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Unaccountable #25

VTB Capital: The Russian bank that took Mozambique for a ride

VTB Capital: The Russian bank that took Mozambique for a ride

The people of Mozambique have been battered in recent times by devastating cyclones and an increasingly virulent armed insurgency in the north of the country. The backdrop is a country battling state capture. This involves a coterie of corrupt politicians, multinational corporations and international banks.

In a previous instalment of Unaccountable we wrote about the role of Credit Suisse in the mega-looting in Mozambique. This week we turn our attention to the complicity of part Russian state-owned bank, VTB Capital.

In 2016, 14 donors and the International Monetary Fund (IMF) stopped all lending to Mozambique, plunging the country into an economic crisis. Mozambique’s currency plummeted in value by 70% and its annual GDP growth rate fell from 6.7% to 3.8%. All this stemmed from the country’s “secret tuna-bond” loans. These loans worth $2.2-billion (about R30-billion) were hidden from the IMF, Mozambique’s other lenders and donors, lawmakers and from the Mozambican public. With the help of corrupt, complicit and woefully inept bankers from Credit Suisse and VTB Capital, corrupt Mozambican politicians were able to orchestrate a mega-heist. 

The Deal and its makers

Mozambique’s tuna-bond loans were issued in 2013 to fund three new state-owned companies – Ematum, ProIndicus and Mozambique Asset Management (MAM) – purportedly as part of a project to create a tuna fishing fleet and other maritime infrastructure. Ematum was supposed to be a tuna-fishing company; ProIndicus a maritime security company; and MAM was created to facilitate maritime repair and maintenance. 

Despite the stated intention of the state-owned companies to establish extensive maritime infrastructure related to tuna fishing, they were in fact all projects of Mozambique’s intelligence agency, the Serviço de Informaçäo e Segurança do Estado (SISE). Most of the $2.2-billion loan was ultimately spent on maritime security and defence equipment that did not reach Mozambique or was poorly implemented. The Mozambican officials participating in the project were almost all SISE officials, led by António Carlos do Rosário, the SISE’s director. Other officials involved were then minister of finance, Manuel Chang (currently awaiting extradition in South Africa) and Ndambi Guebuza, the son of then-president Armando Guebuza. 

All three state-owned companies (Ematum, ProIndicus and MAM) contracted Privinvest, an international Abu Dhabi based shipbuilding group to supply fishing boats, build ports and equipment for maritime security and fishing. Privinvest boasts of clients of more than 40 navies around the world, which are primarily NATO and NATO-allied Middle Eastern countries. It’s CEO is French-Lebanese businessman and billionaire Iskandar Safa. However, Privinvest’s team on the Mozambican project was led by Jean Boustani, a senior executive who has been described as Safa’s lieutenant, and Najib Allam, the group’s CFO.

Mozambican and Privinvest officials arranged loans with VTB Capital and Credit Suisse to finance all three projects, thus the moniker “tuna bonds”. All three loans were state guaranteed; if the companies defaulted on payments, the state and by extension the Mozambican people were on the hook to repay the loans. Ematum borrowed $850-million from VTB Capital – this was the only loan disclosed to the Mozambican public. The further two loans (jointly raised from Credit Suisse and VTB), for MAM ($535-million) and ProIndicus ($622-million), were kept secret from the Mozambican public and Mozambique’s creditors. 

This financial secrecy served several purposes: First, to conceal the extent of Mozambique’s debt; second, to divert money to state security services; and to enrich Mozambique’s senior state officials, bankers, consultants and middlemen who were all in on the deal. None of the money loaned from Credit Suisse and VTB Capital ever landed in Mozambique – instead it safely sloshed around in offshore bank accounts. According to US prosecutors and investigators from US private firm Kroll, the money was paid into the Abu Dhabi-based accounts of the Privinvest Group. It then distributed the funds among the politicians, contractors and bankers who were in on the scheme. 

An audit by Kroll investigators, contracted by Mozambique’s public prosecutor, revealed that Privinvest overcharged by $713-million on the MAM, Ematum and ProIndicus projects. Kroll’s analysis of the business plans and feasibility studies for the companies indicates that they were expected to generate combined operating revenues of $2.3-billion by December 2016. However, the companies have not made any money and are entirely dependent on the Mozambican state for survival. In 2016, they began to default on their loans, leaving the Mozambican public holding the proverbial ball.

VTB – ‘Putin’s piggy bank’

While much is known about the sordid dealings of Swiss banking giant Credit Suisse, VTB Capital is an enigma in South Africa. It is the London-based investment arm of the Russian VTB Group. Headquartered in Moscow, the group’s majority shareholder is the Russian state and it provides financial services through a suite of more than 20 subsidiaries which include financial companies and credit institutions. One subsidiary, VTB Bank, has been referred to as “Putin’s piggy bank”, and was allegedly the planned financier of Donald Trump’s failed venture, the Moscow Trump Tower project. An indication of the bank’s political connections is that its chairperson is Andrey Kostin, a Soviet diplomat and close ally of Russian President Vladimir Putin. 

