26 May 2021
By Stas Ivashkevich, Olga Ratmirova, Ales Yarashevich and Bojana Jovanovic, OCCRP, 25 May 2021
OCCRP — When the Minsk City Council announced the winner of an architectural competition in 2008, the plan for the futuristic project was ambitious. Glass towers twisted like corkscrews, enveloping a 300-meter-high skyscraper, while Venice-style gondolas cruised a canal between residential blocks.
Christened the Minsk Lighthouse, the winning design promised administrative and cultural buildings, as well as a “green zone” and Europe’s largest water park. But all there is to show for the visionary project today are high-rise cinderblock apartment buildings that blend in with much of the Belarusian capital.
The winner of the competition, Zomex Investment, was owned by a family of Serbian businessmen with close ties to Belarus’ strongman president, Alexander Lukashenko. Zomex received huge tax breaks and state resources to support the construction, and was granted free land in the center of the city through a presidential decree.
Multiple projects by Zomex and two affiliated companies — Dana Astra and Belinte Robe — have followed the same pattern: big promises and generous government support for ambitious plans that never materialize. Despite the companies’ repeated failures to deliver on commissioned projects, they keep getting contracts.
When reporters analyzed land registry records, they found that Zomex (which recently changed its name to Emirates Blue Sky), Dana Astra, and Belinte Robes currently have at least 11 construction projects around Minsk. The three companies are the largest developers in the city, and have together been given over 400 hectares of land, valued at about US$1 billion.
Reporters also discovered that the owner of those companies performed a secretive corporate maneuver that allowed him to continue profiting from sweetheart deals with Lukashenko’s administration, while dodging sanctions imposed by the European Union.
Until late last year, all three firms were owned by Dana Holdings. That company is registered in Cyprus and until recently was owned by Nebojsa Karić, a member of a wealthy and influential Serbian family that has extensive business interests in Belarus.
In December 2020, the European Union blacklisted Dana Holdings for “benefitting from and supporting” the Lukashenko regime, which has drawn international ire for brutal crackdowns on peaceful protesters rejecting a rigged vote and demanding fair elections.
The Karić family may have anticipated the EU’s move. Just days before the sanctions were announced, Dana Holdings was removed as the owner of the three property development firms and replaced by a company registered in the United Arab Emirates called Enterprise Developments Holding Limited.
The director and owner of Enterprise Developments is Mostafa el-Tobgy, according to company registration documents obtained by reporters. In 2013, a Dana Holdings advertisement on the popular Belarussan news site TUT.by identified a man named Mustafa Al Tobgy as an executive director of Dana Holdings.
Technically no longer owned by Dana Holdings, the Karić companies are now able to skirt EU sanctions and continue to cash in on their connections to Lukashenko.
Asked about this change in ownership, Vibor Mulić, chairman of the board of Dana Holdings, replied: “All the decisions prior to the sanctions such as changes in ownership were purely for business reasons and were made much earlier.”
He declined to comment on the sanctions levied on Dana Holdings, noting that the company was in the midst of a legal appeal against the decision.
He denied the Karićs had a privileged relationship with Lukashenko.
“There is only a relationship between Dana Astra and the National Olympic Committee,” Mulic said, referring to the firm’s sponsorship of Belarus’ Olympic committee, whose vice president is Lukashenko’s son.
From Communism to Kleptocracy
For over a decade Belarus has been encouraged by international institutions like the World Bank to move away from the state-run economy enshrined during Soviet times. But instead of a market economy, what has emerged is a system of crony capitalism that benefits well-connected private firms. Top public officials, or their proxies, are granted privileged access to entire industries, and move wealth out of the country using offshore companies.
Construction has become one of the most lucrative businesses in Belarus. In 2011, more than half of residential real estate projects in Minsk were still controlled by state-owned corporations. By 2020 private companies were building 90 percent of new projects in the Belarusian capital, according to Minsk-based real estate expert Natalya Litovskaya.
Most of the benefits of this boom have accrued to just three companies: Zomex Investment, Dana Astra, and Belinte Robe. Their owners, the Karić brothers, have reaped the rewards of their relationship with Lukashenko, who has ruled Belarus since 1994, and is no longer recognized by the EU as the country’s legitimate president.
Members of Serbia’s Karić family forged ties with Lukashenko after political rivals in their home country began investigating their businesses in the mid-2000s. Prosecutors accused the Karićs of unfairly profiting from their privileged position under the regime of Slobodan Milošević, but later dropped charges against them.
In 2009, Nebojsa’s uncle, Dragomir Karić, invited Lukashenko to an economic forum at the Serbian mountain resort of Kapaonik. A year later, Dragomir was appointed to lead the construction of a large development in the Belarusian capital called Minsk City. The project was later taken over by Karić’s company, Dana Astra.
The president’s daughter-in-law, Lilia Lukashenko, was listed in company documents in 2017 as one of the deputy directors of Dana Astra, though a spokesman for the Karićs said she no longer works there. (She did not respond to a request for comment.) Dana Astra has also enjoyed free advertising in state media, including television news programs that highlighted apartment sales.
The political connections the Karićs enjoy in Belarus have been hugely lucrative.
Zomex’s net profit for 2019 was more than $35 million, with a profit margin of 61 percent, much higher than the industry average. Earnings available for the first three quarters of 2020 show even higher profit margin of 67.5 percent, and about $22 million earned. According to its arrangement with the government, Zomex pays no taxes on its earnings.
Despite all the advantages it enjoys as one of the regime’s favorite developers –– or maybe because of them –– Zomex has consistently failed to deliver on its proposals. The Minsk Lighthouse competition was no exception.
In 2014, the government gave Dana Astra land through a presidential decree to develop “Minsk World,” another commercial and residential area –– the biggest land giveaway to any company in Belarus. The firm received some 300 hectares, worth around $800 million, as well as unprecedented tax breaks, and the use of the city’s resources for the project’s infrastructure.
The justification for such preferential terms cited the developer’s ambitious promise: the construction of an International Financial Center that would attract foreign investors to Belarus. To date, all that exists of Minsk World are concrete apartment buildings.
Mulić, the Dana Holdings chairman, said the company inherited the incentives that were built into a previous contract with a Russian company that backed out of the project. “All the incentives are awarded based on the investment laws of the Republic of Belarus after negotiations with the Minsk City Executive Committee, the Ministry of Architecture, and other relevant bodies,” he added.
Like the condos of Minsk Lighthouse, the ones at Minsk World are financed with “residential bonds,” purchases of unfinished homes in exchange for a significant, below market value discount. A sizable portion of the Minsk World bonds have been purchased by BPS-Sberbank, a Belarusian subsidiary of the Russian state-owned financial giant Sberbank. As of 2020, the bank has bought $140 million worth of residential bonds from Zomex –– nearly half of the company’s assets. Belgazprombank, another Russian-owned bank, has lent Emirates Blue Sky over $55 million through bond purchases, many times over the renamed company’s declared assets.
Read more at OCCRP
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