BULGARIAN “BAD APPLE” BANK IN THE HOLE WITH 34 MILLION AFTER “SOUTH STREAM” HALT Mind the horns!

Cadastral photo of the land bought by the Bank for 34.5 million levs from an offshore company

First Investment Bank (FIB) has shelled 207 levs per square meter for lands in the “Pasha Dere” site on the Bulgarian Black Sea coast, where the pipe of the discontinued Russian-sponsored project “South Stream” was supposed to come on the surface. This happened shortly after the Cabinet “Oresharski” took office, an investigation of Bivol has revealed. Stopping the project, however, puts a question mark over the profit from this well-calculated investment.

FIB Granted Loan to Offshore Company

FIB has granted a loan for the acquisition of these lands back in June 2005. Then, “Shangri-La” Ltd., owned by Lebanese citizen Gazuan Ahmad Sharaf, bought out agricultural land from private owners in the vicinity of “Pasha Dere.” The land was used as collateral against a loan of 5.11 million levs.

At that time, specific public information for “South Stream” was missing. Formally, the first agreement mentioning the “South Stream” project, between Gazprom and Italy’s ENI, dates from November 2006. It was followed by an agreement with Serbia, from December 20, 2006, to study the possibility of building a gas pipeline from Bulgaria to Serbia.

Information about plans for a new pipeline, however, circulated among the public long before 2005. Studies have been made and it was known that because of the gradual slope of the shelf, “Pasha Dere” is the only place on the Bulgarian coast suitable for the pipeline to come on the surface. The pipeline from the “Galata” gas field comes on the surface in the same area. All this, along with the fact that no steps have been undertaken to change the land use status from forest to regulated plots, is a clear indicator of the investors’ interest in the “Pasha Dere” forests – this was not an investment in tourism, but in long-term gains from easement.

A Google Maps look at “Pasha Dere” and the land plots

Bulgaria and Russia signed an agreement for the gas pipeline on January 18, 2008. In 2009, the value of these same lands, bought with a loan from FIB, has already more than doubled. This is evident from the new loan to “Shangri-La” from FIB for the same lands, granted once they were consolidated. On May 22, 2009, the declared material interest from the lands has already reached 12 437 866.19 levs.

On November 4, 2009, the Cypriot offshore company “Teylwind Trading & Investment Limited” became the owner of “Shangri-La.” Gazuan Sharaf remained manager until December 16, 2010, when he was replaced by Elena Nikolova, an associate of his wife in several companies. Anton Gibril, an Iraqi native with British passport, who has joint business with Gazuan Sharaf’s brother, Ramez, is the manager of the company since May 15, 2013. However, the actual owner of the offshore company is not public under Cypriot law.

We Will Build the New “Stream”…

The government of Prime Minister, Plamen Oresharski, appointed on the mandate of the Bulgarian Socialist Party (BSP), took office on May 29, 2013. Initially, South Stream construction was not explicitly mentioned in the government’s program, unlike the restart of another Russian-sponsored project – the second Nuclear Power Plant (NPP) in the Danube town of Belene. However, it did not take that long before real actions to accelerate the project were started. It became clear very soon that “South Stream” kept its priority status, assigned as early as November 2011 by the government of Prime Minister, Boyko Borisov.

The first public comments of Prime Minister Plamen Oresharski on “South Stream” are dated September 16, 2013. This happened after the right-wing Democrats for Strong Bulgaria (DSB) urged to wait for the opinion of the European Commission before proceeding with the project. In response, Oresharski categorically declared that the pipeline will be built without delay.

Those privy to the government’s plans, however, have reacted a few months before the political message, the property registry shows. As early as June 14, 2013, (the day of the start of relentless protests against the appointment of murky media mogul and controversial politician, Deliyan Peevski, as Head of the State Agency for National Security (DANS) – editor’s note), FIB purchased from “Shangri-La” the same lands that the company has mortgaged earlier, but now for 34 568 598.98 levs. “Shangri-La” retained ownership of half of the 1 000-square-meter plot.

Only three days after the acquisition of the lands by FIB, on June 17, 2013, a meeting was held between representatives of the bank and of “South Stream” with subject “Land Use.” This fact is noted in “South Stream” documentation, which can be seen here. In February 2014, the company “South Stream” published a “Plan for Stakeholder Engagement”, where, in “Appendix B,” FIB is mentioned among the landowners.

FIB – “Bad Apple” and Darling of Any Power

In U.S. diplomatic cables, leaked trough WikiLeaks, FIB was cited as “bad apple” dealing with “laundering by Bulgarian and foreign criminals and connected lending.” According to former US Ambassador in Sofia, John Beyrle, “FIB is now considered to have one foot in the legitimate retail world; it is known as one of the most aggressive and “polished” banks, as well as one in the murkier criminal realm.” Despite the serious allegations, reported to the Ambassador by a representative of the Bulgarian Financial Intelligence, the bank remains to this day a darling of all and any government.

There is evidence that this particular bank has been refinanced by the government of the Three Party Coalition with money from the fiscal reserve. Information about collusion between former Finance Minister and current Prime Minister, Plamen Oresharski, and the Governor of the Central Bank (BNB), Ivan Iskrov, to deposit in commercial banks 1 billion levs from the fiscal reserve was disclosed by Simeon Djankov, former Finance Minister in the centrist government of Borisov’s Citizens for European Development of Bulgaria party (GERB). Djankov was subsequently investigated for exposing a state secret.

The GERB government tried to push amendments to the Forestry Act, directly benefiting projects of FIB owner, Tzeko Minev, to build new facilities and ski tracks in protected areas. The amendment known as “Vitosha Ski” caused mass civilian protests, blocking the key “Eagles’ Bridge” intersection in the capital Sofia, and was eventually withdrawn. It also emerged during GERB’s term that the associated with FIB company “Yulen” has seized 60% more lands in the Pirin mountain than what it was entitled to under the concession agreement.

The described above deals with the lands in “Pasha Dere” looks like a well-prepared schema. It leads to suspicions that FIB possessed insider information from government sources about future plans for the project “South Stream,” way before they were formally announced. Obviously, stopping the project clouds plans of oligarch Tzeko Minev of future profits from easement of the pipeline, but it also heralds pressure on this and the next government to implement “South Stream” at any cost.

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