UZBEKISTAN REFORMS STALL
While there are great opportunities for the private sector the best of these are awarded to those companies with the best political connections. Opacity, cartel-style behaviour and governance weaknesses continue to characterize Uzbekistan’s economy.
The Republic of Uzbekistan is a landlocked former Soviet Republic located in Central Asia. Both its location and its history mean the country is of significant strategic importance to the United States, to China and to Russia. It is a neighbour to Afghanistan, and hosts the Karshi-Khanabad Military Base, a crucial link in the US logistics chain in and out of Afghanistan. Three of Uzbekistan’s cities, Samarkand, Khiva, and Bukhara were critical points along the ancient Silk Road trading route that connected the East to the West. This makes it of great current interest to China, with President Xi seeking to restore the Silk Road under the banner of the modern Belt and Road Initiative. As a former Soviet Republic in Central Asia, it is also of profound importance to Russia, which has ambitions to create a trading bloc in the region (in the form of now-stalled Eurasian Economic Union) to rival the European Union.
Until the death of President Islam Karimov in 2016, Uzbekistan was run very much like a traditional Soviet Republic. It was isolationist, brutal, and nakedly hostile to the private sector, with wealth concentrated in the hands of government officials and their families, and power concentrated in the hands of in the country’s feared National Security Service, a domestic intelligence organization modelled on the KGB. The National Security Service, under Karimov, crushed dissent, imprisoned and tortured thousands of political prisoners, and muzzled the news media.
A classic strongman, Karimov ruled Uzbekistan from its independence in 1991 until his death in 2016. Despite his clear admiration of Soviet methods, he was deeply suspicious of Russia both in its present form and in its previous incarnation as the centre of the USSR, and resisted Vladimir Putin’s efforts to increase Moscow’s influence over former Soviet Republics. Under Karimov, Uzbekistan refused to join the Eurasian Economic Union, a Putin pet project, when it was formed in 2015.
President Shavkat Mirziyoyev (left) with Russian President Vladimir Putin at Karimov’s funeral
Upon Karimov’s death in 2016, there was some surprise when his Prime Minister, Shavkat Mirziyoyev took over as president. Even more surprising, Mirziyoyev has turned out to be far more of a reformer than anyone anticipated. Rather than simply continuing to rule as Karimov had done, Mirziyoyev made a number of sweeping changes. He has curbed the once-untouchable security apparatus in the country, introduced economic reforms to boost the private sector, welcomed back expats who fled during the Karimov regime, released political prisoners, relaxed censorship, and has taken steps to improve Uzbekistan’s dismal human rights record – notably, by dispensing with exit visas for leaving the country and by beginning to phase out the practice of dragooning doctors, nurses, students and other ordinary citizens to pick cotton for no pay and in appalling conditions during the annual harvest season.
Change is certainly underway in Uzbekistan. On the surface, these reforms make it look like Uzbekistan is moving away from authoritarianism, and is gradually easing towards the liberal democratic system of government personified by the United States. This appearance has been the source of praise and optimism particularly in the West.
Deeper analysis, however, suggests that this analysis is too simplistic. With America’s influence in the region – and in global affairs broadly – eroding rapidly, it is Russia and China who are emerging as the most significant investors and partners in Uzbekistan. While China seems to have become Uzbekistan’s most important trade partner and lender, it is Russia’s oligarchical economy that seems to be serving as the model for Mirziyoyev’s reforms.
Under Mirziyoyev, Uzbekistan is embarking on an expansive programme of privatization, deregulation and state aid. Viewed on its own, the legislation Mirziyoyev has introduced suggests that Uzbekistan is fast becoming an exciting place to invest, with plenty of opportunities for the private sector.
In practice, however, there is no transparency about how businesses are selected to be beneficiaries of the state aid and/or opportunities that this programme creates.
In addition, there is growing evidence that many of the businesses that have benefitted the most from these newly created opportunities have either unknown or heavily cloaked beneficial ownership, or can be traced directly to allies or family members of the ruling class.
This suggests that a new oligarchical class is emerging in Uzbekistan. While the country’s wealth is now perhaps flowing through different channels from channels it flowed through under the previous regime, it seems to be pooling once again in the hands of the political elite, their families, and their allies.
