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Abu Dhabi, UAEMonday 18 June 2018

British MP pockets almost Dh150,000 a month from troubled Kurdish oil firm

Iraqi-born Nadhim Zahawi earns a handsome wage at Gulf Keystone while shareholders have seen their investment all but wiped out

Conservative MP Nadhim Zahawi (R) pictured at the Conservative Party Conference in 2010 with then British prime minister, David Cameron. (Peter Macdiarmid/Getty Images)
Conservative MP Nadhim Zahawi (R) pictured at the Conservative Party Conference in 2010 with then British prime minister, David Cameron. (Peter Macdiarmid/Getty Images)

Prominent British MP Nadhim Zahawi is pocketing almost £30,000 (Dh145,656) a month for his role at troubled Kurdish oil explorer Gulf Keystone, causing disquiet among investors who have watched its share price crash over the past five years.

According to the latest register of MPs’ interests, the Conservative politician — who is of Iraqi descent — earns a monthly salary of £29,643 as chief strategy officer at the oil firm, which operates in Iraqi Kurdistan.

That’s more than the average Briton makes in an entire year.

On an annual basis, it works out as £356,000 and he also received a bonus payment of £253,200 in January.

Taken by itself, Mr Zahawi is doing nothing wrong. Parliamentary guidelines allow MPs to take on second jobs, provided they declare every outside interest.

But for Gulf Keystone’s long-suffering shareholders, the latest revelation of his earnings has provoked anger after their investment in the company was all but wiped out. Once a darling of the stock market, the shares have collapsed by more than 99 per cent since 2012.

A 1-for-100 share consolidation at the end of last year means that today’s share price of 104p is equivalent to 1.04p in "old money" … which is a long way off its high of 425p.

“Most investors are absolutely furious,” Justin Urquhart Stewart, co-founder of Seven Investment Management, told The National.

“This is not how you treat shareholders. The payments made out to various people involved in the firm, right from the get-go, seem to have been out of all proportion for the amount of business success.”

He added: “I’m afraid I regard such businesses operating with things like this as being highly suspicious and frankly businesses that no sensible investors should go near.”

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Read more:

RAK Petroleum’s DNO pulls out of offer to buy Gulf Keystone

Iraqi Kurds’ ambitions tied to ability to keep energy sector on track

Genel Energy another victim of Kurdish geology

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In the MPs’ register, Mr Zahawi states he spends “between eight and 21 hours per week” in his role at Gulf Keystone. This, too, has raised eyebrows given the high amount of compensation he receives for so little time. “If I were paying someone £29,000 a month, I’d expect more than a part-time effort involved,” Mr Urquhart Stewart noted.

Mr Zahawi did not respond to a request for a comment, but a spokesman from Gulf Keystone confirmed “he doesn’t work full-time — he’s clearly got commitments as an MP”.

The company has been dogged by geopolitical tensions in the Iraqi ­region, which have flared up again in recent weeks following the disputed Kurdish independence vote.

According to the spokesman, that is precisely the rationale for paying Mr Zahawi so handsomely, given his expertise and contacts in the region.

“He knows Kurdistan extremely well. It is an extremely complicated area — recent events show that more starkly than ever. So being able to navigate those complexities, to have the sort of relationships that he does … that is invaluable,” he said.

“Yes, he’s earning a lot of money. Does the company think that’s a worthwhile investment? Clearly they do, because if you get that wrong, then your field, your operations, are worth nothing.”

The company, like many other oil companies, has also been saddled with high amounts of debt, adding to its woes. It tried and failed to find a buyer, and subsequently underwent a financial restructuring last year, bringing its debt level down to US$100m (Dh367.3m) from $600m. As if that wasn’t enough, it also had to deal with ISIL on its doorstep and the collapse in the oil price. “It was a perfect storm,” the spokesman said.

He acknowledged all of this has put a strain on shareholders, which include the likes of Blackrock, Lansdowne Partners, MAN Group, Taconic Capital and Capeview Capital.

