April 14, 2010

Prokhorov's Zimbabwe ties: Violation or loophole?

More on prospective Nets owner Mikhail Prokhorov's Zimbabwegate: International sanctions expert Usha Haley tells the Village Voice (okay, tells me) that despite the Russian billionaire's denials that he's had direct business dealings with associates of Zimbabwean dictator Robert Mugabe, she's still convinced that he's in violation of U.S. sanctions: "They have been working with Zimbabwe's officials that have been banned by the U.S. government — there's no doubt about that." In South Africa under apartheid rule, she notes, her research found that most international sanctions had little impact on companies' behavior, precisely because they were able to maintain business as usual via arm's-length agreements: "They erected facades, putting all kinds of administrative barricades between themselves and their operations in South Africa. In spirit, they violated these sanctions. And that's what I'm saying is happening with Prokhorov — except it looks like the trail is hotter with Prokhorov."

Whether the violation is of the spirit or the letter of the law, however, remains unclear. SW Radio Africa reports that "Prokhorov, through his Renaissance Capital investment bank, snapped up a significant shareholding in the government owned Commercial Bank of Zimbabwe Holdings in 2007." However, it adds:

The saving grace for Prokhorov, as exiled investment banker Gilbert Muponda explains, is that CBZ Holdings is not on the US targeted sanctions list. This is despite its key role in the sourcing of funds that sustained the oppressive Mugabe regime. Current Reserve Bank governor Gideon Gono ran the bank as Chief Executive for several years, earning a reputation as Mugabe's personal banker. Muponda told us that CBZ was now the country's biggest bank in terms of deposits, largely owing to help and support from the central bank chief and former boss, Gono.

(Thanks to Atlantic Yards Report for the link.)

The big question here is what the U.S. Treasury Department, which has jurisdiction over sanctions law, will do, and they ain't talking. Though they do have a really impressive list of things they can do to sanctions violators, if they want.