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Central Asia Report: April 19, 2005


19 April 2005, Volume 5, Number 14

WEEK AT A GLANCE (11-17 April) Kazakh President Nursultan Nazarbaev initiated a new anticorruption campaign with a decree on 15 April, revamping disciplinary councils to keep officials in line, ordering the financial police to draw up a 2006-10 anticorruption plan, and introducing measures to make procurement more transparent. Earlier in the week, the president swapped the heads of the Central Election Commission (CEC) and Justice Ministry -- Zagipa Balieva, who had led the CEC since 1996, will now take over the Justice Ministry, while former Justice Minister Onalsyn Zhumabekov will replace Balieva at the helm of the CEC.

Bermet Akaeva, the daughter of ousted and now former President Askar Akaev, created a stir when she returned to Kyrgyzstan to take up her seat in parliament, although she quickly agreed to stay away from the legislature until the courts and Central Election Commission rule on disputes over her election. U.S. Defense Secretary Donald Rumsfeld visited, meeting with U.S. military personnel at the U.S. air base near Bishkek and with acting President Kurmanbek Bakiev in the capital. Bakiev said that Kyrgyzstan will continue to honor its commitments to the United States, but noted that he doesn't see a need for any additional foreign forces in the country. Rumsfeld wished the country's new leadership well in "building a stable and modern and prosperous democracy." Kazakhstan's Seimar Investment Group acquired BiTel, Kyrgyzstan's largest mobile-phone operator, although the Prosecutor-General's Office issued a reminder that it is looking into BiTel, which is widely rumored to have ties to the ousted president's family (see story below). And acting President Bakiev apprised parliament of his government's plans on 15 April, promising the implementation of a "100 day economic plan," tough measures against corruption, and swift action to counter a rash of land seizures that has wrought havoc in the capital.

Tajikistan's Foreign Ministry asked diplomatic missions and international organizations to provide advance warning of their contacts with local civil-society groups, arguing that some Tajik organizations have used such meetings to "distort the strategy and tactics of Tajikistan's state policy." The Asian Development Bank announced that it has allocated over $110 million for projects in Tajikistan over the next three years. Anatolii Chubais, the head of Russia's Unified Energy Systems, visited, vowing that Russia will complete the construction Tajikistan's Sangtuda-1 hydropower plant by 2009. Lieutenant General David Barno, commander of the U.S.-led coalition in Afghanistan, came for talks on security issues with Tajik President Imomali Rakhmonov. For his part, the president addressed a joint session of parliament, warning that recent events in Kyrgyzstan might unnerve investors, hailing improved relations with Russia, calling for a renewed fight against corruption, and urging international organizations in Tajikistan to stick to their statutes and mandates.

Turkmenistan resolved its price dispute with Russia over natural gas, as Turkmen President Saparmurat Niyazov and Aleksei Miller, the head of Russia's Gazprom, agreed that Russia will now pay cash for gas, with the price remaining $44 per 1,000 cubic meters. Previously, Gazprom had paid half in cash and half in kind. Earlier this year, Turkmenistan had halted shipments in an attempt to secure a price raise. President Niyazov and his Iranian counterpart, Mohammad Khatami, attended the official opening of the Friendship Dam on the Turkmen-Iranian border, both praising the facility as a symbol of blossoming relations. Other Turkmen links to the outside world deteriorated somewhat, however, as the Communications Ministry refused to extend the licenses of a number of international shipping companies, including DHL and FedEx.

In Uzbekistan, a human rights group announced that the government carried out an execution on 1 March, and the UN Human Rights Committee issued a statement sharply criticizing the government action. A group of journalists, several of them from Britain's Institute for War and Peace Reporting, asked the Interior Ministry to confirm or deny internet reports of impending measures against them; Deputy Interior Minister Alisher Sharafuddinov complied, meeting with the journalists and denying the report. Alisher Khujaev, a physicist who until recently headed the Communications Agency, replaced Abusaid Kuchimov as the director of Uzbekistan's Television and Radio Company. And a retired woman in Tashkent set herself on fire to protest a government campaign to destroy small garden plots near residential dwellings; she was hospitalized in serious condition.

HOW WEALTHY ARE THE AKAEVS? Among the factors that brought down former Kyrgyz President Askar Akaev, popular dissatisfaction loomed large.

Arguably, nothing fueled that discontent so much as the perception that Akaev's rule had foundered in massive, near-total corruption.

