyfriend. That may not be such a problem elsewhere, but the journalist lives in a consrevative country and wasn’t married to the man. More threats and blackmail followed, about releasing the intimate pictures. Khadija, however, didn’t give in and so whole video footage was made public in the state friendly media. In accordance to Islamic tradition, her out of marriage relations brought shame to her entire family and her own brother was determined to right the wrong by killing her. Ultimately, Khadija ended up in prison in 2014, where she spent three and a half years on trumped up charges. She was released because of immense international pressure and didn’t serve her whole sentence. Khadija never stopped writing about state corruption. 

In spite of the known authoritarian, non-democratinc and corrupt regime, Azerbaijan remains a major trade partner of the Czech Republic, the most important one from the whole Southern Caucasus region - the main import article being oil. In 2020, one third of all the oil imported to Czechia comes from the country. According to the Czech ministry of trade, there are tens of companies doing business in Azerbaijan.