Identifier
Created
Classification
Origin
07YEREVAN272
2007-03-09 13:47:00
CONFIDENTIAL
Embassy Yerevan
Cable title:
CONCERN OVER PROPOSED IFC LOAN TO ARMAVIA
how-toVZCZCXYZ0001 RR RUEHWEB DE RUEHYE #0272 0681347 ZNY CCCCC ZZH R 091347Z MAR 07 FM AMEMBASSY YEREVAN TO SECSTATE WASHDC 5053
C O N F I D E N T I A L YEREVAN 000272
SIPDIS
SIPDIS
E.O. 12958: DECL: 03/09/2017
TAGS: ECON EAIR PGOV AM
SUBJECT: CONCERN OVER PROPOSED IFC LOAN TO ARMAVIA
REF: 06 YEREVAN 666
Classified By: CDA A.F. Godfrey for reasons 1.4 (b,d).
C O N F I D E N T I A L YEREVAN 000272
SIPDIS
SIPDIS
E.O. 12958: DECL: 03/09/2017
TAGS: ECON EAIR PGOV AM
SUBJECT: CONCERN OVER PROPOSED IFC LOAN TO ARMAVIA
REF: 06 YEREVAN 666
Classified By: CDA A.F. Godfrey for reasons 1.4 (b,d).
1. (C) Econoff recently met with local International Finance
Corporation (IFC) head Nerses Karamanukian to raise post's
concern about a proposed USD 11 million loan to Armenian
national air carrier Armavia. Over the past year, Armavia
has been plagued by financial problems and the company is
owned by Mikhail Baghdasarov, an Armenian oligarch of dubious
reputation. The extent of Armavia's difficulties became
apparent when an Armavia flight crashed into the Black Sea in
May 2006. At that time, Executive Director of Armenian
International Airports Juan Pablo Gechijyan (protect) told us
that the crash could have been anticipated given the growing
number of serious safety problems on Armavia flights. He
also told us that Baghdasarov was in arrears to the airport
in excess of USD 1 million for landing fees and other charges
(reftel). Indeed, Armavia's reputation is so poor that some
international organization, including UN organizations, do
not permit official travel on Armavia flights.
2. (C) Econoff raised these concerns with Karamanukian who
reassured us that there would be provisions in the IFC loan
agreement to ensure that Armavia improves its safety,
maintenance and financial management practices. Post,
however, remains concerned about the commercial viability and
political prudence of this loan. Indeed head of KPMG Armenia
Andrew Coxhall (protect) told us that KPMG had been
approached to provide the audited financial statements
required for the IFC loan agreement, but when it became clear
that KPMG was unwilling to guarantee a clean audit, Armavia
chose to have the audit done by a less expensive (and
presumably more corruptible) local auditor.
3. (C) Post understands that the IFC Board will be
considering the Armavia loan proposal in the coming days.
Given Armavia's poor business practices, the dubious
reputation of Armavia's owner and suspect nature of the
firm's audited financial statements, post urges that this
loan application be given the utmost scrutiny.
GODFREY
SIPDIS
SIPDIS
E.O. 12958: DECL: 03/09/2017
TAGS: ECON EAIR PGOV AM
SUBJECT: CONCERN OVER PROPOSED IFC LOAN TO ARMAVIA
REF: 06 YEREVAN 666
Classified By: CDA A.F. Godfrey for reasons 1.4 (b,d).
1. (C) Econoff recently met with local International Finance
Corporation (IFC) head Nerses Karamanukian to raise post's
concern about a proposed USD 11 million loan to Armenian
national air carrier Armavia. Over the past year, Armavia
has been plagued by financial problems and the company is
owned by Mikhail Baghdasarov, an Armenian oligarch of dubious
reputation. The extent of Armavia's difficulties became
apparent when an Armavia flight crashed into the Black Sea in
May 2006. At that time, Executive Director of Armenian
International Airports Juan Pablo Gechijyan (protect) told us
that the crash could have been anticipated given the growing
number of serious safety problems on Armavia flights. He
also told us that Baghdasarov was in arrears to the airport
in excess of USD 1 million for landing fees and other charges
(reftel). Indeed, Armavia's reputation is so poor that some
international organization, including UN organizations, do
not permit official travel on Armavia flights.
2. (C) Econoff raised these concerns with Karamanukian who
reassured us that there would be provisions in the IFC loan
agreement to ensure that Armavia improves its safety,
maintenance and financial management practices. Post,
however, remains concerned about the commercial viability and
political prudence of this loan. Indeed head of KPMG Armenia
Andrew Coxhall (protect) told us that KPMG had been
approached to provide the audited financial statements
required for the IFC loan agreement, but when it became clear
that KPMG was unwilling to guarantee a clean audit, Armavia
chose to have the audit done by a less expensive (and
presumably more corruptible) local auditor.
3. (C) Post understands that the IFC Board will be
considering the Armavia loan proposal in the coming days.
Given Armavia's poor business practices, the dubious
reputation of Armavia's owner and suspect nature of the
firm's audited financial statements, post urges that this
loan application be given the utmost scrutiny.
GODFREY