Reforming an economy – shaking up laws and regulations, changing ownership structures and establishing these new channels – also offers a new ruler and his coterie the ability to weaken any potential rivals located in the economic elite, reward new patronage networks, and shore up power.
This means the country is less attractive to investors that than its exciting new legislation implies. While there are great opportunities for the private sector in the country, the most lucrative of these opportunities, it seems, are awarded not to the best or most innovative companies, but to those companies with the best political connections. Opacity, cartel-style behaviours, and governance weaknesses continue to characterize Uzbekistan’s economy.
2. The good news about Mirziyoyev’s reforms
Shavkat Mirziyoyev ascended to the presidency in September 2016 following the death of President Islam Karimov. His ascension, although contested, was settled quite rapidly. Towards the end of August, it had become common knowledge that Karimov had died, with the presidents of Turkey and Georgia even sending their official state condolences. The Uzbek government, however, refused to acknowledge Karimov’s death publicly, and the state-controlled media even broadcast a proclamation Karimov had supposedly “signed” on 26 August. This proclamation announced that September 2 would be a national holiday. This national holiday afforded the Uzbek state the time to settle on a successor: right after that holiday, it was announced that Karimov had died and that Mirziyoyev was the interim president. Three months later, Mirziyoyev was confirmed in office in an election in December 2016.
Mirziyoyev had served in the government in some shape or form from the state’s inception in 1991. He began his career as a governor in a region called Jizzakh Oblast, later became governor of Karimov’s home province Samarkand Oblast, and ultimately rose to become Karimov’s prime minister from 2003 to 2016.
In the three years he has been in office, Mirziyoyev has made sweeping reforms that have undoubtedly improved the lives of ordinary Uzbeks and made the country more hospitable to business. The economy has been a particular point of focus. As Professor Kristian Lasslett, an expert on the region from the University of Ulster, notes:
The areas earmarked by the Mirziyoyev government for the most radical reform have tended to centre on the rights, interests, and operational environment of business. With strong international support, for example, the Uzbekistani government has embarked on an ambitious programme of privatization and deregulation, pump primed by state aid which has been coupled to reforms that are designed to secure property rights, deter rent-seeking, and modernise the public administration. The shape and contours of this programme is set out in a large volume of state laws, regulations and decrees.
Mirziyoyev’s reforms are viewed by many within Uzbekistan as deeply flawed, but nevertheless a positive step.
A long-term foreign businessman in Uzbekistan told us that the country is very dynamic under the new regime, and that this is a direct result of the attitude and measures taken by Mirziyoyev. According to this source, the renewed dynamism in Uzbekistan can be traced largely to Mirziyoyev’s emphasis on innovation. He has surrounded himself with young, foreign-educated professionals specializing in economics, telecoms, IT, and Higher Education. He remains very open to new ideas and has even established a special Minister for Innovation.
Our sources picked out the following improvements to the country since Mirziyoyev took power:
- Relations with neighbouring countries have improved. Some of Mirziyoyev’s reforms have centred around visas, the free movement of goods, and customs – and these have been overwhelmingly positive.
- The public sector is more responsive. The current administration created more channels for citizens to air their dissatisfaction with government, and incentivized the public sector to resolve such problems.
- Media censorship has eased, even if it has not disappeared.
- Investment in infrastructure has been good. The limited sovereign capacity is being channelled to the right investments, including electricity distribution networks, water and wastewater, road and rail.
- Economic data has become more accessible. The IMF, for instance, now has access to statistics that it would never have been allowed to see before.
- Modest human rights reform is underway. Our sources confirm that undue arrests and confinements still happen. Nevertheless, it is an improvement on what it was previously, as the government has released some political prisoners and closed the country’s notoriously harsh prison, Jaslyk.
Some sources – especially those who work for international financial institutions — also emphasized the need for patience and keeping expectations realistic. On this view, transforming a country like Uzbekistan is a decades-long project, and it is far too early to properly assess Mirziyoyev’s reforms. As the head of one of the international financial institutions in Uzbekistan put it, Uzbekistan’s label as the ‘rising hope in Central Asia’ is “creating unreal expectations. Simple reforms take years.”
3. Red flags
All the same, many people within the private sector within the country admit to some deep reservations about the changes underway.
