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Russia's MTS Leaving Uzbekistan Amid U.S. Corruption Probe

  • Mike Eckel

Russian telecom giant Mobile TeleSystems (MTS) says it will sell its stake in its Uzbek joint venture and leave the Central Asian country completely, amid an ongoing corruption probe by U.S. authorities involving the daughter of the country's long-ruling president.

In a statement August 5, Andrei Smelkov, vice president and director of the foreign subsidiaries unit, said MTS had decided sell its ownership in the venture, called UMS, "due to a variety of business reasons and other circumstances."

The Uzbek government holds the other 49.99 percent of UMS.

An official close to UMS told RFE/RL's Uzbek Service that the sale would close by the end of the month.

The abrupt sale comes just four years after its Uzbek subsidiary, Uzdunrobita, fell afoul of Uzbek authorities, which accused it of regulatory violations, arrested several of its top officials, and revoked its license.

Uzdunrobita was controlled at the time by Gulnara Karimova, the eldest daughter of President Islam Karimov.

The sale is the latest fallout from a massive, multiyear investigation involving U.S. and European authorities into alleged corruption in Uzbekistan involving Karimova.

MTS's competitor in both Russia and Uzbekistan, VimpelCom, earlier this year agreed to pay nearly $800 million in fines and penalties to U.S. and European regulators stemming from alleged bribes paid to companies linked to Karimova.

The U.S. government is now in protracted negotiations with Uzbekistan over repatriating some of the assets seized by U.S. authorities

MTS, which is traded on the New York Stock Exchange, is Russia’s largest mobile-phone operator. It is controlled by the Russian conglomerate Sistema, whose majority shareholder is billionaire Vladimir Yevtushenkov.

VimpelCom is controlled, through a series of intermediary companies, by Russian billionaire Mikhail Fridman. The company is traded on the NASDAQ stock exchange.

In 2015, VimpelCom hinted at looming criminal liability, saying it was putting aside nearly $1 billion to deal with potential liabilities.

MTS said in a separate comment e-mailed to Reuters that its decision to exit Uzbekistan was not prompted by the U.S. investigation or by any business difficulties related to the Uzbek government.

The other company facing potential U.S. liability is TeliaSonera, a Swedish-Finnish communications giant.

Swedish authorities have aggressively investigated Uzbek-related bribery allegations after reports on Swedish television. Four senior executives there later resigned.

A criminal investigation by Swedish prosecutors may return indictments in that case later in 2016.

Karimova spent years in the limelight as an aspiring pop star, fashion designer, and famous socialite in Uzbekistan.

Central Asian watchers at one point speculated she might become president after her aging father, who recently celebrated his 78th birthday. But she appeared to fall out of favor in 2014 as the multinational investigation gathered steam.

Photographs were published last year showing her under house arrest in Uzbekistan.

With reporting by RFE/RL's Uzbek Service
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