Uzbek Authorities Squeeze German Firm

A German bakery firm has become the latest foreign-run enterprise to come under pressure from the Uzbek authorities. 

The Vkusny Khleb firm in the town of Halkabad, just outside the Uzbek capital Tashkent, is now back in business after standing idle since July. Commentators say that was possible only because German diplomats intervened vigorously on behalf of the company.

In late July, officers from Uzbekistan’s National Security Service, SNB, arrived at the bakery unannounced to carry out an inspection. No reason was given, and the government has not revealed what concerns prompted the move.

Staff at the firm said employees were assaulted, company equipment destroyed and mobile phones were confiscated by the SNB team, who then sealed the premises shut.

The bakery’s outlet shops in Tashkent were closed, and another group of armed and masked officers raided the company’s main office in the city. masks simultaneously visited the head office of the company in Tashkent, where they briefly detained German ambassador Wolfgang Neuen, who had come to find out what was going on.

The company resumed work on September 7, after the German foreign ministry had passed a stiff note to its Uzbek counterpart on the need to adhere to agreements and conventions covering the business sector.

Vkusny Khleb is a wholly owned local subsidiary of Germany’s Steinert Industries, which also has glass- and brick-making factories in Uzbekistan. The bakery was created out of a local firm which had gone bankrupt.

A lawyer in Tashkent, who did not want to be named, said it was common for the authorities to apply strong-arm tactics to foreign-owned businesses, flouting the rules that are supposed to protect them. Sometimes it is just a warning to “put them in their place”, he said, and at other times the aim was to force them to sell a going concern to a local player.

A member of the Uzbek parliament’s upper house said the SNB was probably trying to warn the German firm that its assets could be seized at any moment.

"They come up with a range of methods for pressuring foreign businesses, from making it impossible to access hard currency to fabricating allegations of tax evasion,” he said.

Earlier this year, Turkish-owned shops of the Turkuaz chain in Tashkent were subjected to similar raids by masked officers. State-owned media later suggested that certain Turkish companies were a front for Islamic extremists.

The British-owned Oxus Gold is currently in a legal dispute with the Uzbek authorities. Once again, it was accused of various financial wrongdoings, allegations which its lawyers say are a ploy to dispossess it of its interests in the lucrative gold-mining industry. (See Gold Dispute Won’t Help Uzbekistan's Image.)

Human rights activists Abdurahmon Tashanov says the only way for investors to defend their interests is to ensure their governments are prepared intervene on their behalf.

"If investors are not supported by their national governments, they have no real chance of defending themselves," he said."When governments are courageous in standing up for their businessmen – as the Germans did in this case – the Uzbek authorities often halt the persecution. The Germans responded in the right way – force must be met with force."

This article was produced as part of IWPR's News Briefing Central Asia output, funded by the National Endowment for Democracy.