Arkadii Dubnov, a journalist who follows Central Asian events closely for Russia's "Vremya novostei," provided a tidy summation in a 3 April discussion on Deutsche Welle: "One of the main problems in Kyrgyzstan, as in the rest of the post-Soviet world, is a fantastic level of corruption. In this respect, Kyrgyzstan stands out because corruption there meant that the Akaev family controlled all financial flows, all levers [of influence], all big business, as well as medium and small business. This was known not only in Kyrgyzstan, which was one of the reasons for the uprising, but also beyond its borders."

Difficult To Prove

The rumored holdings of the Akaev family include some of the best-known assets in Kyrgyzstan. "Argumenty i fakty" published an incomplete list on 13 April, citing "unofficial information" as the source: BiTel, the country's largest mobile-telephone operator; the Narodny supermarket chain; the Airek media holding; resorts on Lake Issyk-Kul; liquor producers; and even gas stations. But while such lists are easy enough to find in the Kyrgyz and Russian media, they fall short of accepted standards of legal proof. As Kanat Amankulov, the head of the legal department in the Prosecutor-General's Office, told Kyrgyzstan's "Delo No" on 14 April, the issue is not so much legal ownership but rather control, which is even more difficult to prove. Amankulov stressed that his office has no documented proof of ties between the various companies popularly linked to "the family" and actual members of the Akaev clan.

Amankulov went on to enumerate a number of businesses currently under investigation. They include the above-noted Airek and BiTel, both allegedly controlled by Aydar Akaev, the former president's son; as well as Aalam Service Ltd. and Manas International Service, which sell jet fuel to the U.S. air base in Kyrgyzstan and were reported by the "Financial Times" on 22 July 2002 to be controlled by presidential son-in-law Adil Toigonbaev. Amankulov said that future investigations will target the Narodny supermarket chain and Meerim, the charitable foundation run by the former president's wife. He also noted that the investigations are a tough proposition, stressing that an audit of BiTel's financial transactions is making slow progress. Deputy Prime Minister Daniyar Usenov had suggested as much on 7 April, saying, "Certain problems have come up in the audit of BiTel," Kabar reported. Still, Amankulov suggested that preliminary checks have turned up evidence of financial chicanery. He told "Delo No," "We know that Aalam Service's monthly revenues from selling jet fuel were $20 million-$30 million, but the company's profit for the last fiscal year was $1,000. What does that tell you?"

'The Family Piggybank'

In the wake of the upheaval on 24 March that felled Akaev, there is considerable impetus for just this sort of rapt attention to his family's holdings. Deputy Prime Minister Daniyar Usenov said, "The people demand that we check the property holdings of President Akaev, and the government must carry out this demand," Russia's "Nezavisimaya gazeta" reported on 5 April. Almaz Atambaev, the head of the Social Democracy Party and a declared candidate for president, was more categorical, announcing on 7 April: "Only the property that [Akaev] has declared will be retained. As I understand it, the declaration indicates an old Mercedes and an apartment. Let them keep that," akipress.org reported. Rina Prizhivoit, a longtime foe of the ousted president, expressed widespread sentiments in an 8 April article in MSN when she wrote: "If one compares the financial flows that streamed for several years into the family piggybank from the alcohol and sugar industries, the Kant Cement and Slate Plant, from jet fuel shipments, from BiTel, [the newspaper] Vechernii Bishkek and the ad agency Airek, casinos, restaurants, etc., with the taxes that trickled in to the state, the one gets a sense of the extreme greed and omnivorous appetite of the 'holy family.'" Acting Finance Minister Akylbek Japarov even put a number on the supposed influx to the "family piggybank" at a news conference on 8 April (although he did not explain how he arrived at it), saying that the Akaevs received $1.2 million-$2 million every 40 days-to-two months from their various holdings, Kabar reported.

But as Amankulov's comments about ownership and control suggest, the groundwork involved in a thoroughgoing investigation of the Akaev family's assets will be considerable. It will also require strong political will. Some suspected that the will was already flagging when acting President Kurmanbek Bakiev recently remarked that he saw no obstacles to Adil Toigonbaev's return to Kyrgyzstan, Kabar reported on 14 April.

