Uzbek business community torn by elite turf war

Uzbek businesses find themselves caught in the crossfire of an ongoing feud among the Central Asian republic’s ruling elite. Intrigue has rapidly developed as the health of Islam Karimov, the 75-year-old president who has ruled the country since 1991, continues to decline, with no clear successor in line for the throne.

Gulnara Karimova, President Islam Karimov’s eldest daughter, has earned an international reputation for her real estate holdings in Europe and work as a pop singer and fashion designer. In recent years Karimova also allegedly began to plan how she would succeed her father as Uzbekistan’s next president.

These ambitions, along with her financial clout, aroused consternation among other members of the ruling elite, particularly her mother, Tatiana Karimova, and Uzbekistan’s security services, which developed out of the KGB and continue to wield enormous power.

Already a pariah in many international circles for being a member of Uzbekistan’s notoriously brutal and corrupt ruling elite, Karimova was forced to resign from the position of Uzbekistan’s permanent representative to the United Nations in 2012 following multiple money laundering investigations in Europe.

She also angered Russia in the summer of 2012 by launching a raid targeting the Uzbek subsidiary of the Russian Telecommunications company MTC, whose 9.5 million subscribers made it a serious competitor to her own telecommunications business interests. Reports of her shady dealings in telecommunications continued into 2013, when Swedish prosecutors began to investigate irregular financial transactions between Karimova and the Scandanavian telecommunications company TeliaSonera. The firm had allegedly paid a $300 million bribe to Gayane Avakyan, an associate of Karimova, in exchange for a 3G license in the former Soviet republic.

Rumors then began to spread regarding fears among the country’s security elite that Karimova was plotting to seize power. Since last autumn, Uzbekistan’s National Security Service has carried out a full-scale attack on Karimova’s business holdings. In October, three radio stations and four TV networks belonging to her suddenly ceased broadcasting, claiming that they were switching to new formats. This was followed by raids targeting charities and stores under her operation by tax authorities as well as the freezing of her bank accounts.

Other members of Uzbekistan’s economic elite with close ties to Karimova are also being targeted. Darakchi, a newspaper belonging to Firdavs Abduholiqov, a close associate of the first daughter, was targeted by tax authorities last week, resulting in the freezing of its bank accounts and the layoff of many employees. Abduholiqov then fled the country.

Her cousin Akbarali Abdulaev was also arrested in October, along with the directors of a number of enterprises under his control. Abdulaev controls the entire oil and gas transportation infrastructure in Uzbekistan’s Fergana Valley, making the capture of his assets highly lucrative.

Karimova has responded to these attacks on her business interests by divulging information on corruption and Uzbek state-business relations to the international press and the broader internet via her Twitter account. In an interview with the Turkish newspaper Hurriyet Daily News in early December, she asserted that a massive money laundering network exists in the cotton industry, naming the companies and banks involved in the scheme.

The first daughter also claims to have information on the laundering operations that are run by the elite members of the country’s security services who continue to target her, as well as details about how her mother and sister carry out massive smuggling operations for goods that are sold at markets under their control.

On December 23, Karimova leaked details concerning the extortion that is carried out by the ruling clique to obtain funds for lavish annual New Year’s celebrations: each small business is required to pay about $1,000 to local officials, while large businesses must collectively “donate” $145,000 for an enormous celebration at the Presidential Palace. On December 24, the news broke that Uzbek Secret Police Chief Rustam Inoyatov reportedly had resigned from his post.

This struggle will likely only intensify as the question of who is to succeed Karimov in Central Asia’s most populous republic looms over the upcoming 2015 general elections. These circumstances will continue to erode the country’s weak business climate, as any asset belonging to the elite becomes a potential pawn and further details concerning the regime’s corrupt dealings are leaked.

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Categories: Central Asia, Politics

Author:Luke Rodeheffer

Luke is an incoming MA student at Stanford’s Center for Russian, Eastern European, and Eurasian Studies, where he is the recipient of a Foreign Language and Area Studies scholarship for Turkish. Luke was previously a Fulbright fellow in Ukraine and research assistant at Koç University in Turkey. In addition to security analysis and political risk assessment focusing on the former Soviet Union and Middle East, he enjoys hiking and writing. He has previously contributed to a variety of publications, including Business Insider, The Diplomat, The Interpreter, and the Middle East Monitor. Follow him on Twitter at twitter.com/lukerodeheffer.

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One Comment on “Uzbek business community torn by elite turf war”

  1. April 17, 2014 at 2:50 am #

    That is why nations fail, repressive political institutions, create extractive economic institutions creating abject poverty which is what ruling elites want.

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