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: 274 - (27/10/03)
Political limbo with president ill
There is a distinct possibility, not proof as yet, that President Islam Karimov is gravely ill. The nature of the regime is such in Tashkent that outside observers are in somewhat similar a situation to Kreminologists of old. Official bulletins do not mean much. One is not dealing with an open society. Gorbachev's policy of glasnost never took off in Uzbekistan.
Back in 1991 the Soviet president of the country became the leader of an independent Uzbekistan, with the Communist Party of Uzbekistan simply changing its name to the Democratic Party of Uzbekistan. The personnel remained the same, as did the official policy, a mild version of perestroika.
One thing that did not change, indeed if anything was intensified, was a harsh repression of opposition, especially of Islamic militants. The Uzbek regime is one of the harshest in the FSU. Torture is common and abuses of human rights are rife.
The main sign that Karimov is in danger of soon dying is that he has taken a leaf out of Yeltsin's book by having the rubber-stamp parliament pass a law recently giving himself and his family immunity from prosecution should he stand down. This event itself is highly indicative. His days in office seem to be numbered.
The key question is can the Karimov clan survive the departure of the top man, Karimov himself? He always kept power firmly in his own hands, allowing no obvious successor to emerge. He was in the habit of rebuking his ministers publicly for their sins. Everything was always their fault, never his. He is not likely to be missed.
The daughter behind the throne
There is one key figure to what could happen the president's daughter, Gulnora Karimova, someone as important as Tatiana was in the last years of Yeltsin. She is only 31, but has amassed a huge business empire. It includes property and trading interests, plus the largest mobile phone provider in the country and a large cement works.
She is adviser to the foreign minister, Sadiq Safayev, which is ironic right now because she is at the centre of a complex legal battle for the custody of her children, whose father, Mansur Maqsudi, married her in 1991 when she was 19. He has asked for divorce and is no longer persona grata on Tashkent. He lives in the US and is the scion of a prominent Uzbek-Afghan family that resides in New Jersey. A US court has issued an arrest warrant against her for defying a court order to return her children.
There was a big bust-up two years ago and members of the Maqsudi clan were arrested or expelled. The family had a 55% stake Coca-Cola Bottlers Uzbekistan through its ownership of Roy Trading. But this was liquidated by the government and back taxes of $12 million were demanded, a huge sum in the impoverished country.
The UK's Financial Times (FT) of August 19th has published a special investigation that throws new light on the story. Ms Karimova was not herself available for comment.
Ms Karimova has her own parent company Revi Holdings, set up in November 2001, which operates out of the Sharjah free economic zone in the United Arab Emirates. There is also an offshoot in London, Revi UK, located in New Bond Street. Revi acquired a controlling stake in the largest mobile telephone company in Uzbekistan, Uzdunrobita, with a clinching 31.4% from the Uzbek government to add to a 20% stake already owned by Revi. Then in an even more handsome deal another Sharjah-based offshore company in the Karimova stable, United International Group, acquired a 44.5% stake in Quvasay Cement Factory, one of Uzbekistan's prize business assets. The sum paid for this was a modest, $172,853. It helps
to have the right sort of father in Central Asia.
This makes the Uzbek situation an unusually interesting one right now. The Karimov clan busted the Maqsudi one two years ago. Is another clan about to topple the
Clearly the president's state of health is fundamental to what now ensues. The regime is so tight that FT readers are likely to be far better informed about "the commanding heights" of the Uzbek economy than the Uzbeks themselves. The leading figures in Tashkent, however, will know all about it. It will be intriguing to see what happens next.
The US waits in the wings
Under the Clinton Administration the country was in purdah - almost. Strobe Talbott, Clinton's roving ambassador for the region, was especially censorious about the brutal ways of the regime. Fortunately for Tashkent two events changed everything. Firstly the republicans came power in Washington, traditionally a lot more relaxed about such matters. Secondly of course came 9:11. Uzbek support became vital for the US to proceed with the war in Afghanistan.
Washington has 1,800 troops at an air base in the southern city of Chanabad, right across the border from Afghanistan. The US extended US$500m in 2002 in aid and rent for the base. The State Department also quietly removed Uzbekistan from it's list of those countries where freedom of religion is under threat. The Uzbeks have come in from the cold in a big way. The US has extended aid and credit. The Bush Administration is keeping its eye on the long haul. It may just possibly be vindicated now.
Gazprom eyeing 87bcm purchase of Uzbekistan gas in 2004-2012
Russian gas monopoly, Gazprom, is planning to buy 87bn cubic metres of natural gas from Uzbekistan in 2004-2012. This target was announced by a company director at Gazinvest (part of the Gazprom subdivision Gazexport), Vladimir Volokitin, at a recent international conference in Tashkent devoted to regional energy cooperation in Central Asia. "Work on preparing a long-term contract for Uzbek gas procurement continues," he said, Interfax News agency reported. He did not say when this contract might be signed.
