Getting hard currency in and out of Uzbekistan, with its notoriously tight controls over cash flows, is about to become even harder as Tashkent brings into force draconian new checks over bank transfers that will hit investors and individuals, foreign and local alike.
The new rules, announced by the UzDaily.uz website on June 17, launch a new monitoring system that forces banks to report a wide range of bank transfers into and out of Uzbekistan to the tax authorities. The report said the rules were approved on June 12, but did not specify when they will come into force.
For foreign companies, these include fines received from local partners via transfer for breaching agreements. Dividends or profits repatriated abroad to foreigners who have founded companies in Uzbekistan also come under the rules. (The right to repatriate profits is theoretically assured to foreign investors under Uzbek legislation, but frequently breached due to the Byzantine hoops through which they must jump to repatriate their money.)
The rules also cover payments to non-residents for sales of shares in Uzbekistan-based businesses and of property in Uzbekistan, which will hit both foreign companies and foreign individuals.
The rules aren’t just targeted at foreigners: Uzbek citizens will also be hit as the transfers they receive and make come under scrutiny. Any transfers abroad from Uzbek banks by individual account holders above the equivalent of $10,000 per calendar year will come under the microscope, as will all transfers from abroad to their accounts from foreign companies.
Transfers of funds via international services such as Western Union and MoneyGram – used by many labor migrants abroad to send remittances home – are not covered by the rules.
Water was the hot topic as the leaders of Kazakhstan and Uzbekistan met in the Uzbek capital, Tashkent, on June 14.
Kazakhstan’s president, Nursultan Nazarbayev, struck a conciliatory note over access to Central Asian water resources, a subject which Uzbek leader Islam Karimov last year warned could lead to war.
“A great deal depends for our future on how [Central Asian states] cooperate and trust each other and together resolve our questions without hindering other states,” Nazarbayev said in remarks quoted by state news agency Kazinform.
“Our approaches on many aspects, including the water problem in the region, coincide,” he said of Kazakhstan and Uzbekistan. “And we want to send a friendly message to our neighbors that we ourselves have to resolve these questions. There are no unresolvable problems and questions.”
Speaking of the plans of neighboring Kyrgyzstan and Tajikistan to build hydropower projects on Central Asian rivers upstream, which Karimov strongly opposes, Nazarbayev said disputes could be resolved “only on the basis of negotiations and the strengthening of mutual trust, without confrontation.”
Karimov has long been a vociferous opponent of plans by Tajikistan and Kyrgyzstan to complete long-stalled hydropower dam projects -- Rogun on the Vakhsh River (the headwaters of the Amu-Darya) in Tajikistan and Kambarata on the Naryn River (which becomes the Syr-Darya) in Kyrgyzstan.
It doesn’t suggest confidence in a currency when a prominent company refuses to accept it. That’s especially true when the company is owned by the same folks printing the money.
Uzbekistan Airways, the Central Asian country’s state-run flag carrier, reportedly plans to limit the number of tickets it sells in exchange for Uzbekistan’s national currency, the sum.
The airline will adopt quotas to limit its intake of the hapless Uzbek sum from July 1, report Uzmetronom.com and Fergana News. Under the new rules, only World War Two veterans, some disabled, some business travelers, and those attending the funerals of immediate relatives may continue to purchase tickets for sums, Uzmetronom – a site believed to be used to distribute leaks from Uzbekistan's security services – reported June 7.
"All other citizens will have to buy tickets in US dollars,” Uzmetronom said. Cash only, it added.
Moscow-based Fergana News notes that the airline stopped accepting sums for trips originating outside of Uzbekistan in August 2011.
Anyone holding a sack full of sums won’t be surprised. Authorities have long failed to eliminate the black market for the currency. Dollars are currently exchanging hands at about 2,750 sums each, while the official exchange rate stands at 2,085 sums to the dollar. Even at official rates, though, it is difficult to get any bank to part with its dollars.
Fancy entering Uzbekistan’s telecom market? Russian mobile giant MTS's assets are up for auction and can be yours for about $300 million.
MTS, which was the largest mobile operator in Uzbekistan until last summer, withdrew from the country’s scandal-ridden telecom sector this year after it became embroiled in a shady taxation dispute that looked more like an official asset grab.
A "committee of creditors" of MTS's Uzbekistan subsidiary, O'zdunrobita, has decided to auction off the firm's assets, the Uzbek State Committee for Privatization, De-monopolization and Development of Competition announced through its Biznes-Daily Media website on June 3.
Officials set a reserve price at 600 billion sums (about $290 million at the official exchange rate), Biznes-Daily Media said. The deposit required to register for the auction is 20 percent of the reserve price ($58 million). Bidders may submit their applications by 6 p.m. Tashkent time on June 28. The auction will be held July 1.
In some ways, it's a deal. Last year, Michael Hecker, MTS's vice-president for strategy and corporate development, put the value of the company's Uzbekistan assets at over $1 billion.
Making sense of Uzbek economic figures is a difficult task. With no way to verify official data, observers must parse the limited information Tashkent drips out. And those official stats often appear more like a wish than reality.