They describe how the reform process seems to have stalled after its initial successes. While the changes enacted thus far are clearly positive, they were, these sources thought, also the changes that were the easiest to implement. Having picked off the low hanging fruit (currency conversion, for example) the country is now having difficulty with the more complex reforms of taxation policy, corporate governance, privatisation and demonopolizing.
These changes are extremely challenging in the absence of robust democratic institutions, such as an independent judiciary and civil society.
In essence, the complaints our sources raise center around two major issues:
- There is no real long-term vision, or planning for how the reforms might be implemented
- Many of the reforms serve only to provide unfair advantages to businesses owned by figures close to the president
Our contacts raised the following concerns about the reform programme, which suggest a lack of planning or vision around the reforms:
- There is a lack of qualified human capacity. The Uzbek government has opened its doors to western-educated Uzbeks to return to work for the government, but “the legacy inertia in the system as well as low salaries” are hindering these recruitment efforts.
- The reforms are being carried out too rapidly. The bureaucracy is not given enough time to get used to one reform before another is passed. This fast pace of reforms suggests that not enough thought is being given to how reforms might be implemented. This is also creating problems for investment, as given the breakneck speed of the reforms, foreign companies are unable to forecast effectively. Two lawyers told us that they are advising foreign companies not to enter Uzbekistan until “the dust has settled”.
- Reform directives from the top are also lost at the middle-management level which lacks experience in implementing such reforms.
- There is no vision about tax reform. An Uzbek lawyer told us that the legislation about taxation is unclear and “difficult to interpret”. A businessman claimed that the government’s taxation policy has not been thought through properly, and is “piecemeal and driven by competing government priorities”.
Our sources also flagged issues around a rigged economy, designed to favour certain politically connected players over others. They describe measures that seem designed to protect certain businesses from competition.
- State monopolies are just being replaced by private monopolies. Our contacts pointed out that tariffs imposed on the chocolate and cement industry seem to serve only to benefit members of Mirziyoyev’s inner circle, and to help them develop a monopoly in those sectors. Other contacts all pointed to other associates of the president receiving access to lucrative mining assets.
- Tariffs are choking small businesses. Our sources suggest that tariffs are on the rise again and are making importing certain goods ruinously expensive. The only rationale for the tariffs that are creeping back into law are that they protect the businesses of the politically connected.
- Privatization is making things more, not less expensive. Since the government privatized the energy market, prices have increased by a whopping 20%. This again suggests that the goal of privatization is not to create competition but to shore up certain people’s economic interests.
- The basic rules of conflict of interest are being violated. While there are regulations in place to prevent conflicts of interest arising, these are not being followed or enforced.
- Inequality is increasing. One Uzbek journalist said that the divide between the wealthy and the poor is increasing. Many contacts complained about the low salaries outside of the civil service (the average is US$ 50 per month!) and an increase in tariffs.
These concerns raised by our sources align with those raised by criminologist Professor Kristian Lasslett, an expert in the region who published a forensic analysis of the reforms in May 2019. Lasslett, notes that despite the positive developments in the country, there remain significant warning signs that investors ought to be aware of. He says:
“There are a lot of red flags that should cause Uzbek people cause for concern and should give the international community cause for concern that there is significant state aid being given out through very opaque decisions, without an open and competitive process, to politically exposed companies who are cloaked in corporate secrecy. And that needs to change because what investor can have confidence that they’re getting a fair deal when those types of transactions are going on, on a frequent basis?”
In his forensic report, Lasslett identifies a series of corporate and governmental red flags that should worry anyone looking to invest in the country. Lasslett’s corporate red flags center around the fact that a number of the companies receiving lucrative contracts or aid from the Uzbek government had extraordinarily opaque beneficial ownership structures. This made it impossible for Lasslett to trace who the profits of these companies would flow to.
He also sets out a series of worrying governmental red flags. The most pressing of these are that conflict of interests in government officials tasked with dispensing state funding or awarding tenders are not policed, and that the process by which companies are awarded lucrative contracts or state aid is not transparent at all.
Having companies with opaque beneficial ownership structures receiving lucrative contracts, when there is no transparency regarding why those particular companies were awarded those contracts, creates, as Lasslett points out “a serious risk that an explicitly oligarchical system will emerge, bringing with it growing inequality and instability.”
