US embassy cable - 05MINSK1146

UNCLAS MINSK 001146 
 
SIPDIS 
 
SIPDIS 
 
E.O. 12958: N/A 
TAGS: ECON, EFIN, EINV, PGOV, BO 
SUBJECT: Who's Taking over Djem Bank? 
 
Ref: Minsk 955 
 
1. Summary: Since late July the GOB has been exerting heavy 
pressure on foreign owned Djem Bank.  The National Bank of Belarus 
admitted it misused the law to take control of the bank.  It then 
revoked a number of Djem's licenses, demanding the bank return USD 
16.5 million it loaned abroad to Belarusian territory.  Two senior 
Djem officials have also been arrested, one for the fourth time. 
While this appears to be a simple case of the GOB taking over 
another business, Djem Bank blames its problems on a shadowy 
western conspiracy.  Meanwhile a Russian buyer has appeared, who 
wants to purchase a controlling stake in the embattled bank, adding 
another layer of confusion.  End summary. 
 
 
The State Takes Control 
----------------------- 
 
2. On July 25 the National Bank of Belarus (NBB) invoked a clause 
of the Law on Economic Insolvency to take control of Djem Bank and 
temporarily pass management of the bank to a rival, BelGazpromBank. 
After Djem Bank filed an appeal with the Supreme Economic Court 
(which was denied September 8), the NBB admitted that Djem Bank was 
not bankrupt or facing financial difficulties, but that this was 
simply the easiest means of gaining control of the bank (reftel). 
On August 9 the NBB passed management back to Djem Bank, but 
implemented restrictions preventing the bank from: conducting 
banking transactions in rubles, clearing foreign currency 
transaction, receiving deposits from corporations, opening 
accounts, offering banking guarantees, managing trust capital, and 
issuing new bank cards.  On August 10 the NBB announced it would 
immediately drop all restrictions if Djem Bank returned USD 16.5 
million it had lent abroad (to unnamed U.S. and Kyrgyz firms) to 
Belarus.  The NBB argued it was protecting Djem Bank's shareholders 
after the bank made high-risk loans with their deposits.  NBB 
Chairman Pyotr Prokopovich told a press conference August 29 the 
NBB had been asking Djem Bank to increase its deposits in Belarus 
since 2001, but that the bank had instead been moving its money 
from Montenegro, to Russia, to Kyrgyzstan's AziyaUniversalBank.  On 
September 4 the Belarusian Securities Committee revoked Djem Bank's 
license for securities trading. 
 
3. The State Control Committee arrested Djem Bank CEO Aleksandr 
Tatarintsev on August 10 for abuse of power (article 424 of the 
Criminal Code).  The independent BelGazeta newspaper wrote 
September 5 its sources claim Tatarintsev was arrested for 
disbursing USD one million in dividends to share holders July 25 
and 26, immediately after the NBB took control of the bank.  Acting 
Director General Sergey Bliznyuk was arrested September 12 and 
charged with exceeding his authority/abuse of power (Article 426 
Part 2 of the Criminal Code).  Both remain in detention. 
 
 
Western Plot or GOB Nationalization? 
------------------------------------ 
 
4. Representatives of Djem Bank declined to meet with Econoff, 
stating all their views are included in recent press releases.  The 
releases complain the bank's problems are all politically 
motivated.  The bank claims a number of government officials and 
others are attempting to overthrow Lukashenko by forcing Djem Bank 
into illegal activities that would destabilize the economy.  The 
bank accuses these people of being connected with unnamed western 
institutions opposed to Lukashenko that seek to privatize 
Belarusian state property by selling it to Baltic and Polish 
interests.  Djem Bank speculates this is being done to aid Belarus' 
political opposition.  As part of this long reaching plot, the bank 
announced GOB officials have conducted 141 searches of the bank 
since 1998, and provides pictures of armed and ski-masked 
government officials raiding the bank.  Djem also complains CEO 
Tatarintsev has been arrested three other times since 2003, with 
all other charges being dismissed. 
 
5. A reliable economic contact who claimed to have inside knowledge 
told Poloff that the GOB's actions against Djem Bank are an attempt 
to control easy credit in Belarus.  He said that previously only 
two Belarusian banks, Djem Bank and Golden Taler Bank - both 
private and majority foreign owned, provided easy access to lines 
of credit to local and foreign companies.  The GOB did not like 
this, as this credit remained outside GOB control.  On June 22 
Minsk police arrested Alexander Nelin, Chairman of the Board of 
Golden Taler Bank, on embezzlement charges (Article 210 Part 3 of 
the Criminal Code).  According to our contact, since then Golden 
Taler has been more amenable to the GOB's wishes.  Djem Bank did 
not surrender control to the GOB, so it is facing the current 
difficulties.  [Note: according to NBB information, Golden Taler is 
listed as a "Belarus-British" bank, which is 74 percent foreign 
owned.] 
 
 
And Djem Bank has a Buyer? 
-------------------------- 
 
6. Djem Bank is a private bank, owned 37.23 percent by Canadian 
interests, 33.12 percent by Latvian holders, 19.65 percent by 
private Belarusian individuals, and 10 percent by Russia's 
Institute of Economic Strategies.  On September 6 Russian investor 
Alexey Senin, CEO of the Slavia Charity for Support of Orthodox 
Programs and editor of the weekly journal Russian Messenger, 
announced his plan to purchase a controlling stake in the bank. 
Under Belarus law a foreign investor needs permission from the NBB 
to by more than 10 percent of a Belarusian bank.  Djem Bank 
subsequently announced it was helping Senin prepare the necessary 
documents. 
 
7. Comment: This story is unusual on many levels.  In the 
Belarusian context, the most logical explanation is that the GOB is 
trying to control access to credit as well as the local banking 
sector.  This certainly fits with other recent GOB actions 
(reftel).  In that vein, it is possible Djem Bank's press 
statements are simply an attempt to curry favor with the Lukashenko 
regime by jumping on his "blame the West" bandwagon.  However, as 
this story of persecution by a mysterious cabal also has the ring 
of the sorts of conspiracy theories often believed in the former 
Soviet Union, Djem Bank's management may believe it to be true. 
Even stranger is that anyone, let alone a foreigner, would decide 
to buy this bank as it faces such problems.  It would make some 
sense if a Lukashenko crony suddenly appeared as a buyer, but in 
the past the GOB has been extremely reluctant to sell any assets to 
Russian buyers, unless the Russian buyer is a front for other GOB 
interests.  In the murky world of Belarusian banking, it remains 
unclear for now it is unclear what is happening. 
 
KROL