A complex blend of regional and ethnic factors is also at play on this particular front -- Toigonbaev hails from Kazakhstan, a potential source of much-needed investment in Kyrgyzstan. National Bank head Ulan Sarbanov announced on 14 April that the bank will soon be examining the role of "Kazakh capital" in the Akaev family's dealings, Kabar reported. But at a meeting with Kazakh Energy Minister Vladimir Shkolnikov on 18 April, Kyrgyz Deputy Prime Minister Usenov stressed that Kyrgyzstan welcomes Kazakh investment and will not re-privatize any enterprises in which Kazakh businesses own a stake, akipress.org reported. In another comment the same day, Usenov alluded to the issue of the Kazakh son-in-law: "The Kyrgyz side has no objections to the honest Kazakh firm Asia-Cement, which bought 67 percent of the Kant Cement and Slate Plant. The question of how the rest of the factory's shares ended up in the hands of the Kyrgyz people's son-in-law, Adil Toigonbaev, is for law-enforcement agencies to resolve."

Crossed Signals

Whatever the results of future probes, an unexpected conflict between one of Russia's industrial heavyweights and a group of Kazakh investors has already shed some light on one of the alleged Akaev family assets: the mobile-phone operator BiTel.

With 330,000 subscribers, BiTel controls around 90 percent of Kyrgyzstan's cellular-phone market and notched earnings of $32 million in 2004, "Vedomosti" and gazeta.ru reported. Numerous reports -- Russia's CNews on 14 April and gazeta.ru on 18 April, for example -- have identified Askar Akaev's elder son, Aydar Akaev, as one of the owners of BiTel.

The current dispute over BiTel involves Russia's Alfa Group and Kazakhstan's Seimar Investment Group. In 2004, Alfa Group, which owns blocking stakes in two of Russia's top three mobile-phone operators, in 2004 acquired Kazakhstan's Fellowes, which held an option to buy 100 percent of BiTel, "Kommersant-Daily" reported on 14 April. The Russian newspaper estimated the option deal at $150 million. When Alfa learned that plans were afoot to sell BiTel, it filed suit through Fellowes to block the deal. In late March, a Bishkek court ruled in Alfa's favor, freezing BiTel's assets, akipress.org reported. But on 13 April, Kazakhstan's Seimar Investment Group announced that it had acquired 100 percent of BiTel, RFE/RL's Kyrgyz Service reported. Seimar circumvented the freeze by buying not BiTel itself but the three offshore companies registered on the British Isle of Mann that held all of BiTel's shares, CNews reported -- Kyrgyz Mobil Tel Limited, Flaxendale Holdings Limited, and George Resources Limited.

Even as Kyrgyzstan's Prosecutor-General's Office warned that BiTel's previous owners -- whoever they might be -- might have sold off the company in order to conceal various financial machinations, a source at Fellowes told CNews that the Alfa affiliate would file suit on the Isle of Man and in other jurisdictions to try to block the deal. Moreover, "Vedomosti" reported that it had obtained a copy of a request, signed by Kanat Amankulov, head of the legal department at the Kyrgyz Prosecutor-General's Office, asking Capco Trust, the Man-registered offshore that is the trustee for BiTel's shareholders, to provide full information on BiTel's owners and refrain from "any actions that could lead to the alienation of assets."

BiTel hit back in a 15 April press release on the company's website (http://www.bitel.kg), asserting that Alfa Group has no legal claim to BiTel. The press release quoted Kanat Asylov, a partner with the law firm of Steiner and Zingermann, as saying, "The option [that Alfa acquired when it bought Fellowes] expired on 1 December 2003." The statement added that corporate raiders were trying to take advantage of the "temporary chaos" in Kyrgyzstan to pick up Kyrgyz companies on the cheap, and it promised that BiTel would "not be one of them."

The story has continued to develop. The option to acquire BiTel had originally belonged to the Bermuda-registered IPOC International Growth Fund, which subsequently sold it to Fellowes. (In an odd coincidence, IPOC is a player in another dispute involving Alfa Group -- over Alfa's disputed 2003 purchase of a blocking stake in the Russian cellular operator MegaFon; see "RFE/RL Business Watch," 23 September 2003.) On 18 April, "Vedomosti" quoted an IPOC representative as saying, "The former owners of BiTel received money from IPOC and Fellowes, but they did not transfer the shares." While noting that by the time Alfa bought Fellowes, it was "clear that the sellers [BiTel shareholders] did not want to carry out their part of the deal," the IPOC representative said that "we reached an agreement with Fellowes to help them get the shares." Still, IPOC did not say how much money was paid toward the option, and admitted that the option eventually expired. Experts queried by "Vedomosti" and "Gazeta.ru" agreed that Alfa's chances of acquiring BiTel are slim, especially since it will have to spar with its opponents in a Kyrgyz court (where analysts suggested it may find itself outmaneuvered by local players).