In December last year, Volokitin noted, a contract with national holding company Uzbekneftgaz was signed that stipulated five billion cubic metres of natural gas would be supplied to Russia in the period running from last June to next May. This contract is being fulfilled.
Last year also saw the signing of an agreement between Gazprom and Uzbekneftegaz on strategic cooperation in the field of gas. This agreement envisions long-term Uzbek gas buys in 2003-2012 and bringing yearly volumes to 10bn cubic metres by 2005. It also provides for joint implementation of projects in gas extraction on a production sharing basis.
Currency convertibility is announced
At a press conference on 8th October, Uzbek Deputy Prime Minister and Economy Minister Rustam Azimov told journalists that Uzbekistan has fulfilled its currency-convertibility obligations to the International Monetary Fund (IMF), Charles Carlson reported for RFE/RL.
"This letter means that we irrevocably accept the obligation that starting 15th October, all currency regulations in Uzbekistan will be made in accordance with Article 8 of the IMF," Azimov said.
According to the joint press release from Azimov and the head of the IMF mission in Uzbekistan, Erik de Vrijer, Tashkent has lifted all currency restrictions and abolished the practice of multiple currency rates.
De Vrijer described Uzbekistan's decision as an "important" economic step but said that while the move shows a commitment to economic reform, it is "not the only step needed" in the country.
The lack of a freely convertible currency was frequently cited as the single greatest barrier to Uzbekistan's economic development. The decision to finally convert the currency now means that foreign businesses are more likely to open factories in Uzbekistan, as long as it is possible to convert profits from soms to dollars or euros at a rate set by the market, not by the Uzbek government.
Measures already adopted by the Uzbek government include the abolishment of the preregistration requirement of export-import contracts, lifting the ban on payments to offshore zones, and eliminating limits on the purchase of currency both by companies and individuals.
At the press conference, Azimov noted that the funds of Uzbek citizens will soon be able to be freely converted in exchange offices, adding that, beginning on 8 October, "funds in Uzbek soms of noncitizens will be also converted according to regulations derived from Article 8 -- in other words, without any limitations."
At the same time, Azimov guaranteed that the inflation rate in Uzbekistan will not skyrocket, forecasting that the final level will not exceed 8 percent to 8.5 percent this year and around 8 percent next year.
However, with regards to price stability, Azimov said: "We cannot guarantee stability of prices because it is not the task of the government. But we can guarantee stability of monetary-credit policy, guarantee that there will not be any intervention in the monetary and inflation process from the side of the government and Central Bank."
The decision is part of an economic action plan unveiled by the Uzbek government earlier this year in an effort to satisfy the demands of the IMF. Under the plan, all barriers to currency convertibility were to be lifted.
The announcement came one month ahead of schedule. Azimov had told journalists in Tashkent in June that Uzbekistan would introduce full currency convertibility by November.
The decision to introduce the convertibility of the som follows a history of postponed and missed deadlines. In 2000, President Islam Karimov pledged to restore currency convertibility but failed to do so. As a result, the IMF closed its Tashkent office in April 2001.
Uzbekistan also missed two other deadlines last year to introduce convertibility and make other changes to liberalize trade and agriculture. The IMF consequently declined to renew an economic reform program in Uzbekistan.
But in an interview with RFE/RL in July, the IMF's De Vrijer noted that full convertibility of the som will not solve all of the problems facing the Uzbek economy. "Introducing currency convertibility is an important step for Uzbekistan, but it is not a panacea for all the problems besetting the Uzbek economy," he said. "An important thing it will do is to clearly expose the problems that need to be addressed, instead of hiding them behind the veil of an overvalued exchange rate."
Of the five Central Asian states, only Turkmenistan does not yet have full currency convertibility.
UzbekTelecom sell-off just round the corner
Uzbekistan may call a tender for the sale to foreign investors of more than half of the shares in state communications operator UzbekTelecom from October to December, Interfax News Agency reported.
The deadline for selling off the telecom group will be established once the results of an international audit are finalised. PricewaterhouseCoopers is handling the audit. Delegates from the Uzbek State Property Ministry, UzbekTelecom, and key ministries and departments, at which the results of the UzbekTelecom audit are slated for talks, convened in mid-October. The international audit of the company's condition was prompted by a recommendation by a financial consultant to the government regarding UzbekTelecom's privatisation and international consortium headed by Commerzbank AG of Germany. This is the first time the company has been audited to international standards.
For two years, the consortium has analysed the country's telecommunications sector, the legal base and UzbekTelecom's financial shape. The consortium has prepared a report on the privatisation climate and done a thorough business check-up on the company. It has also worked out a strategy for privatising UzbekTelecom, the source was quoted as saying.
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