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The US is stepping up pressure on Uzbekistan after a New York-listed telecommunications operator had its Uzbek licence suspended and five of its local managers were jailed.
The US Commission on Security and Co-operation in Europe warned of “a deterioration in bilateral ties” and a “chilling effect on foreign investment” if the executives of MTS were not released from jail, and if an Uzbek investigation into the company’s subsidiary in the country was not handled with more transparency.
A copy of the commission’s letter to President Islam Karimov was seen by the Financial Times as annual bilateral talks between the US and Uzbekistan began in Tashkent on Thursday. The US body, also known as the US Helsinki Commission, is headed by Christopher Smith, a Republican congressman, and Benjamin Cardin, a Democrat senator.
The US relied on Uzbekistan’s Karshi-Khanabad air base during the invasion of Afghanistan, but relations were strained after Washington condemned Mr Karimov’s regime for the 2005 massacre of hundreds of Uzbek civilians in Andijan. The US was asked to abandon the air base a few months later.
The current saga with MTS appears to echo problems faced by other western groups in the region, including London-listed Oxus Gold, Newmont Mining of the US and Wimm-Bill-Dann, the Russian dairy producer which is now part of PepsiCo.
Coca-Cola, meanwhile, found itself the subject of a $100m arbitration lawsuit after it became entangled in the divorce between Gulnara Karimova, the president’s daughter, and Mansur Maqsudi, once the largest shareholder in Coca-Cola’s Tashkent bottling factory. The two parties settled the lawsuit confidentially.
MTS’s difficulties began in June when Bekzod Akhmedov, head of MTS Uzbekistan, disappeared; his whereabouts are currently unknown. Shortly thereafter, Uzbek authorities accused MTS of owing the state over $900m in outstanding tax payments. MTS has denied any wrongdoing.
The company’s Uzbek licence was cancelled indefinitely by a Tashkent court earlier this month after the telecoms regulator ordered the company to shut down its network the same day. On July 17 more than 9m Uzbeks – nearly a third of the country’s population – were left without mobile service, forcing them to queue for hours for a new SIM card from one of MTS’s competitors.
Four Uzbek managers at MTS have been in jail since June. A fifth, who is of Russian nationality, was released earlier this month and given permission to fly back to Russia this week just as US-Uzbek bilateral talks were beginning.
While MTS operates primarily in Russia and the CIS, more than a third of its 47 per cent free float is owned by US funds, with Lazard Asset Management and Blackrock being among the biggest shareholders. The company has a market capitalisation of $19.1bn.
AFK Sistema, the Russian holding owned by the oligarch Vladimir Yevtushenkov, owns the remaining 53 per cent of MTS.