Uzbekistan: EBRD Visit Marks Win for Liberal Faction

Top representatives of the European Bank of Reconstruction and Development traveled to Uzbekistan on March 15 for a visit that could have major repercussions for ongoing intra-elite struggles.

According to official statements, EBRD President Suma Chakrabarti and his team will hold multiple high-level meetings with Uzbek officials over their three-day stay.

The dry language of the press releases disguise the political implications.

“We already see several areas of interest, such as regional connectivity and integration, advisory services and finance for [small and medium enterprises], and the financing of green energy and energy efficiency projects,” Chakrabarti said in a statement.

The EBRD has also said it wants to help in addressing the potentially disastrous remnants of the Soviet-era uranium mining and processing industry.

This trip has been in the woodwork for a few months.

As preparation for the visit, Uzbek Foreign Minister Abdulaziz Komilov on February 6 met with  Natalia Khanjenkova, the EBRD’s managing director Central Asia and Russia. Khanjenkova said at the time that the EBRD hoped for long-term cooperation with Uzbekistan.

The EBRD’s representative office in Tashkent was opened in 1993. According to gazeta.ru, the bank carried out 55 projects in its time in Uzbekistan, investing almost 900 million euros ($950 million) into the local economy.

Things began to go sour after the EBRD’s ill-fated annual general meeting in Tashkent in 2003. Uzbekistan had lobbied hard to host the event in the teeth of recurrent reminders of the country’s disastrous human rights record. After much diplomatic wheedling by Komilov, who was also foreign minister at the time, Tashkent managed to persuade then EBRD President Jean Lemierre to row back on threats to relocate the meeting.

Uzbekistan — and the late President Islam Karimov in particular — would desperately come to rue that session of protracted courtship. The scene at the general meeting was waspishly described in the memoirs of British diplomat Craig Murray, who was London’s ambassador to Uzbekistan in the early 2000s.

“Lemierre was sharp and expressive, his tone heavy with Gallic contempt. Karimov first went ashen-faced. Then he ostentatiously removed his ear­ phone and tossed it away. Then he placed his head in his hands, covering his ears before slowly moving his hands round to close his eyes, then allow­ing his head to slump forward until it almost rested on the table. He remained in that extraordinary posture for ten minutes,” Murray wrote.

Relations between the authorities and the EBRD began to worsen from that moment on until the bank’s representative office closed in 2007. The EBRD’s operations in Uzbekistan are now limited to the support of an existing portfolio of investments spread over five projects and worth 8 million euros.

The reformist-leaning institution comes with an agenda.

In its Transition Report for 2016-27, the EBRD says a pressing priority for Uzbekistan will be to relax currency controls, which would go a long way to putting an end to the damaging two-track official and black markets exchange rates.

“Stringent currency controls in the country are having an adverse effect on the ability of businesses to carry out their export/import-related operations, and they need to be gradually removed. The exchange rate unification is also an important pre-condition for creating a more sustainable economy and improving the environment for doing business,” the EBRD noted.

The now seemingly imminent return of the EBRD hints at the continued role of deputy Prime Minister Rustam Azimov, who is listed on the bank’s website as the institution’s governor for Uzbekistan and the main booster for the doomed 2003 Tashkment AGM. Azimov was once considered a possible contender for succession to Karimov, whose death was announced in early September, so when Prime Minister Shavkat Mirziyoyev got the nod instead, Azimov’s career prospects looked poor.

But Mirziyoyev has, against some expectations, embarked on an attempted economic liberalization drive that bears hallmarks of Azimov’s more notably dovish instincts. Instead of fighting among themselves, these two men appear for now to have joined forces. That Mirziyoyev — long considered a dour, Russian-leaning, yes-man for Karimov’s cruel, autarkic regime — was recently described as a “reformist” by Reuters news agency is ample testament to how swiftly his reputation has evolved.

Wasting no time after securing power, the new president took aim at the currency black market — a bold move in view of the fact that this murky business is believed to be in the control of the powerful security services. The currency business is only one of many vested interests presumed to be in the ambit of secret police bigwigs, who shirk from talk of “liberalization” in the way vampires disdain daylight.

Reuters cited sources in the diplomatic and business community as saying that Mirziyoyev is indeed locked in a battle of wills against the aging head of the National Security Service, Rustam Inoyatov.

"Mirziyoyev is trying to show the West that he is a reformer, especially when it comes to the economy and the financial sector," one diplomatic source told Reuters. “But the security chief, Inoyatov, has a different position — he is against swift reforms.”

The arrival in Tashkent of an outside figure as senior as the president of the EBRD should, accordingly, be read as a clear signal of the West’s support for the incoming ruling set and its enthusiasm for pro-trade policies and its opposition to the security service cronies still in effect running the country.

Uzbekistan: EBRD Visit Marks Win for Liberal Faction

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