VZCZCXYZ0002
RR RUEHWEB

DE RUEHNT #0927/01 1590818
ZNR UUUUU ZZH
R 080820Z JUN 09
FM AMEMBASSY TASHKENT
TO RUEHC/SECSTATE WASHDC 0982
INFO RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RUEATRS/DEPT OF TREASURY WASHINGTON DC
RUEHNT/AMEMBASSY TASHKENT

UNCLAS TASHKENT 000927 
 
SIPDIS 
DEPARTMENT FOR EEB/IFD/OIA (HEATHER GOETHERT AND 
KIMBERLY BUTLER) AND L/CID (PATRICK PEARSALL) 
 
E.O. 12958: N/A 
TAGS: CASC EINV KIDE OPIC UZ
SUBJECT: 2009 REPORT ON INVESTMENT DISPUTES AND EXPROPRIATION CASES: 
EMBASSY TASHKENT SUBMISSION 
 
REF: STATE 49477 
 
¶1. (U) The United States Government is aware of six 
(6) claims of United States persons against the 
Government of Uzbekistan (GOU). 
 
¶2. (U) a.  Claimant A 
 
b.  2002 
 
c.  Claimant A was the chief operator of a soft 
drink manufacturing plant in Uzbekistan after its 
independence in 1991.  However, the Claimant 
alleges that following a personal dispute between 
one of the owners of the Claimant and the daughter 
of a high official of the Government, the Claimant 
executives were all forced to leave the country and 
have not been allowed to return or to conduct 
business in Uzbekistan.  Following prolonged 
proceedings in the Tashkent Economic Court and 
Supreme Court, the Claimants shares in the 
bottling plant were reduced, making a large U.S. 
soft drink corporation the major shareholder and 
operator of the bottling plant rather than the 
Claimant.  In addition, the GOU confiscated many 
assets of the Claimant, including 600,000 tons of 
sugar, 120 cars, 70 computers, and the Sergeli 
wholesale supermarket, which had been another large 
investment of the Claimant.  The GOU has explained 
these confiscations as the result of convictions 
for tax violations.  Finally, a number of employees 
of the Claimant were arrested.  The U.S. Government 
has made representations to the GOU to ensure fair 
treatment for the Claimant.  The Embassys last 
contact with the Claimant regarding the dispute was 
in 2003, but the Department of State received 
requests for information about factual issues 
related to this dispute as late as November 2007, 
suggesting that it may be ongoing.  The Claimant 
has left Uzbekistan. 
 
¶3. (U) a.  Claimant B 
 
b.  2001 
 
c.  According to Claimant B, it has been growing 
and exporting cotton in Uzbekistan since 1997.  The 
companys investment is partially funded by the 
World Bank.  The Seed Law of Uzbekistan guaranteed 
it the right to export its product, but according 
to the Claimant, it has been forced to surrender 
all or part of its hard currency earnings for 
exchange to soum at the official rate since 1999. 
In addition, Customs officials have often detained 
cotton export shipments and disregarded agreements 
reached under the Seed Law of Uzbekistan.  The GOU 
has reduced the acreage the Claimant is allowed to 
plant in high-yield seed varieties from just over 
10,000 hectares in 1999, to 8,000 hectares in 2001 
and then to 5,700 hectares in 2003.  Local GOU 
authorities are interfering in the management of 
the Claimants farms by keeping farmers under state 
production plans, even though the original business 
plan, approved by the GOU, states the companys 
farms are exempt from state orders.  According to 
the Claimant, continued obstruction by the GOU has 
made it impossible for it to repay millions of 
dollars in loans and will lead to its insolvency. 
 
The Embassy successfully utilized the visit of 
Senator Richard Shelby in January 2002 to force the 
GOU to focus on a resolution of problems for the 
Claimant.  The Embassy arranged a meeting between 
Senator Shelby and Elyor Ganiev, Deputy Prime 
Minister for the Agency for Foreign Economic 
Relations.  The Claimants Managing Director and 
Ganiev also met to determine a way for the Claimant 
to pay back the USD 4.3 million it owes to an 
Alabama bank.  The U.S. Government has assisted the 
Claimant as appropriate, and the Claimant has been 
able to repay the Alabama bank and continue its 
cotton project.  Also, the surrender requirement is 
not the punishment it once was, as the unification 
of currency rates has diminished the negative 
impact of this requirement.  At that time, the 
 
 
Claimant was able, with U.S. Government assistance, 
to negotiate additional cotton acreage to use in 
its business and continue payment on its 
outstanding loan. 
 
