Leaked US diplomatic cables have detailed the sway of the well-connected over Uzbekistan’s economy. One 2008 cable memorably described the rush for assets as “a fairly brazen, at times seemingly desperate grab by [Uzbekistan’s] elites for portions of the Uzbek economic pie.”
It also spoke of “a steady drumbeat of complaints from foreign investors” – and four years on, the list of disappointed investors continues to grow, encompassing Western, Turkish, and Asian firms, as well as Russian ones like MTS.
The case of UK-based company Oxus Gold illustrates the risks faced by bold investors venturing into Uzbekistan’s high-stakes economy. Following sustained pressure (including the imprisonment of a company metallurgist for 12 years on espionage charges), Oxus agreed to sell its 50-percent stake in the Amantaytau Goldfields mining operation to its Uzbek partners last year – but its troubles did not end there.
Oxus accused the buyers of understating the value of its share and remains locked in litigation, seeking $400 million at international arbitration over what company lawyer Robert Amsterdam has bitterly described as “an ongoing campaign to fabricate a reason to steal the last foreign assets in the mining industry in Uzbekistan.”
Turkish-owned businesses have also come to grief. The once popular Demir supermarket in downtown Tashkent stands shuttered after its owners quit Uzbekistan amid disagreements with authorities; investors in another Tashkent store, Turkuaz, fared worse: one is serving a three-year jail sentence on tax evasion charges, seven other Turks were convicted on the charge, but deported, and Turkuaz (renamed Toshkent) is doing a roaring trade under Uzbek management.
The list goes on: Indian textile firm Spentex Industries this spring lodged a $100-million compensation claim with Tashkent after “bankruptcy was thrust upon it;” Denmark’s Carlsberg suspended operations this year over what it described as a “shortage of raw materials.”