Our sources inside Uzbekistan produced corroborating evidence that Lasslett’s caution is well placed, and oligarchical system he warns of is already manifesting itself. This can be seen most explicitly in the way in which Mirziyoyev’s family and close allies have emerged as key players in Uzbekistan’s burgeoning private sector.
4. Mirziyoyev’s Inner circle
President Mirziyoyev with his family, including sons-in-law Oybek Tursunov (third from right) and Otabek Umarov (second from right)
Since coming to power, Mirziyoyev has stripped individuals who occupied influential (informal) positions in Karimov’s regime of their posts and replaced them with relatives and individuals loyal to him.
From the first days of his presidency in 2016, Mirziyoyev started directly appointing his sons-in-law to senior government positions. In January 2017, his older son-in-law, Oybek Tursunov, (42) was appointed deputy head of the Presidential Apparatus, which is responsible for drawing up and implementing the president’s internal, economic and foreign policies. He had previously fallen out of favour with his father-in-law and was sent to Moscow in the mid-2000s and expelled again in late 2018 to temporarily live in Turkey and Dubai. Since, however, he has reportedly returned to Uzbekistan.
Mirziyoyev’s younger son-in-law, Otabek Umarov (39), has worked within the Presidential Security Service since January 2017 and rose to first deputy chief of the organization in January 2018.
Among all our Uzbek contacts consulted for this assignment, Oybek and Otabek have a negative reputation for their ‘reckless’ personal behaviour and aggressive conduct – particularly Oybek, who has been involved in several hostile takeovers of companies in various sectors. Neither are renowned for their business acumen, but widely regarded as excessively privileged.
A well-connected Uzbek businessman told us that ownership of the most lucrative businesses in Uzbekistan have been divided between the two sons-in-law and Uzbek-born businessman Alisher Usmanov who has gained sweeping influence in Uzbekistan’s economy since Mirziyoyev’s ascent to power in 2016.
5. Picking up where the Karimov family left off
Former President Islam Karimov’s family, and his daughters particularly, were notorious for their ostentatious displays of wealth and for operating with impunity under their father’s rule, with diplomats describing them as ‘robber barons’.
Gulnara Karimova (centre)
His daughter Gulnara Karimova was actually placed under house arrest in 2014, partly due to a bitter falling out with both her father and her sister (who she accused of sorcery) and partly due to being implicated in an international US $865 million corruption case involving a Russian telecommunications network, which the USA’s Department of Justice described as one of the largest bribery cases in history.
Karimov’s other daughter Lola Karimova-Tillyaeva, while less ostentatious than her sister, was also understood to own or control considerable amounts of businesses in the country.
Lola Karimova-Tillyaeva and her family
Since Mirziyoyev’s ascent to power, his sons-in-law Oybek and Otabek have been generating a reputation for being, if anything, worse than the Karimova sisters had been in their heyday. According to our sources, there is now a popular expression in Uzbekistan, ‘under Karimov we had two daughters, now we have two daughters and two sons-in-law’.
One of our contacts alleged that both sons-in-law are involved in racketeering schemes, and have been methodically seizing the Karimov family’s ill-gotten assets for themselves.
A lawyer with longstanding experience in Uzbekistan told us that both sons-in-law increasingly “occupy the rent-seeking role of gatekeeping” and have extensive and ever-growing business interesting in construction, cement, and, more recently mining, where they are creating problems for international mining companies trying to operate in the country.
The late President Karimov’s wife, Tatyana Karimova, still lives in Uzbekistan and is running a charitable fund. We understand that Timur Tillyayev, married to President Karimov’s second daughter Lola, is also allowed to continue running some of his businesses.
6. The growing influence of Oybek Tursunov
Oybek Tursunov (left) with Chechen leader Ramzan Kadyrov
Oybek Tursunov is married to President Mirziyoyev’s eldest daughter Saida. According to a former government official, he was either born in 1976 or 1977. He served as deputy head of the Presidential Apparatus between January 2017 and August 2018, when he was dismissed from this role.
Oybek has long profited from nepotism, with all his business successes owing to his father-in-law’s connections to the state. As an Uzbek businessman put the point to us, Oybek has never had ‘a real job’.
When Mirziyoyev was Prime Minister, he handed Oybek a job at the Uzbek National Committee for State Supplies and Reserves. Later on, Oybek was also given a role in the representative office of state railway company Uzbekistan Temir Yollari in Moscow.