Following the Russian annexation of Crimea in 2014, VTB Bank and Kostin were placed on the US and EU sanctions list due to their close affiliation with the Russian state. In September 2016, both VTB Bank and VTB Capital were fined $5-million by the US Commodity Futures Trading Commission for “executing fictitious and non-competitive block trades in Russian Rouble/US dollar futures contracts”. VTB Capital has had to severely cut back its business in London. It has stated that this is due to the untenable conditions presented by Brexit, but the bank has been hit hard by the sanctions regime. Furthermore, the fallout from the Mozambican tuna-bond scheme has led to investor dissatisfaction.

A taste for risky business

According to VTB Capital’s chief executive, Alexei Yakovitsky, VTB’s competitive edge lies in its ability to do risky business, especially with African governments. In an interview with Euromoney, Yakovitsky stated: “We know that Africa is one of the riskiest regions in the world… Our competitive edge is that we are an emerging market bank and we are prepared to do business other banks won’t do. That increases our pricing power and we are able to charge for the increased risk.”

According to Kroll investigators, VTB Capital did in fact charge higher interest rates for the MAM loan than the interest rates for the Ematum and ProIndicus loans. Beyond that, the case for the loans was flimsy and there were several other suspicious or unsubstantiated payments involving Privinvest and Credit Suisse bankers. These should have raised red flags at VTB, but were ignored.

Flimsy due diligence

As we highlighted in Unaccountable 00021: Credit Suisse, the case for all of the tuna-bond loans was flimsy. Any bank official performing their due diligence requirements should have known that these loans were secretive, and thus illegal under Mozambican law. The loans for MAM and ProIndicus were not approved by parliament, the Council of Ministers, the Central Bank or the attorney-general – despite this being a legal requirement.

This explains why, on 12 May 2020, Mozambique’s constitutional court passed a groundbreaking judgment declaring the two loans worth $1.4-billion null and void. The court found that “the government acted outside the constitution, violating unequivocally the article that reserves the exclusive right of parliament to authorise to make or grant loans”.

Industry experts also found the feasibility studies on the Ematum and ProIndicus projects to be worthless, while it is unclear whether one was ever conducted for MAM. That VTB Capital and Credit Suisse proceeded with the loans despite this, and the lack of compliance with Mozambican law, reveals either woeful ineptitude or a willingness to cash in on dubious loans. 


Numerous bankers and middlemen made a mint from these secretive loans. One example of such crookery is New Zealander Andrew Pearse, the senior Credit Suisse banker on the ProIndicus bond who was paid $45-million in kickbacks by Privinvest. Privinvest also helped him set up his financial advisory business, Palomar Capital Advisors with his lover and colleague, Detelina Subeva. Documents obtained by Kroll and the US Department of Justice show that Pearse was one of three beneficial owners of a company called Palomar. The other two were Iskandar Safa and his brother Akram Safa. Palomar became a company of the Privinvest Group. 

Palomar was an integral player in the tuna-bond loans. It helped organise loans and disburse payments between Privinvest, the banks and Mozambican officials. Documents obtained by Kroll show that Palomar arranged the loan between VTB Capital and MAM. According to the Kroll report, MAM borrowed approximately $535-million from VTB Capital between May and June 2014. This money was then sent on to Privinvest, through a correspondent bank in New York. 

It appears that this money only reached Mozambique indirectly as bribe payments. Accounting statements from Privinvest’s CFO, Najib Allam, indicate that Privinvest made bribe and kickback payments to Mozambican officials using the money obtained from VTB Capital. These kickbacks included $5-million to former finance minister Manuel Chang and $13-million to António Carlos do Rosário.

While testifying in his trial in a New York court in 2019, Pearse stated that the VTB Capital executive in charge of the deal, Makram Abboud, also received $2-million in kickbacks from Privinvest. In the same proceedings, Privinvest executive Jean Boustani’s lawyers stated that paying bribes was the “cost of doing business” in Mozambique. However, Privinvest denied making payments to VTB’s Abboud. 

VTB Capital has vehemently denied Pearse’s allegations, stating that their internal investigation found that there was no impropriety by Abboud or any other VTB staff. VTB’s press office responded that they were “surprised to hear the claim in US federal court by a convicted fraudster”.

The alleged $2-million bribe to Abboud is not the only suspicious payment related to the VTB loan. According to Kroll’s audit, $40.8-million was paid to VTB Capital from Palomar’s bank account. The report found that: “The only evidence provided in support of this payment is an undated letter from MAM to Palomar in which Person references an agreement between MAM and the Contractor to make this payment. Kroll was not provided with a copy of this agreement and it is not currently clear why the Contractor agreed to pay USD 40.8 million due from MAM to VTB Capital, or why the payment was made by Palomar”.

