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Article

A Russian banking scandal taints Uzbekistan’s cotton revolution - and leads back to Switzerland via the UK

17 August 2020

....Without rigorous corporate due diligence checks, the Uzbek government’s cotton privatisation initiative has opened the door to potential abuse. The use of British companies highlights the UK’s role in this opaque process, and publicly available corporate data and court records raise questions about how closely the Uzbek authorities are monitoring privatisation.

Up until recently, students, medical workers, teachers and public servants, to name just a few of the targeted groups, were press-ganged into the cotton fields of ostensibly privately owned farms by the Uzbek government. Farmers themselves faced gruelling targets and received derisory farm-gate prices. The forced labour programme eventually prompted international brands to publicly commit to avoid using Uzbek cotton in their supply chains...

Court records relating to Starbank’s implosion indicate the selection process for the cotton privatisation initiative has adopted a “pragmatic” approach to investment, as advocated by Uzbekistan’s First Deputy Minister of Economic Development and Poverty Reduction. “You have to be pragmatic... the most important thing is whether an investor makes an investment or not,” the deputy minister said – regarding a US$1.3 billion construction project that has exhibited serious due diligence red flags and conflicts of interest...

Through British offshore vehicles, [Agadzhan] Avanesov [chairman of the board of Starbank] and a closely tied Kyrgyz businessman own Uzbek companies that guaranteed bad Starbank debts worth over $20 million. These companies are at the centre of the privatisation programme for Uzbekistan’s cotton industry...

[refers to Starbank, Welroy Technology, Textile Technologies Group, Vertical Alliance; includes response from Agadzhan Avanesov (chairman, Starbank; primary beneficiary, Vertical Alliance); Murat Yakubzhanov (owner, Welroy Technology) did not respond]

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