Fallouts with his father-in-law
Oddly, Oybek’s has not managed to cultivate a good relationship with Mirziyoyev, despite his complete dependence on him for his personal wealth. In the past 20 years, there have been two dramatic fallouts between the two. According to one Uzbek journalist, that Oybek has not been permanently cut off from political power, and from the wealth that comes with it, is purely a result of Mirziyoyev’s ‘high regard for loyalty above all else’.
The first fallout occurred when Oybek was banished to Moscow in the mid-2000s. During the course of our investigation, we heard conflicting versions of what triggered his exile.
The first version, which was told to us by a journalist, claims that this was the result of a murder than took place in one of capital city Tashkent’s night clubs in the mid-2000s. Oybek was allegedly behind the murder, but his father-in-law allowed him to flee to Moscow, sending one of Oybek’s accomplices to prison for manslaughter in his place. (In 2016, long after his return to the country, Oybek managed to secure his accomplice’s release from prison.)
The other version we heard, which came from a local businessman, was that Oybek had been sent to Moscow for ‘too much partying and burning someone’s car’.
The second major bust-up resulted in Oybek’s being fired from his cushy job in the Presidential Administration in August 2018.
An investigative journalist informed us that Oybek was fired as a result of his trying to extort Russian businessman Marat Kabayev. Unfortunately for Oybek, Kabayev’s family connections supersede even Oybek’s. Kabayev is the father of Alina Kabayeva, who is alleged to be Russian President Vladimir Putin’s partner. He is also the Chairman of the International Association of Islamic Business. Uzbek-born Kabayev was a prominent footballer in the Soviet Union and has established a commercial footprint in Moscow through close relations to the city’s mayor Sergey Sobyanin, as well as in Tatarstan and Uzbekistan.
Kabayev is currently conducting several oil and gas related projects in Uzbekistan. Oybek it seems, made the mistake of demanding a share of Kabayev’s profits from this venture. Kabayev raised the issue directly with Putin, who then conveyed his displeasure to Mirziyoyev.
Another incident that must have played some role in this dismissal was that Ziroat Mirziyoyeva, the President’s wife, having recently been told that Oybek was cheating on her daughter.
Once again, the genesis of this story lies in Oybek’s excessive avarice.
Following Mirziyoyev’s ascension to power in late 2016, Oybek began muscling in to the most profitable sectors of the economy. One of the companies he targeted was Uz Don Mahsulot, a wheat production and processing company. Oybek arranged for loyal proxies to be installed at the helm of this company so they could funnel a share of the profits to him.
This brought him into conflict with the director of a company called Fargona Don Mahsulot, a subsidiary of Uz Don Mahuslot. This director apparently took offense with the way Oybek and his proxies were running Uz Don Mahsulot, and retaliated by reporting an extra-marital affair that Oybek was conducting to his mother-in-law, the First Lady Ziroat Mirziyoyeva.
This combination of incidents resulted in Oybek being temporarily exiled from the country for several months. During this time he lived in Turkey and Dubai.
An investigative journalist informed us that Oybek has returned to his former post as deputy head of the presidential administration after temporarily living in Dubai. Our source added “Oybek’s friends work in the administration,” demonstrating the extent of his influence over the institution.
It is noteworthy that nearly all sources interviewed for this report commented on Oybek’s growing role in the economy. One of our contacts noted that “Oybek is the new Gulnara”, in reference to former President Islam Karimov’s eldest daughter, who dominated large swathes of the Uzbek economy during his rule.
Noteworthy Business interests
In September 2016, only a few weeks into Mirziyoyev’s interim presidency, Oybek gained control over one of the biggest markets of the country, the Abu Sakhiy Bazaar in Tashkent. The bazaar had previously been controlled by Timur Tillyayev, former President Karimov’s daughter Lola’s husband.
Abu Sakhiy was known for contraband consumer goods and their resale to local shops. Using Karimov’s influence, Abu Sakhiy also monopolized import routes to Uzbekistan and charged all other importers in Uzbekistan customs fees for using Abu Sakhiy’s routes.