So take the following in that spirit.
Citing parliamentary budget committee papers, the Novyy Vek newspaper reports that Tashkent posted a budget surplus worth 0.4 percent of GDP in the period from January to March this year.
The surplus stood at 86.7 billion sums ($41.6 million at the official exchange rate) in the first quarter of 2013, Novyy Vek said on June 4. Budget revenue was $2.58 billion (24.8 percent of the first quarter GDP) and expenditure totaled $2.53 billion (24.4 percent). The newspaper did not provide budget figures for 2012, but said the 2013 national budget was approved with a deficit of $575.5 million, or 1 percent of GDP.
"The main factors increasing the state budget's revenue … are the expanding tax basis and increasing tax collection," Novyy Vek reported, citing the parliamentary documents.
While local income and corporate tax rates have stayed largely unchanged over the past year, Tashkent increased the petrol tax by 20 percent in 2013 and has slapped unpopular new excise and customs duties on a wide range of imports, sparking inflation fears.
Another foreign telecoms firm appears to have been paying millions of dollars to various charities in Uzbekistan, some of them linked to Gulnara Karimova, strongman Islam Karimov’s flamboyant daughter. The revelations come in the wake of reports that Nordic telecoms giant TeliaSonera paid Karimova’s charities to stop harassment from Uzbek officials.
Malaysia's state-owned Petronas oil and gas company will jettison all its hydrocarbon investments in Uzbekistan this year, a company representative has said. Meanwhile, a small company registered in an offshore tax haven is eager to ramp up its exploration projects in the Central Asian country.
"This decision by Petronas is final. The Uzbek government is now preparing documents that will make it possible to legally complete the process of exiting from upstream projects," an anonymous source at the company told Russia's RIA Novosti news agency on May 24. The move is in line with "the company's general strategy to optimize its activities in the region."
The source said that Petronas had already stepped away from production-sharing agreements on two projects: a gas condensate field on the Ustyurt Plateau adjacent to the Aral Sea and the Boysun oil and gas field in the Uzbekistan's south. These PSAs were signed between 2008 and 2010, RIA Novosti said.
It is unclear exactly why Petronas is bowing out. Large foreign investors in Uzbekistan have been known to face harassment from excessively attentive officials looking for kickbacks. But the company has been scaling back operations in Uzbekistan for some months, declaring in April that one project turned out to be commercially unfeasible. Overall oil and gas production in the country has fallen in recent years.
Federal authorities in Idaho have arrested an Uzbek man on suspicion of conspiring with the Islamic Movement of Uzbekistan, a Washington-designated terrorist group, and providing the organization with bomb-making training.
The arrest of Fazliddin Kurbanov, 30, comes only weeks after news emerged that the alleged Boston Marathon bombers hailed from the former Soviet Union. It is likely to fuel growing concerns in the United States about terror threats emanating from the ex-Soviet states, which regional leaders are already eager to exaggerate to justify their widespread repression against followers of Islam.
Some media in Uzbekistan have seized the opportunity to link Kurbanov to refugees who found asylum in Idaho after Uzbek authorities opened fire on unarmed civilian protestors in the eastern town of Andijan in 2005. Tashkent has long alleged it was battling Islamic militants that day and has sought to tar the refugees as radicals. But the Uzbek media attempts to make a connection are extremely tenuous.
The Associated Press reports that Kurbanov was arrested May 16 in Boise after a grand jury charged him with "conspiracy to provide material support to a foreign terrorist organization," "conspiracy to provide material support to terrorists," and "possession of an unregistered explosive device." The indictment alleges that Kurbanov provided money and computer software to the Islamic Movement of Uzbekistan (IMU) "to be used in preparation for and in carrying out an offense involving the use of a weapon of mass destruction."
After causing a storm of speculation by alleging that Uzbek President Islam Karimov had suffered a heart attack in March, exiled opposition leader Muhammad Solih has said he sees no role for himself in a post-Karimov Uzbekistan.
In an interview with the Moscow-based Fergana News website published on May 16, Solih – who many feel discredited himself with the rumor – insisted his information on Karimov's heart attack and subsequent bedridden condition was accurate and said that Karimov’s appearance looking alive and well on state television several days after the reports surfaced did not contradict his information.
Solih said it had taken his group 15 hours to verify the heart attack and confirm it with "several sources" inside the Uzbek government. "According to our information, the day Karimov suffered a heart attack he had an argument with his daughter, Gulnara [Karimova]," Solih told Fergana News editor Daniil Kislov.
Solih explained that the argument between father and daughter was caused by Karimova’s "frivolous" behavior: Uzbekistan's powerful security service, the SNB, intercepted material compromising Karimova before it appeared in the Russian press to "save the family."
That part is certainly credible: Karimova is a dilettante, an aspiring pop star and fashion designer who posts sultry pictures of herself wearing negligee on the Internet: Enough to embarrass any father.
"And she is partially to blame for his suffering such an attack," Solih explained, "but I absolutely did not think that there would be such a fuss about the heart attack because something similar could happen to anyone."