On October 14, Tajikistan’s President Emomali Rahmon singled out the company Umed-88 as an insolvent business that the government had irresponsibly provided with a large loan. The following week, local media unveiled that just as Rahmon was speaking, Radjabali Odinayev, the founder and owner of Umed-88, had been arrested on charges of fraud, smuggling, tax evasion, and forgery.
Official sources outlined that Umed-88 was the beneficiary of a loan of 170 million somoni (around $19 million), which it inappropriately used to pay off large debts to its main lenders, instead of investing the sum into the project agreed upon with the Ministry of Finance. The ministry had facilitated the loan at the favorable interest rate of 18 percent, compared to the 30 percent market rate.
The loan, oddly, was organized by Rogun HPP, the state-owned company responsible for the construction of the world’s tallest dam and hydroelectric plant. In May 2015, Rogun HPP, the Ministry of Finance, and Umed-88 signed an agreement for a short term loan of 170 million somoni to be returned to Rogun HPP by year end. The funds were allocated with the specific task of boosting fuel supplies to agricultural enterprises. Umed-88 was among the top four fuel suppliers in the country.
Umed-88 instead decided to use the loaned money to pay off its debts to Amonatbank and Tojiksodirotbank. The country’s anti-corruption agency filed a criminal case against Umed-88 and its managers for embezzlement of public funds. Notably, the anti-corruption agency maintains close ties with the presidential family: Rustam Emomali, Rahmon’s son, was its chairman until January 2017. In April, several of the agency’s officials were arrested for corruption and replaced with other loyalist figures.
Another member of Rahmon’s family is set to gain from Odinayev’s downfall. Shamsullo Sohibov, the president’s son-in-law, owns Umed-88’s competitor, Faroz. Eurasianet reported sources close to the industry as saying that Sohibov had pressured Odinayev to inflate the price of gasoline at filling stations. Sohibov had gained ownership of Faroz by ousting its previous owner, Umarali Kuvvatov, who later became a dissident in exile and was killed in Turkey in 2015.
If the links to a potential abuse of power by members of the presidential family are evident, the participation of Rogun HPP in the original loan is less straightforward. In mid-2015, the project for the construction of the Rogun dam and hydroelectric power plant was at an impasse. It was a highly controversial geopolitical topic between downstream Uzbekistan and upstream Tajikistan, as it would have diverted the flow of the Vakhsh river, one of the main tributaries of the Amu Darya, which is used to irrigate cotton and agricultural fields in Uzbekistan. Rogun was also a project without takers: the World Bank had approved the government’s plan to build the dam, but the first roadshows to attract builders had failed.
Besides the scant revenue from the forced public subscription to Rogun coupons, the company’s budget stemmed from government funds and could not be brought to fruition without a contractor willing to build the dam. In April 2015, Tajikistan’s government signed a deal to build the $1.2 billion CASA-1000 project to export electricity to Afghanistan and Pakistan by 2019. Construction started in mid-2016. At the time, however, Tajikistan did not produce enough electricity to supply domestic demand all year around.
It was only the following year that Rogun HPP could find a contractor. In July 2016, it handed out a $3.9 billion contract to Italy’s Salini Impregilo. Now, the company says, the first two turbines will be operational by July 2018 and April 2019 respectively. Critics of the projects, however, doubt the financial viability of the project, given that Tajikistan’s government might just not have enough funds to honor the contract with Salini Impregilo, especially in light of the economic crisis within the country, with collapsing remittances from migrant workers and a failing banking sector to restructure.
The funds allegedly embezzled by Odinayev’s Umed-88, though not massive in proportion, came out of Rogun HPP’s accounts and will eventually be returned. The rough takedown of Umed-88, with workers immediately taking down the signs from filling stations, seems to be the typical elite raid aimed to seize market share in an industry. The presence of Rogun HPP in the mix, however, could also mean that the government was also trying to clean up the accounts of the president’s pet project.