Oybek also has significant investments in the banking sector. Kapitalbank Oybek owns 95% of Promadik Invest, a company incorporated in 2007 which rents and leases agricultural equipment, while his associate Ismail Muradov holds 5 per cent. In August 2019, Promadik Invest acquired 36 per cent of Kapitalbank, one of only six private banks in Uzbekistan’s state-dominated financial services sector.
Oybek also owns assets in cement production. According to a lawyer, imports of cement were hampered by the resumption of tariffs in May 2019, forcing construction firms to rely on more expensive domestic producers. The contact noted this was “an example of vested interests receiving preferential regulatory treatment.”
President Mirziyoyev ordered the construction of a new cement factory in Andijan east of Tashkent in 2017. We could not corroborate whether Oybek is the ultimate beneficial owner of this plant, however, it would dovetail with information from our contacts.
Oybek controls several media agencies, including television channels, and reportedly, owns several restaurants in Tashkent.
An investigative journalist told us that “Oybek is buying up land as well as large electronics retailers such as Fleshka and Malika.”
Oybek’s immediate family
As noted above, Oybek is married to Saida Mirziyoyeva. They have an adolescent son, Miromon, named after the president’s father, and younger daughter, Saodat. Since February 2018, Saida has been serving as deputy director of the Information and Mass Communication Agency within the presidential administration where she works on promoting the image of Uzbekistan abroad.
Batyr Tursunov, Oybek’s 72-year-old father, has enjoyed a series of prominent positions in the new regime. In 2016, he was appointed deputy commander of the National Guard, which is Mirziyoyev’s most trusted security agency. More recently he was promoted to serve as the first deputy head of the State Security Service in February 2019.
In the 1980s, during the Soviet era, Batyr Tursunov was a KGB general, prior to heading the anti-terrorism and extremism unit of Uzbekistan’s interior ministry. In 2001, under Batyr Tursunov’s watch, former parliamentarian and civil activist Shavruk Ruzimuradov was tortured to death in prison.
Ulugbek Tursunov, Oybek’s brother, serves as first deputy head of the interior ministry in Tashkent. By all accounts Ulugbek turned out to be incompetent and contemptuous of ordinary citizens’ concerns. Local public record reports assess that he was promoted solely due to his familial ties to the presidential family.
7. Otabek Umarov, cautious but trusted
Otabek Umarov was born in Kokand in the Fergana region in eastern Uzbekistan in 1979 and has been married to President Mirziyoyev’s second daughter Shakhnoza, since 2007.
He worked in Uzbekistan’s embassy in South Korea and as deputy director of state-owned company Uz Avto in Seoul, South Korea, in 2015.
Otabek joined the Presidential Security Service in January 2017, rising to become the head of the service the following year. His appointment was part of an internal power struggle between President Mirziyoyev and Rustam Inoyatov, the powerful head of the much-feared National Security Service. Inoyatov, who had led the organization since its inception in 1995, was widely considered the second most influential figure in the country after Mirziyoyev himself.
The significance of Otabek’s appointment to this role lies in the fact that the head of the Presidential Security Service had previously answered to Inoyatov, and not the president directly. But as a journalist put it to us, Mirziyoyev ‘could not afford to trust Inoyatov to oversee the Presidential Security Service anymore’.
Inoyatov was removed from his position as head of the National Security Service in 2018. That it was Otabek who was entrusted with overseeing the president’s security speaks to the president’s faith in his son-in-law.
By all accounts Otabek is less ostentatious and more cautious than Oybek, with far fewer rumours about him in circulation. However, one investigative journalist we interviewed claimed that Otabek had quietly taken a 30% stake in Orient Finance Bank.
Otabek was appointed president of the Triathlon Federation of Uzbekistan on March 7 2019. This might not sound like a significant appointment, but it is common practice in former Soviet states to use sport associations as informal power centres.
A mere three months after this appointment, it was reported that Gulnara Karimova’s villa north of Tashkent would be transferred to the Triathlon Federation, one of many examples of the Karimov family assets being acquired by Mirziyoyev’s family.
Otabek has a taste for fast cars. On 8 July 2019, Otabek was fined USD 200 after a night-time race on one of Tashkent’s main roads. Otabek was also involved in a car accident in late August, which went unreported in the media. According to our contact, Otabek was driving at 150 mph when a collision occurred, resulting in one victim being taken to hospital. According to the contact, members of the security forces protected Otabek’s identity from eyewitnesses by covering his face with a hood and quickly removed him from the scene. Our contact has matched the car that the individual was driving at the time with photographs of Otabek’s car on Instagram.
