11 august 2020

Central Asia news

Russian businesses in Uzbekistan upset by delays with hard currency conversion. Other problems are not uncommon either

12.03.2007 10:48 msk

Review of the Russian media

Business Russia

The Russian-Uzbek negotiations in Tashkent on March 7 exposed certain problems in the bilateral economic relations.

Russian Deputy Minister of Economic Development and Trade Andrei Sharonov appraised business climate in Uzbekistan as not particularly healthy for Russian investors. The latter are definitely upset by delays with hard currency conversion and gains repatriation. As far as Sharonov is concerned, this is a plain example of dual standards in taxation: excise duty on Russian goods is higher than it is on Uzbek commodities which collides with the existing accords.

It takes Russian companies between several months and half a year to get back the gains and that upsets Russian businesses too. The Uzbeks deny the innuendo and claim that the delay never exceeds 4 or 6 days. "They are bluffing. Whoever is interested, there are lists at our trade mission of Russian companies owed millions," Sharonov said. According to the newspaper Vedomosti, the Uzbek legislation does not set any deadlines while the Russian does (90 days).

Trade mission official says as well that conversion of gains is another problem Russian businesses encounter in Uzbekistan. Russian companies deliver goods whose price is set in US$ to the Uzbek partners, the latter transact money to local banks, and money gets stuck there for months on end. Handling the Russian money, Uzbek banks profit handsomely. RBK Daily suspects in the meantime that the blame for this practice cannot be pinned on the banks themselves because these latter have their orders from the political leadership. Prime Minister Shavkat Mirziyaev promised the Russian delegation at the talks to have a look at the matter and see what he could do.

Uzbek grudges against Gazprom

The Uzbeks struck back once the Russians had given vent to their feelings. Uzbekistan accused Gazprom of failure to fulfill its obligations (investment in gas production) and, off the record, threatened to suspend gas export to Russia. The problem will be handled at the next round of the talks in Moscow.

All Uzbek gas (about 10 billion cubic meters a year) is exported by two Russian companies nowadays - Gazprom and Lukoil. Under the terms of the 2006 accord, Gazprom is supposed to begin development of the Shahpaty gas field. With this project on line, gas export to Russia should increase to 13 cubic meters in 2007. Sharonov claims in the meantime that Gazprom has been unable to realize the project. It was supposed to invest $300 million in the project but actually invested only about $30 million. That was what enabled Mirziyaev to voice grudges at the talks.

According to RBK Daily, however, Gazprom management denounces all accusations. It pins the blame on the Uzbek authorities that procrastinate with geological survey licenses.

As a matter of fact, this is not all by way of discord between Russian and Uzbek gas companies. Joint sale of Uzbek gas in the third markets is another problem. Tashkent wants to up gas production. Gazprom in its turn insists on delivery contracts. The sides seem to be unable to reach a mutually acceptable decision.

Helicopters to be jointly repaired

The negotiations also dwelt on the accord between the governments of Russia and Uzbekistan on establishment of Uzrosavia, an Uzbek-Russian joint venture on the basis of the Chirchik Aviation Repair Factory. "The venture will repair MI-8s, MI-24s, and their modifications, as well as units and components for the Armed Forces of the Republic of Uzbekistan and other countries," official Russian statement indicates. "The joint venture will service helicopters from Uzbekistan and other post-Soviet Central Asian republics," Oboronprom General Director Denis Manturov said.

Uzmetronom comments in the meantime that this enterprise has actually existed in Chirchik since the late USSR. ("This is but a small facility, the size of a workshop, where helicopters are repaired to the best of the existing technical and intellectual capacities...")

Burying the Chkalov Factory ASAP

Mirziyaev suggested that the Chkalov Aviation Factory in Tashkent were made a part of the United Aircraft Corporation. After all, the former is already involved in the contracts with foreign customers.

First and foremost, the matter concerns the Russian-Chinese contract for IL-76 transport planes that are to be assembled in Tashkent. The contract was signed in 2005. In late 2006, however, it turned out that the factory was behind the schedule and that the IL-76s would be available at $30 million apiece instead of the planned $21 million. Needless to say, the news didn't make Russia happy. The idea of having some ILs assembled by Aviastar in Ulianovsk was suggested. Even worse, the scandal jeopardizes the planned production of IL-114s in Tashkent.

In the meantime, foreign companies are already lining for this future plane with the range of up to 1,500 kilometers. Uzbekistan is loath to lose so lucrative a contract. Moreover, the events in Andijan (mass riots in May 2005) made the United States and EU reluctant to deal with Uzbek President Islam Karimov. The situation being what it is, the loss of IL-76s and IL-114s may spell doom for the Chkalov Factory.

Boris Aleshin, the head of Rosprom and chairman of the Russian-Uzbek government commission, dispelled these fears. He said that the IL-114s would be assembled in Tashkent. As for the IL-76s, "there is nothing to say at this point" was how Aleshin put it.

Ruslan Pukhov, Director of the Center for Analysis of Strategies and Technologies, does not think that Moscow will want the Chkalov Aviation Factory in the United Aircraft Corporation. "The factory is in dire straits nowadays. It is not working. Even its former Russian-speaking specialists left Tashkent. Russia's decision to withdraw the IL-76 contract from it will leave it in trouble," the expert said.

Immigrants were discussed

According to Vedomosti, there was only one issue on the agenda Russia and Uzbekistan agreed on. Before May, our governments will sign three accords on immigrants (their readmission, defense of their rights, and war on illegal immigration). Missions of immigration services will be opened (Russian in Uzbekistan and Uzbek in Russia) to share information. Konstantin Romodanovsky, Director of the Federal Service of Immigration, claims that 102,658 Uzbeks are officially registered in Russia while unofficial estimates place their number at between 1 and 1.5 million.