Turf tussles involving Uzbekistan’s cellular phone market indicate that clan infighting is intensifying behind the scenes in Tashkent.
A report published September 20 by the Uzmetronom news website, which frequently features leaks from well-placed sources, announced the opening of a criminal case against Abdulla Aripov, who was fired as deputy prime minister in August. He is allegedly facing corruption charges for illegally granting licenses to O’zdunrobita, the Uzbek subsidiary of Russian cell phone giant MTS. Owned by Russian oligarch Vladimir Yevtushenkov, MTS became embroiled this summer in a taxation dispute that forced the company to write off more than $1 billion in losses.
Meanwhile, another company operating in Uzbekistan's cell phone market, TeliaSonera (whose largest shareholders are the Swedish and Finnish states), is under fire over allegations of shady payments for rights to operate in Uzbekistan. The case is allegedly linked to a money-laundering investigation in Switzerland.
Amid the scandals, one name keeps popping up -- that of Gulnara Karimova, eldest daughter of strongman President Islam Karimov. A woman of many talents, Karimova is known to dabble in diplomacy, entrepreneurship and entertainment, using the stage name Googoosha when she takes on her pop diva persona.
The General Prosecutor’s Office in Tashkent could not be reached to confirm the Aripov arrest report, which Uzmetronom attributed to “trustworthy” sources.
Aripov, whose portfolio included the telecoms sector, looks set to take the fall for the MTS controversy, which made international headlines. MTS says charges of wrongdoing laid against it by Tashkent are “totally absurd and groundless,” and amount to a pretext for the state’s expropriation of its property.
The news of the case against Aripov -- formerly an influential player who had survived as deputy prime minister for a decade -- suggests that a clan war is taking place behind the scenes within Uzbekistan’s secretive ruling circles. Uzmetronom’s report offered a hint that the Aripov case may be a bid to deflect unwelcome attention away from Gulnara Karimova, who owned O’zdunrobita before selling to MTS in 2004.
“Unlike the eldest daughter of the head of state, who is hardly likely to grasp pricing for services of this type, the deputy prime minister -- being a specialist in the field, and furthermore invested with great powers -- orients himself wonderfully in this sphere,” the Uzmetronom report stated.
Analysts believe that in the Uzbek economy, where power is wielded by a coterie of players close to Karimov and his family, someone is making a play for MTS' slice of the telecom pie. Tashkent is in the process of seizing MTS’ assets in Uzbekistan, estimated to be worth $700 million, and four O’zdunrobita executives have been found guilty of corruption.**
The name Karimova – whose reportedly rapacious business practices led to her being dubbed a “robber baron” in one US diplomatic cable publicized by WikiLeaks – has repeatedly surfaced in media reports about the MTS affair, amid speculation that she might have wanted to take back a slice of the lucrative cellphone market.
Karimova is also under fire in the TeliaSonera case. In mid-September, Swedish broadcaster SVT aired allegations that TeliaSonera -- which owns the Ucell mobile phone company in Uzbekistan -- paid hundreds of millions of dollars to “a small, one-woman company in a tax haven” called Takilant Limited, which is run out of Gibraltar by Uzbek national Gayane Avakyan. The payment was ostensibly made in exchange for the rights to operate in Uzbekistan.
Avakyan, according to the SVT report, is “very close to the Uzbek dictator’s daughter Gulnara Karimova, and is also the focus of a major money laundering investigation recently launched by Swiss authorities.” Hundreds of millions of francs have been frozen in Swiss banks in that investigation, which involves four Uzbek nationals, two of whom are under arrest in Switzerland.
Avakyan could not be reached for comment, and a request for comment e-mailed to Fund Forum, a charitable organization run by Karimova, was not immediately answered. TeliaSonera Chief Executive Lars Nyberg has acknowledged that his company paid around $350 million for licenses to Takilant (money which SVT could find no trace of in public records), but denied any wrongdoing.
The telecoms scandals have rattled investors' nerves and once again highlighted the perils of doing business in Uzbekistan’s hostile investment environment. There are also signs that the telecoms cases may also be rattling nerves within the ruling elite.
**An earlier version of this story incorrectly stated that four MTS employees had been found guilty of corruption and jailed. They were found guilty, fined, and released.
Joanna Lillis is a freelance writer who specializes in Central Asia.