Russia conquered Uzbekistan in the late 19th century. Stiff resistance to the Red Army after World War I was eventually suppressed and a socialist republic set up in 1925. During the Soviet era, intensive production of "white gold" (cotton) and grain led to overuse of agrochemicals and the depletion of water supplies, which have left the land poisoned and the Aral Sea and certain rivers half dry. Independent since 1991, the country seeks to gradually lessen its dependence on agriculture while developing its mineral and petroleum reserves. Current concerns include insurgency by Islamic militants based in Tajikistan and Afghanistan, a non-convertible currency, and the curtailment of human rights and democratisation.
Update No: 270 - (26/06/03)
The opponents of Islam Karimov, president of Uzbekistan, and everything he represents are on the warpath. That is in the first place the Islamic Movement for Uzbekistan (IMU). It was badly hit in the US campaign against al-Qaeda, but not irreparably. It has regrouped in the last 21 months in Pakistan, probably under the guidance of Tohir Yuldashev, their new leader after the death of their old one in the war.
The IMU has been enhanced as a menace by rumours that Gulbiddin Hekmatyar, the Afghan-Pashtun leader of the Hizb e-Islami, has shown an interest in joining forces with them. In February Hekmatyar was added to the hit list of the Americans. Hekmatyar has subsequently come out against the US as the main enemy in Central Asia. A combination of his forces and the IMU could prove to be a significant force in politics in Uzbekistan.
Karimov has made them the number one enemy of the state. He is in a way right to do so. They have several times tried to kill him.
A grim, but gamy, regime
The Uzbek regime is refusing to cooperate with the EBRD in reforms and correction of abuses of human rights, notably torture. President Islam Karimov insisted at an EBRD meeting in Tashkent in early May that his state reserved the right to use torture. He has in the past threatened to strangle religious dissidents with his own hands.
The grim and repressive regime feeds the conditions that bred such as IMU and its young, desperate militants. Actually they are an ideal foil for the regime, justifying its austere form of rule. Karimov and the IMU are bosom enemies that complement each other.
If Tashkent makes no moves towards reform and reserves its torture chambers intact, then it is highly likely that the EBRD and the IMF will withdraw from any financial role in the republic, as they have already done in Belarus and Turkmenistan next door. Karimov is not quite the pariah in the West as Niyazov is, the batty Turkmen president. Karimov has even done a deal with the US, whose emissary for the region, Elizabeth Jones, has already hauled the regime over the coals for its dismal record over human rights. Democracy and liberal ways are not for Uzbekistan so long as Karimov is in full charge.
Economy pulls through
The economy is curiously not doing so badly as all that. Officially it is the only one in the CIS (which leaves out the Baltic states) that is larger than twelve years back, being registered at 109 over 1991. Belarus and Turkmenistan, the other non-reformers, came in in the 90s. These are their own figures of course. But the IMF medicine that was accepted elsewhere has not been a wholly unmixed blessing.
The existence of firm exchange controls in Uzbekistan preserved it from the currency crash that afflicted Russia and Kazakstan in 1998, as also Ukraine and other CIS republics. The Ferghana Valley is a rich, fertile crescent of territory. Uzbekistan is not as wretchedly poor as several of its neighbours. It is the pivot of Central Asia; and the Karimov regime looks as secure as any in its region. As for Western criticism, Karimov gave his answer by quoting Kipling at the EBRD meeting. "East is East and West is West and never the twain shall meet." Not in his time at any rate!
The abundant host
The Uzbeks, 22 million strong, occupy the core of Central Asia, which makes up the Ferghana Valley. The valley is fertile, which is why people here lived here for centuries, indeed millennia.
Tashkent was the natural host to a gathering of Central Asian states for an EBRD meeting in early May. Representatives from 27 former communist states congregated in the Uzbek capital to give a good-bye party to the eight of them destined next year for EU membership - the Czechs, the Slovaks, the Hungarians, the Poles, the Slovenians and the peoples of the threefold Baltic states.
The frozen East
President Islam Karimov is a realist in international affairs. He does not believe in tolerance before the act or magnanimity after it. There is no guarantee that the 30 protestors at the meeting were exonerated, if charged.
Uzbekistan accelerates Kandym oil-gas project
Uzbekistan has taken measures to accelerate implementation of the Kandym oil and gas project. It is to be pursued on production-sharing terms together with Russian oil major LUKoil and Itera, Interfax News Agency quoted a source in the Uzbek national holding company Uzbekneftegaz as saying.
