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It took all of 14 minutes for a court in Uzbekistan to revoke the licence of Russia’s MTS, the biggest mobile proer in the country. The case, heard last month, resulted in around 40 per cent of the country’s citizens waking up to find their mobile phones had been cut off.
Guilty verdicts in a separate, criminal, case against MTS employees that concluded last week look set to prompt the full government expropriation of the Uzbek arm of MTS, which the Russian parent company says it has invested around $1bn (£617m) in over the past eight years.
The case again turns the spotlight on a country with one of the world’s worst human rights records but which has been courted by the West due to its strategic importance.
As a Russian company used to working in the thorny markets of the post-Soviet world, MTS hoped it would be immune from the shakedowns that have hit other companies operating in Uzbekistan. The Russian telecoms giant, however, has been forced to write hundreds of millions of pounds of cash and assets off its balance sheet after the ruthless pursuit of its Uzbek arm.
“This is the biggest telecoms proer in Central Asia, and we’ve been subjected to a classic shakedown,” says Michael Hecker, MTS’s vice president for strategy and corporate development.
“It was systematically expropriated, with fundamental violations of human and procedural rights. It’s just unbelievable.”
Since MTS bought Uzdunrobita, a small local mobile company, in 2004, the business has gone from strength to strength. But earlier this summer difficulties began as the company’s local CEO disappeared, apparently reacting to a tip-off that problems were afoot.
Shortly afterwards, five members of the top management were arrested. One of them, a Russian citizen, was released after pressure from the Russian foreign ministry, but the four Uzbek citizens remained in jail, as hundreds of other company employees were brought in for questioning.
One of the arrested managers was put in handcuffs and paraded in front of other MTS employees called into the prosecutor’s office as witnesses, Vladimir Kozin, a Russian lawyer hired by MTS, told The Independent from Tashkent.
The intimidating tactic was meant to give them an idea of what could happen if they did not give the “right” eence, he claims. By the time lawyers were allowed in to the interrogation rooms, the witnesses had already signed statements, which were then submitted to the court with no discussion or questioning.
Uzbekistan has long had a poor human rights record, including the use of enforced child labour to pick cotton, allegations of systematic torture in the prison system, and a massacre of hundreds of unarmed protesters in Andijan in 2005. It has been ruled since the Soviet collapse by President Islam Karimov, and his socialite daughter Gulnara Karimova has been cited by several foreign investors and Western diplomats as a powerful business magnate who controls much of the country’s economy.
Ms Karimova has always denied being the owner of a wide range of business interests in the country. However, in one of the only interviews she has ever given to Western media, Ms Karimova told The Independent in 2004 that she owned the majority stake in Uzdunrobita just before it was sold to MTS.
MTS declined to comment on whether they paid Ms Karimova when they bought the company in 2004, or whether they ever negotiated directly with her.
The Uzbek embassies in Russia and the US did not respond to requests for comment; neither did an official in the Uzbek Prosecutor’s Office. Carolyn Lamm, a US lawyer who has acted for the Uzbek government in legal cases before and led a delegation of US business representatives to Tashkent in August, insists that the case is simply about following legal regulations.
She told The Independent from Washington that while she has not worked on the Uzbek case against MTS, “what I heard around the Business Forum was that they failed to pay their taxes and were not operating legitimately”.
She insists that “Uzbekistan is a great place to invest”.
In the conclusion of the legal case against the MTS employees, the four men were convicted of a litany of offences last week including tax evasion, abuse of power, forgery and the bizarre-sounding “pseudo-entrepreneurial activities”. The men were released from prison, but were sentenced to over $700m of fines, which the court ordered to be gathered by seizing assets from MTS. Lawyers say the four are too afraid to launch an appeal.
Mr Kozin says that the criminal case, which involved over 60,000 pages of eence, was heard in just two weeks, while the separate case that stripped MTS of its operating licence took just 14 minutes. Chaos ensued as millions of people across the country were left with non-functioning SIM cards. “I have worked in Russia and across the region since 1988 and I have seen a lot of things but I have never seen anything quite like this,” said Mr Kozin.
Mr Hecker of MTS describes the whole situation as “entirely ridiculous from every kind of sensible or acceptable kind of legal standard”.
He says it has been impossible for MTS to get “anyone serious to the negotiating table” in Uzbekistan to discuss the case.
Analysts agree that it looks like a classic case of expropriation, and say the circle of people who could sanction such an audacious move against the largest foreign investor in the country is small.
“It is hard to believe this could be done without explicit authorisation from the very top of the Uzbek government,” says Steve Swerdlow, Central Asia researcher for Human Rights Watch.
He added: “To say that due process is violated in these proceedings is an understatement. It is yet another warning signal about the dangers of doing business in Uzbekistan and another reminder of the arbitrary nature of the state and its rulers.”
Gulnara Karimova: the ultimate ‘it girl’
The eldest daughter of the Uzbek President Islam Karimov, Gulnara is the ultimate Central Asian “It girl”.
She has attempted to emerge from her father’s shadow by embarking on projects such as clothing and jewellery design, and most recently as a pop singer.
Using the name Googoosha, apparently her father’s pet name for her, she has paid for an advertising campaign in the US calling her an “exotic Uzbek beauty”. US diplomatic cables said Gulnara, 40, is assumed by many Uzbeks to control numerous businesses in the country, which she denies.