“Are shareholders angry? … Of course they are. The Gulf Keystone story is not a straightforward one,” he said. “No one says it has been an easy ride for those guys.”

He added: “Are they annoyed about Nadhim, and salary, and all the rest of it? Yes, undoubtedly. But when you explain to them that without that sort of skill set you’re in a precarious position, I think people recognise that it’s a prudent commercial decision.”

Expertise or not, Mr Urquhart Stewart isn’t convinced that this sort of remuneration makes sense.

“£29,000 is more than the average salary for British people for a year, and you’re getting that on a part-time basis? No, no, no. That is outrageous,” he said.

“This is a company that has been badly run for the benefit of a minority, and that minority is generally not the shareholders. And considering the shareholders are the owners of the business, I regard that as frankly disreputable.”

It is not the first time Mr Zahawi has brushed with controversy. In 2013, he was caught up in the MPs’ expenses scandal after admitting he made taxpayers foot the bill to heat the stables on his private estate. The millionaire MP apologised for the “mistake” — which saw him take £5,822 from the public purse — and pledged to pay back the money that was wrongly claimed.

His role advising another Kurdish oil company, Afren, also didn’t end well. The company went bust in July 2015 following an executive pay scandal and a cash crisis triggered by the oil price slump. Last month, Afren’s former chief executive and chief operating officer were charged with a £300m fraud that allegedly contributed to the company’s collapse.

Mr Zahawi told The Sunday Times he had “absolutely nothing to do with the executive decisions at Afren” during his time as adviser. He added: “My role was specifically to do with finding a buyer for the Kurdistan assets.” He took on his role at Gulf Keystone shortly after Afren went under.

His CV also includes a stint as adviser to disgraced Tory peer Jeffrey Archer, and he ran YouGov with another of Mr Archer’s aides, Stephen Shakespeare.

Mr Urquhart Stewart believes the British public should be concerned about this “dubious” history.

“I expect people in politics to have a good and high standing in whatever areas they are covering,” he said. “If you’ve got someone in politics who has a dubious business background, then I regard that with a high level of suspicion and the public should be concerned about that.”

If the people of Stratford-on-Avon, where Mr Zahawi has been MP since May 2010, share investors’ concerns about his various business dealings, it is not being reflected in their votes. He was not only re-elected as MP in this year’s general election, but also increased his majority to more than 20,000.

That may be more a reflection of the town’s voting bias rather than the candidate, however. The birthplace of William Shakespeare is one of the safest Conservative seats in the country, having been held by the party since 1950 when the seat was formed.

“It’s not a place where you get much cultural diversity, it’s a wealthy town,” John McDermott, secretary of the Stratford-on-Avon Labour Party, told The National.

Mr McDermott described Mr Zahawi’s various business controversies “utterly disgraceful”.

“But it hasn’t affected his standing in the community, I’m sorry to say. The mass of the Conservative voters here don’t seem to care.

“He claims never to neglect his constituents because all his outside work takes place on the weekend. The guy’s an utter scoundrel.”

Mr Zahawi’s constituency office declined to comment, claiming his involvement with Gulf Keystone was “nothing to do with his work as an MP”. There was no response from his parliamentary office.

The Gulf Keystone spokesman insisted that Mr Zahari is and will continue to be an integral part of the executive leadership team.

“At the moment, the [parliamentary] rules allow us to draw upon the expertise of people like Nadhim, and we think that’s in shareholders’ best interests. So we will continue to use him. We think it’s the right thing to do, we feel he clearly adds a lot of value.”

Mr Urquhart Stewart, however, warned that the company’s governance record casts a negative light on the London market more broadly.

“In order to build up trust, [companies] need to be seen to be having good governance and control. And I’m afraid this company has got a reputation for diametrically the opposite, all the way through.”

He added: “It’s not just about the shareholders. The reputation of this company reflects badly on people in business, and on the exchange itself.

“Companies should not be behaving like this.”