The source said Uzbek president, Islam Karimov, signed a decree on measures to draw direct foreign investment into the development of the fields of the Kandym group, Khauzak and Shady. "Acceptable expenses of investors during development of the prospected Kandym, Khauzak and Shady fields allotted for development on PSA terms are to be compensated for at the expense of compensatory products, beginning with the calendar year in which the release of commercial production begins," the document said.
The existing Uzbek law on production sharing agreements bans transferring investor's expenses to following calendar periods, which makes it impossible to compensate for most of these expenses. The decree allows Uzbekneftegaz, its joint stock companies and other organisations integrated in this system to be members of associations of legal entities acting as investors under PSA agreements.
The Uzbek Justice Ministry, together with other ministries and agencies concerned, has been instructed to put forward amendments to the acting law in line with the presidential decree within one month. The source described this document as "very important," as it would make it possible to lift the existing obstacles to signing production sharing agreements.
Azat Shamsuarov, senior vice-president of LUKoil Overseas Holding Ltd (a LUKoil branch pursuing international projects) said earlier that Uzbekistan's laws contained obstacles to the implementation of PSA projects.
LUKoil and Itera intend to pursue a PSA project on developing oil and gas fields totalling US$930m. Direct foreign investments in this project are estimated at US$760m. In July 2001, LUKoil and Itera signed a preliminary agreement with Uzbekneftegaz to develop the Bukhara-Khiva oil and gas region and prospect the Kungrad block in the Ustyurt region. The operator of the project should be a specially founded joint-stock company, in which LUKoil and Itera would hold 45 per cent each, and Uzbekneftegaz 10 per cent.
According to LUKoil, the total gas resources at 90 billion cubic metres, and gas condensate at up to 10 million
Allatex opens US$7.3m textiles plant in Uzbekistan
Allatex, a joint venture between Uzbekistan and Switzerland, has opened a textiles plant in Central Asian state, worth US$7.3m, Interfax News Agency reported. The agency said the plant has an annual production capacity of 2,985 tonnes of cotton yearn and 4.06m running metres of shirt material. All production will be exported.
Swiss group, Vimatex Inter, owns 51% of the company and Bukhorotex, a member of the Uzbeklegprom group, holds the remaining shares. The project was subsidised by Allatex charter capital and a US$5m loan from Uzbek Asaka. Vimatex has said it will open onother textiles plant by end-December. This US$7m project is currently underway in Karakalpak. The company predicts an annual production capacity of 4,000 tonnes of cotton. An Asaka loan is also financing this project. Uzbekistan is ranked fifth in terms of cotton production across the globe. It produces 3.5-3.7m tonnes of raw cotton and 1-1.2m tonnes of cotton fibre each year.
Asian Development Bank grants US$1m to Uzbekistan
Uzbekistan recently collected an Asian Development Bank (ADB)-approved US$1m technical-aid grant to help bolster corporate governance and revamp local companies, ADB said in a statement, uzreport reported.
The money will be used to develop the legal and regulatory framework for the corporate sector, start restructuring of the state-enterprise sector, and improve regulatory oversight, the report said. Under the contract, proposals on regulatory and institutional reforms will be made, in addition to measures to help develop mechanisms to involve commercial banks in the financial restructuring of the companies in question. ADB Principal Financial Economist for Governance, Finance, and Trade Ying Qian was quoted as saying Uzbekistan has accomplished much to reform state companies on the policy level and in private-sector development, "but many difficult remain on the operational level." According to him, "the weak legal environment and the underdeveloped support infrastructure - particularly financial-management systems and capital markets - contribute to poor corporate governance."
MINERALS & METALS
Construction for gold recovery plant underway
The British-Uzbek joint venture Amantaytau Goldfields has begun the construction of a gold recovery plant at the Amantaytau deposit, Interfax News Agency reported. A source in the Uzbek state committee for geology and mineral resources Goskomgeo, a cofounder, has stated that starting the construction became possible thanks to the opening of a US$36m credit line by the banks Standard Bank Group and West Lb.
The source was quoted as saying the project's timing is not changing, and the first gold from the deposit is slated for production next December. The plant will be able to process around a million tonnes of ore annually, producing up to 200,000 ounces (more than six tonnes) of gold. The price tag on the project's first phase is estimated at US$30m. An initial feasibility study indicates the second phase would cost around US$118m.
Deep ore extraction and processing is forecast at 0.5m tonnes, with gold output of more than 5 tonnes a year. When both phases of the project are completed, Amantaytau Goldfields could be producing upwards of 9 tonnes of gold annually. Aside from Goskomgeo, which is in for 40 per cent, the joint venture's other founders are Oxus Mining Plc (50 per cent) and Navoi Mining and Metallurgical Combine (10 per cent).
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