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Sources Claim Shutdown At Powerful Uzbek Conglomerate


Zeromax has reputedly been under the control of Uzbek President Islam Karimov's oldest daughter, Gulnara Karimova.
Zeromax has reputedly been under the control of Uzbek President Islam Karimov's oldest daughter, Gulnara Karimova.
Sources close to the strategic Uzbek conglomerate Zeromax claim the company's operations are being wound down by the government, RFE/RL's Uzbek Service reports.

RFE/RL could not independently confirm the moves, but layoffs, word of looming debts, and an arrest warrant for a senior executive appeared to point to serious challenges for the highly diversified company. Efforts to contact the company for comment were unsuccessful.

Regarded as one of Uzbekistan's largest and most powerful companies, Zeromax's holdings have included mining operations, agricultural enterprises, construction companies, textile plants, and subsidiaries that control the oil and gas industry in Uzbekistan.

With foreign headquarters in Switzerland, the multibillion-dollar company has been both the largest foreign investor in Uzbekistan and the country's largest private employer.

Zeromax has reputedly been under the control of Uzbek President Islam Karimov's oldest daughter, Gulnara Karimova, who is based both in Geneva and Madrid, where she is Uzbekistan's ambassador to Spain.

Troubling Signs

A source close to Zeromax -- who spoke on condition of anonymity -- told RFE/RL that assets of the company and its subsidiaries were frozen last week and the main office in Tashkent was closed on May 10.

The source said the shutdown began earlier this year and escalated in February, when some 700 Zeromax workers were laid off.

Just a few weeks earlier, the Uzbek government took control of the country's gas exports, which had been a main source of Zeromax revenues. The company has been the exclusive mediator for Tashkent with Russia's Gazprom and LUKoil, and had several joint projects with Russian companies in the exploration of gas and oil fields in Uzbekistan.

Zeromax also has had stakes in several banks in Uzbekistan, as well as shares in foreign companies such as Britain's mining company Oxus Gold.

Zeromax Executive Director Mirodil Jalolov is also listed on Oxus Gold's board of directors. Oxus Gold was charged in 2006 with tax fraud by the Uzbek government. It was acquitted of wrongdoing only after it sold 16 percent of its shares to Zeromax.

An official at a Zeromax subsidiary company told RFE/RL on May 13 that the company's bank accounts had been frozen on May 7. Two Zeromax employees also told RFE/RL separately that the company's accounts had been frozen.

The official, who requested anonymity, suggested that the company might face difficulties meeting its financial obligations if accounts remained frozen for long.

An individual who works with Zeromax's construction projects said that all of its construction sites, including a "special residence for Gulnara Karimova and a super-modern stadium" for the Zeromax-owned Bunyodkor soccer club, have been shut down.

Another source close to Zeromax added that the company was due to complete some contracts with some firms to deliver supplies to U.S.-led forces in Afghanistan. He was unsure if those contracts would be completed.

"Nothing is clear about Zeromax at this moment," he said.

Tough Talks?

The source added that Zeromax head Jalolov was negotiating with the Uzbek government on possible terms for giving up the company. He blamed Zeromax's difficulties on what he claimed were billions of dollars in credits from the Uzbek government based on property and other assets as collateral.

According to an analyst who was close to Karimova, those loans were not repaid and the money was moved to offshore accounts with ties to the Karimov family. RFE/RL could not independently confirm the existence of any such accounts.

In theory at least, Zeromax could be formally taken over by the Uzbek government.

Another observer suggested that problems at Zeromax might indicate that the Karimov family was losing ground in its struggle to maintain power in Uzbekistan and stronger clans in the country could emerge to challenge Karimov.

He speculated that the government might be considering ways to reorganize the company and bring in a new chief executive.

Meanwhile, an arrest warrant was issued on May 13 for Gulyam Imanazarov, Zeromax's deputy director for international relations.

Reported by Farruh Yusupov from RFE/RL's Uzbek Service and written by RFE/RL's Central Newsroom in Prague
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