These are common features of the Mozambican tuna-bond scheme: State secrecy, the unanswered questions, the omissions and obfuscations,  unaccounted money, and the conspicuous absence of shipping vessels and equipment worth $2.2-billion. It has resulted in a litany of lawsuits spanning three continents. Many of these lawsuits have been brought by the Mozambican government against Privinvest, Mozambican officials and Credit Suisse, for their role in impoverishing the country. 

The Credit Suisse bankers – Pearse, Singh and Subeva – pleaded guilty to bribery and wire fraud in the US in 2019. Privinvest and Iskandar Safa are currently being sued in the UK by the government of Mozambique, for “conspiracy to injure by unlawful means; dishonest assistance; knowing receipt and on proprietary claims”, and for bribing Mozambican government officials and the three Credit Suisse bankers who arranged the ProIndicus loan.

Yet, VTB’s lawsuit against the Mozambican state in British courts to enforce repayment of the loan is perhaps the most audacious and potentially impactful. Despite the ruling of Mozambique’s constitutional court and VTB’s own failings, VTB Capital initiated proceedings against MAM and the Mozambican government in 2020 for missing repayments on the loan. As of 2019, MAM and Mozambique owed VTB Capital $817.5-million. The case could entrench a dangerous precedent whereby a poor country and its people are held ransom by a bank for an “odious debt” incurred against the interests of its people and without their consent.  

An odious debt

Mozambique’s constitutional court has set aside the loans after an application by Mozambican civil society. The coordinator of the Mozambique Budget Monitoring Forum, Adriano Nuvunga, said: “The debts are not owed by the people of Mozambique, so we should not have to repay them. International action is needed to prevent loans being given in secret in future.” Mozambicans are paying a heavy price for this debt. Already some of the poorest people in the world, Mozambicans have had to endure spending cuts on essential services as they face natural disasters and conflict. 

The legal doctrine of odious debt has been used to justify the cancellation of debts in a decolonial context, such as in Cuba in 1898 and Algeria in 1962, and at the end of dictatorial regimes like Iraq in 2003. It has yet to be applied in the context of a corrupt, self-serving regime, yet debt campaigners around the world, including the Committee for the Abolition of Illegitimate Debt and the Jubilee Debt Campaign, believe that Mozambique’s case is one of odious debt. 

Reacting to reports that Russian State bank VTB had filed the case against Mozambique and MAM in the UK high court, Sarah-Jayne Clifton, director of the Jubilee Debt Campaign, said: “It is outrageous that UK authorities have so far taken no action against the London banks behind these secret, odious loans… The law should be changed here to make it clear that for a debt to be enforceable against a government, it must have been publicly disclosed when the loan was given.”

Ordinary citizens should not have to pay the debts of corrupt politicians enabled by equally corrupt bankers. “The debts are not owed by the people of Mozambique.” Instead of more pain for the people of Mozambique, VTB Capital, Credit Suisse and the other corporations complicit in the corrupt loans should have to account for their role in a scheme that has left destruction in its wake. DM

Open Secrets is a non-profit organisation which exposes and builds accountability for private-sector economic crimes through investigative research, advocacy and the law. Tip-offs for Open Secrets may be submitted here.

Previous articles in the Unaccountable series are:

Unaccountable 00001: Dame Margaret Hodge MP – a very British apartheid profiteer

 Unaccountable 00002: Liberty – Profit over Pensioners

Unaccountable 00003: Dube Tshidi & The FSCA: Captured Regulator?

Unaccountable 00004: Rheinmetall Denel Munition: Murder and mayhem in Yemen; 

Unaccountable 00005:National Conventional Arms Control Committee: handmaiden to human rights abuse?

Unaccountable 00006: Nedbank and the Bank of Baroda: Banking on State Capture.

Unaccountable 00007: HSBC – The World’s Oldest Cartel

Unaccountable 00008: FNB and Standard Bank- Estina’s Banks

Unaccountable 00009: McKinsey – Profit over Principle

Unaccountable 00010: Jacob Zuma – Comrade in Arms

Unaccountable 00011: Thales – How to buy a country

Unaccountable 00012: John Bredenkamp – Agent of BAE Systems

Unaccountable 00013: Fana Hlongwane – Agent of BAE Systems

Unaccountable 00014: BAE Systems: (Profit) Before Anything Else

Unaccountable 00015: The BAE Corruption Bombshell

Unaccountable 00016: Deloot- How Deloitte gets away with it.

Unaccountable 00017: EY- Incompetent, Negligent or Criminal?

Unaccountable 00018: KPMG at the heart of State Capture 

Unaccountable 00019: IRBA – soft-touch audit regulator in turmoil

Unaccountable 00020: Credit Suisse – An enabler of mega-looting in Mozambique

Unaccountable 00021: Bain & Company – The KGB of consulting 

Unaccountable 00022: The Chinese Railway Rolling Stock Corporation: China Inc boards the State Capture train

Unaccountable 00023: How Prasa was looted and left for scrap

Unaccountable 00024: Auswell ‘tall-trains’ Mashaba: The middleman who derailed PRASA


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