“How a large Chinese company operates in Serbia”
BELGRADE – Amid Beijing’s efforts to strengthen its influence in Serbia, Chinese tech giant Huawei has signed secret deals with people close to the country’s state-owned telecommunications company to win contracts, leaked documents show.
The first of these Serbian contracts was signed in 2007, the last in January 2014, and they coincide with a period when Huawei was establishing its first business ties in Serbia until the Chinese company became one of the most important partners. by Telekom Srbija. – signing of an agreement of 174 million dollars (150 million euros) in 2016 to modernize the country’s telecommunications infrastructure.
Hidden payments made via offshore companies have been revealed on October 25 as part of the Pandora Papers, a leak of nearly 12 million documents from 14 offshore service providers that were purchased by the International Consortium of Investigative Journalists and reported by the Organized Crime and Corruption Reporting Project (OCCRP) and the Serbia-based organization Crime and Corruption Investigation Network (KRIK).
“I think this is the first time that we have discovered a system that shows how a large Chinese company operates in Serbia,” Vesna Radojevic, KRIK journalist and one of the authors of the investigation, told RFE / RL.
The documents show secret offshore payments made to Igor Jecl, a former Telekom Srbija executive, worth $ 1.4 million in contracts, loans and consulting fees, as well as an apartment from an offshore company that was given by Huawei for “consultancy,” which financial experts told OCCRP “raises red flags for corruption.”
The Pandora Papers leak also shows that at least $ 1.16 million (â¬ 1 million) was invested in offshore companies owned by Jecl and Milorad Ignjacevic, a prominent Serbian lawyer who had commercial ties to Telekom Srbija. .
If you have consulting jobs in Serbia, what’s the deal with doing business in Serbia? Why should you hide in the British Virgin Islands or Panama? “
According to the documents, Jecl was asked to help Huawei obtain approvals and licenses, and “to invite the customer (Telekom Srbija) to make payments to Huawei in a timely and prompt manner.”
Vuk Vuksanovic, researcher at the Belgrade Center for Security Policy, told RFE / RL that while corruption in the Balkans is not unique to Chinese companies, âthis episode shows that corrupt practices are one of the reasons for which local elites are frequently receptive to Chinese. projects.”
Huawei and Pandora leaked to Serbia
Although the OCCRP and KRIK reports did not reveal explicit evidence of irregularities, analysts told RFE / RL that the offshore network and the leaked documents provide insight into how Chinese companies are winning. in influence in the Balkan nation through potentially corrupt trade and political networks.
Stefan Vladisavljev, analyst at the Belgrade Fund for Political Excellence, told RFE / RL that although much attention has been paid to Chinese activities and investments in Serbia, this case represents a rare example of evidence showing how influence is acquired.
“Chinese projects in Serbia have often been confronted with questions due to a lack of transparency and failure to follow procedures that would comply with the rules of free market competition,” Vladisavljev said. “This is a clear sign that these concerns were not without reason.”
Responding to the implications of the Pandora Papers leak, a Telekom Srbija spokesperson told RFE / RL that he would take âall necessary stepsâ regarding the allegations against him in relation to Huawei.
âTelekom Srbija operates according to the law and according to the highest corporate standards. In this regard, we will take all necessary legal measures in cooperation with the competent authorities as soon as possible, âthe spokesperson said.
In Serbia – where Beijing has a close relationship with President Aleksandar Vucic and has steadily deepened its ties over the past two decades – growing cooperation with Chinese companies continues unabated.
Vucic cemented relations with Beijing during his tenure, cooperating on infrastructure, tourism and technology projects that have brought in more than $ 10 billion in foreign direct investment since 2005. Serbia is part of the Chinese “Belt and Road” initiative and one of the main cheerleaders to establish strong ties with Beijing across Central and Eastern Europe.
Huawei is a giant in the global tech industry. While a U.S.-led diplomatic and sanctions campaign recently reduced its market share, the Chinese company is still the world’s largest supplier of telecommunications equipment and a leader in next-generation 5G technology.
The United States and other countries claim Huawei threatens their national security, saying the company is beholden to the Chinese government and could be used for espionage. Huawei has denied these accusations.
In Serbia, Huawei mobile phones are widely available with all operators in the country and the company is involved in the development of 5G networks and surveillance systems in the country as part of a âsmart cityâ initiative supported by China.
In response to questions from RFE / RL, a statement provided by Huawei said the company “has always followed international and local laws, as well as the business ethics of the countries in which it operates.” He added that “all employees of the company must comply with local laws and regulations.”
When asked about Jecl and contracts with Huawei related to offshore entities, the Chinese company told RFE / RL that “they did not have such information in their files.”
We don’t know where Jecl is. OCCRP’s repeated attempts to reach him for comment – both directly and through companies linked to his name – have gone unanswered. Records show that he no longer appears to have an address in Serbia and that his company registered in the British Virgin Islands has been closed. Attempts by RFE / RL to reach Jecl were also unsuccessful.
Beijing, Belgrade and the unanswered questions
The payments revealed by the OCCRP and KRIK reports overlap with Huawei’s global rise and enter the European market.
According to documents, an offshore company that was set up was supposed to work on behalf of the Chinese company in Serbia and Montenegro. Jecl’s stated role was to work as a sort of lobbyist to foster links with the economic and political elite and to “establish good relations with telecom operators in Serbia and Montenegro, but also with government officials” .
In addition, Huawei was supposed to receive assistance in obtaining the necessary permits to operate in Serbia and to fulfill “the obligations of the contract that Huawei and [the telecommunications operator] will sign.
âIt’s important that everything takes place abroad,â Radojevic said. âIf you have consulting jobs in Serbia, then what’s wrong with doing business in Serbia? Why should you hide in the British Virgin Islands or Panama? For Huawei and for the people we spoke about, the other question is whether there really were any consulting jobs and what these signed agreements really mean.
While the last disclosed contract dates from early 2014, Jecl continued to file invoices through offshore companies in 2016.
Radojevic says this is tied to Huawei’s growth in Serbia, having signed a contract to develop Internet TV for Telekom Srbija in 2014 and a larger deal to upgrade the company’s telecommunications infrastructure in 2016.
âThe latest invoices are from 2016, and that’s why we linked it to this big Huawei expansion in Serbia from 2014 and 2016, when they got big contracts,â Radojevic said. “It is up to Telekom Srbija itself, but also to the Serbian prosecutor’s office, to investigate what really happened and what is behind these agreements.
Written by Reid Standish in Prague based on reporting by Iva Martinovic in Belgrade.