Otabek’s immediate family
According to our contacts, Otabek’s wife Shakhnoza used to live in Moscow. Along with Otabek, she also spent several years in South Korea where she worked in pre-school education and nurseries. In August 2019, she was promoted to head the policy department in the then-recently established Ministry of Pre-School Education where she had been working in mid-level positions after her father’s ascent to the presidency.
Otabek and Shakhnoza have a son and two daughters, one of which was born in Tel Aviv in 2010.
8. Alisher Usmanov
Alisher Usmanov (right) shaking hands with President Mirziyoyev
Uzbek-born Russian Oligarch Alisher Usmanov is the third member of the extended Mirziyoyev clan who has benefited extensively under the new regime. At one stage, Usmanov was said to be Russia’s richest man.
Alisher Usmanov has familial ties to the Uzbek president. His nephew Babur Usmanov, married Mirziyoyev’s niece Diyora Usmanova (neé Khashimova) in 2009. While Babur died in a car accident in 2013, Usmanov has remained close to the Miriyoyev family.
In April 2016, Usmanov and Mirziyoyev arranged Diyora’s remarriage with Batyr Rakhimov, an influential businessman in the aluminium industry and an affiliate of Salim Abduvaliyev, a purported ringleader of an organised criminal group in Uzbekistan.
Several sources we consulted for this assignment stated that Usmanov is the principal conduit between President Mirziyoyev and Russian President Vladimir Putin. One Kazakh contact with business interests in Uzbekistan stated that Usmanov in fact brokered Mirziyoyev’s ascendancy to the presidency. Numerous contacts have noted the subsequent rise of Russian influence in Uzbekistan.
According to an investigative journalist, Usmanov has also played a critical role in pushing economic reform in Uzbekistan, a move which has significantly increased the influence of oligarchs in the economy.
An Uzbek lawyer noted that “Mirziyoyev did not show any ambition for change throughout his 13 years as prime minister. It was Usmanov who influenced him and initiated the president’s reform course.”
One source noted that “some reforms are favourable to vested interests. The government has planned to impose tariffs on electronics. They want to keep foreign producers out and monopolies are being created. Usmanov is one of the lobbyists behind such reforms.”
An executive at an international financial institution noted that “many people thought that Usmanov would become president after Karimov’s death. Usmanov helped Mirziyoyev by bringing companies to Uzbekistan.” President Mirziyoyev needs Usmanov’s financial and political support to manage tensions within the Uzbek elite.
Usmanov is involved in a myriad of building projects, such as a business centre and hotel in his home region of Namangan; and a vast Islamic ‘Renaissance Center’ near Tashkent’s old town. An investigative journalist informed us that Usmanov is also developing a gold mine in Angren.
9. The Russia Connection
President Mirziyoyev (left) with President Putin
As we have seen, while Mirziyoyev has been rapidly transforming Uzbekistan, it is not clear that he is transforming it into a liberalized economy. On the contrary, the country seems to be transforming into something much more like an oligarchy modelled on Putin’s Russia, with economic reforms carefully designed to protect and enhance the business interests of family members and allies of the political leadership.
That Mirzioyev would gravitate to a Russian system is perhaps unsurprising. Mirziyoyev himself speaks excellent Russian and has the ear of Putin and his inner circle. He also recently made a huge financial commitment to buy a Russian Nuclear reactor. Russia in return is making an effort to support him. One example of this support is Russia’s decision to buy Uzbek gas that the country does not truly need.
When asked about Mirziyoyev and his leadership style, one contact commented that Mirziyoyev hadn’t seen much beyond Russia before coming to the presidency, that he is the same age as Putin and has a similar outlook.
The contact added: “he doesn’t look far away for models.”
Despite the many admirable improvements that have been made in the country, Uzbekistan under Mirziyoyev is still not a country yet low-risk from an investment point of view. While there are many opportunities for the private sector opening up, the best and most lucrative of these appear to being reserved for those with the best political connections. Moreover, both of the president’s sons-in-law, and Oybek in particularly, are operating with impunity and have a tendency to attempt to muscle into businesses that they deem to be particularly attractive.