Nicholas Watson in Prague -

As a new Albanian government takes power promising to clamp down on corruption and European Commission President Jose Manuel Barroso raises the possibility the country could be granted EU candidate status later this autumn, the future for this impoverished part of Europe looks brighter than it has done for years. Yet as recent events over the ownership of the country's sole refiner show, there's still a long way to go.

On September 10, Albania's president officially appointed Edi Rama as the country's new prime minister, and the following day his Socialist Party-led government, which won 83 of parliament's 140 seats in the June election, presented a programme for its 2013-2017 term of office that is designed to further the country's progress in joining the EU.

Among the top priorities are reforming the judicial system and establishing a National Bureau of Investigation to fight against organised crime, corruption and trafficking. The government's anti-corruption policy will focus on prevention, increasing transparency in state institutions and punishing corrupt individuals, it said. There are certainly enough to choose from; after eight years under the thumb of former prime minister Sali Berisha, Albania now finds itself in Transparency International's "Corruption Perceptions Index" down in 133rd place out of 174 countries, the economy dominated by oligarchic and criminal interests.

Case in point is the former state-owned refiner ARMO, which in August suddenly switched hands in a deal blessed by the outgoing government. According to documents filed with Albania's National Center of Registration (QKR) on August 8, controversial businessman and Berisha crony Rezart Taci appears to have sold his shareholding in ARMO to a mysterious company called Heaney Assets Corporation, which is connected to Azerbaijani interests. Heaney Assets, whose ultimate owners bne has been unable to determine, paid €35m for Taci's stake in AMRA Oil, which in turn controlled 85% of ARMO's stock. The rest of the refiner's shares remain in the hands of the Albanian government. The QKR documents also show that Heaney Assets paid almost €15m for minority stakes in several other companies controlled by Taci, including Europetrol, Taci Oil and Kuid.

According to reports and comments from officials, the financial state that Taci left ARMO in explains why the purchase price was so low; Taci bought the refiner in 2009 in a dodgy privatisation for €128.7m. According to various sources, ARMO owes Albania's state oil producer Albpetrol about €25m, and there were other debts taking the total up to as much as €120m. Taci is believed to have also had an unpaid loan of €75m from the Bank of Azerbaijan. The Azeri bank sued him for the money in August 2012, but withdrew the lawsuit after a few days, according to reports and sources.

According to an August 25 interview with Eno Bozdo, at the time the deputy minister of economy, trade and energy, in the Albanian economic weekly Monitor, the new owners of ARMO have pledged to honour all the firm's debt obligations. Bozdo also claimed in the interview that the Ministry for the Economy, Trade and Energy was "kept in the loop" regarding the talks between Taci and Heaney Assets, and signed off on the deal due to "the financial predicament in which ARMO recently found itself."

Old tricks

The financial state of ARMO and the murky way it was offloaded is not a total surprise, say observers.

First, it has been clear for some time that Taci was in financial difficulties. In February, the previous Albanian government was humiliatingly forced to cancel the winning bid from a consortium headed by Taci in the tender for state oil and gas firm Albpetrol after it failed for two months to come up with a down payment. It later turned out, as bne has reported, that the 10% bank guarantee put up by Taci's Vetro Energy to back its €850m bid for Albpetrol was a fantasy, meaning the government couldn't claim it as recompense.

Even before that the nature of Taci's victory in the October 2012 tender for Albpetrol was being called into question. The initial announcement on October 3 by Prime Minister Berisha that Albpetrol was to be sold to a "US-run consortium" had everyone applauding, hoping for a new era of transparency and investment for the country's most valuable strategic asset. It was only days later that it shockingly emerged that the winning consortium Vetro Energy was actually 51% owned by Taci. You couldn't blame Taci for using this trick, as it worked so well three years previously with the tender for ARMO. Then, Taci used a previously unknown Swiss company to close the deal, and shortly afterwards he re-registered ARMO under the Taci Group.

For Gary Kokalari, founder of Albanians for a Democratic Albania, which is involved in fighting corrupt practices in Albania, this was merely one of several reasons why the privatization of ARMO was illegal. "First, ARMO was supposed to be a strategic privatization of a state-owned asset, and there is no legitimate government in the world that would have allowed a last-minute switch to occur as was the case with the insertion of Taci into the ARMO deal at the 11th hour," he says. "Not to mention my belief that Taci was not a financially qualified bidder, as is now well known and I also believe [tender advisor, US law firm] Patton Boggs should have discovered this from the start. Furthermore, to my knowledge Taci never lived up to the terms of the deal, and the terms included the requirement that he invest several hundred million dollars for completion of the acquisition and for capital expenditures to modernize the facilities. We now know he never had the funds, instead from day one he started milking the company like a fat cow and drove the business steadily into the ground."

The timing of the ARMO sale to Heaney Assets is also interesting, rushed through as it was in the window between Berisha conceding the election on June 26 and the new administration taking control in September. There's no equivalent in Albanian to the Russian word krisha, which literally means "roof" and refers to protection that a business enjoys from important people higher up, but the sentiment still applies in this fairly lawless country. "It doesn't take a genius to figure out that Taci rushed to sell ARMO while Berisha was still in power because they were both desperate to protect their interests," says Kokalari. "In my opinion, there were suspicious circumstances surrounding the privatization of ARMO and the subsequent sale by Taci, and the new Albanian government should immediately investigate the transactions to determine if fraud was committed. If so, the government should seize the assets and start over again."

The question, though, is whether this new government has the appetite to investigate past shady deals or will prefer to let sleeping dogs lie. After all, Rama has a very full in-tray, with the crumbling and unreconstructed economy at the top of the list. "The economic challenges Albania faces are familiar, and enormous," says Gerald Knaus of the European Stability Initiative. "There is the prospect of short-term crises. There is concern about an energy supply crisis later in the year. Some worry about discovering the true state of public indebtedness following an audit (including all unpaid bills by Albanian public institutions which will come due). The motor of previous growth, the construction sector, has come to a halt. At this moment there is almost no credit being given to Albanian companies by banks, a disaster if the goal is structural change."

All that suggests chasing dodgy businessmen down meandering legal avenues for past misdeeds may not be that high on the agenda. Much will depend on the EU, which has already rejected twice Albania's membership applications but looks minded to confer candidate status by the end of this year. bne's previous discussions with Brussels about shenanigans in Albania suggests that they too have their eye set on the future rather than the past.