Mozambique has “implicitly suggested” that a government guarantee on a $535 million loan might not be valid, state-run Russian bank VTB , which lent most of the money, said in a London court filing.
The money lent by VTB was one of three multi-million dollar loans that funded a project encompassing tuna fishing, maritime security and shipyard development in Mozambique and is now at the heart of a $2 billion debt scandal.
Hundreds of millions of dollars went missing in what U.S. authorities have alleged was an elaborate front for a bribery and kickback scheme.
Mozambique remains on the hook for the money, but has contested the validity of a government guarantee on one of the other loans, $622 million which was lent by Credit Suisse. The Swiss bank has denied a claim it is liable to pay any damages to Mozambique and has submitted a counter claim arguing that the African state should have to repay its loan.
Mozambique has tried to restructure the loan from VTB, which in December filed a lawsuit against state-run Mozambique Asset Management (MAM) and the state after talks failed.
“In correspondence, [the Republic of Mozambique] (both directly and indirectly through its solicitors) has purported to reserve its rights in relation to the MAM guarantee and has implicitly suggested that the MAM facility and/or the MAM guarantee may not be valid and binding,” the filing, submitted to the London High Court and dated Feb. 24, said.
Mozambique’s attorney general’s office did not immediately respond to a message seeking comment. A representative for VTB did not immediately respond outside office hours. VTB was seeking a declaration that the guarantees are in fact enforceable, the filing shows. VTB is seeking a sum of just over $670 million, the outstanding balance of the loan plus interest, or damages for breach of contract.
The filing is the first suggestion that Mozambique could try to nullify the guarantee on the loan by VTB, which had previously not been involved in any related court proceedings.
VTB filed its lawsuit in a year when Mozambique and Russia were working to strengthen ties, with Mozambican President Filipe Nyusi visiting Russia twice in 2019.
The debt scandal has already sparked court cases spanning London, New York and South Africa, involving global investment bank Credit Suisse, three of its former bankers, Mozambique’s former finance minister and a past president’s son.
Credit Suisse, which Reuters reported on Monday is now a target of investigations by U.S. authorities, and VTB provided or arranged loans totalling around $2 billion for the project, but the supposed benefits never materialised.
Credit Suisse has said it is cooperating with authorities.
Mozambique did not disclose some of the loans, which were guaranteed by the state. The International Monetary Fund and other donors cut off support when they came to light in 2016, triggering a currency collapse and a debt default.