Whatever the outcome of the dispute between Alfa Group and Seimar Investment Group, it has already occasioned a rash of publications in Russia's business press. And the Kyrgyz Prosecutor-General's Office is pressing on with its investigation. While there are no guarantees that either will answer the questions about the Akaev family's suspected involvement in BiTel -- let alone their other alleged assets -- they at least increase the chances, even as they underscore the complexity of the task. (Daniel Kimmage)

KILLING POINTS TO POSTREVOLUTIONARY DANGERS IN KYRGYZSTAN. Gunshots rang out in Orto-Say, a town about eight kilometers from the Kyrgyz capital of Bishkek, on the night of 10 April. The victim was Usen Kudaibergenov, a prominent Kyrgyz personality who gained fame as a stuntman in Soviet films. But this time the bullets were real. And when his two assailants fled, Kudaibergenov was dead.

He had played a visible role in the upheaval that followed the ouster of President Askar Akaev and was an ally of the leading candidate for the newly scheduled 10 July presidential election. The motives behind Kudaibergenov's killing remain mysterious, but his death points to the dangers that lurk in postrevolutionary Kyrgyzstan.

Born in 1949, Kudaibergenov came to film through the circus and went on to a career as stuntman and stunt director that spanned more than 100 movies. Trouble struck in 2000, when a Kyrgyz court sentenced the stuntman to a 10-year prison term for financial misdeeds. But Kudaibergenov, who was amnestied after spending five years behind bars, maintained in one of his last interviews, published by strana.ru on 11 April, that his friendship with Feliks Kulov, a political foe of then President Akaev, was the real cause of his problems with the law. Kudaibergenov said that his imprisonment was part of an official attempt to "sink" Kulov, and recounted that prison authorities held him in solitary confinement for nearly two years in a futile effort to force him to testify against Kulov.

Kulov, whose own Akaev-era corruption convictions were only recently voided by the Supreme Court, has emerged as a force to be reckoned with in Kyrgyz politics ever since protesters freed him from prison on 24 March. A recent poll of 630 Bishkek residents showed that Kulov, who is a presumptive candidate in the 10 July presidential elections, would garner 52 percent support if elections were held today, RFE/RL's Kyrgyz Service reported. His nearest rival, acting President Kurmanbek Bakiev, received the endorsement of only 18 percent of respondents.

Naturally, some speculation about Kudaibergenov's death has focused on the link to Kulov. Strana.ru wrote on 12 April that Kudaibergenov was the informal head of Kulov's guard, suggesting that the killing may have been intended as a warning to show that no one is safe. Kulov spokesman Ruslan Chynybaev told strana.ru on 11 April: "Kulov doesn't yet link the killing of Kudaibergenov with himself, but he doesn't rule out that one of his enemies might have removed a friend of the presidential candidate. So you can look at yesterday's killing from various angles." At Kudaibergenov's funeral on 13 April, Kulov's own comments were cryptic, however. "We know who killed Usen. He was never a politician. But he was always a man with a capital letter," Kyrgyzinfo quoted him as saying.

Kudaibergenov's recent activities were, in fact, less political than practical. On the night of 24 March, he helped to organize ordinary citizens in Bishkek into civil-defense brigades to combat a wave of looting. More recently, he spoke out against a spate of land seizures in the capital that has seen thousands stake dubious claims to plots and thus far stymied official attempts to resolve what could prove to be a serious crisis for the fledgling postrevolutionary government. Ernest Adylov, who heads the movement For Law and Order, told a news conference on 11 April: "[Kudaibergenov] organized civil-defense brigades [to combat looting] and infiltrated his people into the groups that are seizing land in order to identify the leaders. Apparently, someone didn't like what he was doing," Kabar reported.

For now, the speculation about Kudaibergenov's death rests on too few facts to support any viable theories. But the troubling possibility that the killing may have resulted from the stuntman's ties to a prominent political figure or his involvement in combating looting and land seizures underscores a real danger. Revolutions flare as a result of many factors, but they quickly come face to face with hard issues of power and property. And they can founder fast if conflicts over power and property are resolved through violence. (Daniel Kimmage. This article was originally published on 14 April 2005.)

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