Unfortunately, in May 2005, the Government of 
Uzbekistan sent a team of inspectors, headed by the 
National Security Service, to investigate the 
Claimants company.  The Claimant perceived this as 
unwarranted harassment stemming from familial ties 
with Uzbek opposition politicians.  The Embassy 
assisted the Claimant in addressing this issue by 
requesting a meeting with GOU officials and sending 
Embassy officers as observers during the National 
Security Service Investigation.  The Prosecutors 
Office nonetheless subsequently brought criminal 
charges against the company, freezing its 
operations and accounts, and the GOU physically 
blocked the factory from receiving raw cotton. 
However, in early 2006, the Claimants fortunes 
turned when it partnered with a local company. 
 
In 2008 the Claimant alleged that local authorities 
in the Tashkent Region were still obstructing 
access to the originally agreed 10,000 hectares of 
raw cotton input.  This in turn was preventing the 
Claimant from servicing the $8 million loan from 
the GOU that it had taken in 1998.  (The GOU, in 
turn, had taken these funds from a larger World 
Bank loan.)  In September, 2008, the U.S. Embassy 
assisted the Claimant in arranging a meeting to 
discuss these issues with Deputy Finance Minister 
Erkin Tursunov.  The Claimant subsequently reported 
that the situation has improved, that it is 
receiving a larger quantity of cotton input, and 
that it is making progress in servicing its GOU 
loan. 
 
The Embassy continues to monitor the situation and 
has regular contact with Claimant B.  The Embassy 
last spoke with the Claimant on May 21, 2009. 
 
¶4. (U) a.  Claimant C 
 
b.  2002 
 
c.  Claimant C provided agriculture chemicals to 
the GOU in 2001 in accordance with a government- 
issued tender in the amount of $340,000.  The 
Claimant asserts that it has never been paid for 
the products.  In February 2003, the Ambassador 
sent a letter to Prime Minister Sultanov regarding 
this case and in 2004 the U.S. Government 
approached high-level GOU officials to assist the 
Claimant in resolving the payment dispute.  The 
Embassy pointed out on numerous occasions that if 
the GOU does not resolve this issue, other 
companies may be reluctant to invest in the 
agricultural sector.  Assistant Secretary of 
Commerce William Lash III raised the Claimants 
dispute with Deputy Prime Minister Rustam Azimov in 
November 2004, advising the Deputy Prime Minister 
that refusing to meet commercial obligations will 
lead other businesses to avoid Uzbekistan.  As of 
the Embassys last contact with the Claimant in 
2005, payment had yet to be rendered.  The Claimant 
has not been in contact with the Embassy since 2005 
and does not have an office in Uzbekistan. 
 
¶5. (U) a.  Claimant D 
 
b.  2003 
 
c.  Similar to the issue faced by Claimant C, 
Claimant D provided agricultural chemicals to the 
GOU in 2001 in the amount of $245,000 and asserted 
that it was not paid.  In February 2003, the 
Ambassador sent a letter to Prime Minister Sultanov 
regarding this case and in 2004, the U.S. 
Government approached high-level GOU officials to 
assist the Claimant in resolving the payment 
dispute.  The Embassy has raised this issue with 
GOU officials, pointing out that it hampers their 
ability to attract investment to the agricultural 
sector.  Assistant Secretary of Commerce William 
 
 
Lash III raised the Claimants dispute with Deputy 
Prime Minister Rustam Azimov in November 2004, 
advising him that refusing to meet commercial 
obligations will lead other businesses to avoid 
Uzbekistan.  As of the Embassys last contact with 
the Claimant in 2004, payment had yet to be 
rendered.  The Claimant is no longer present in the 
country and has not been in contact with the 
Embassy. 
 
¶6. (U) a.  Claimant E 
 
b.  2003 
 
c.  Claimant E purchased 51 percent of shares in an 
Uzbek fruit processing plant in May 2002 from the 
GOU state property committee (GKI).  According to 
the Claimant, it made an initial investment payment 
of approximately $30,000 in June 2002 and a second 
payment of approximately $54,000 in October 2002. 
In November 2002, GKI returned the Claimants 
second payment and declared that it had cancelled 
the contract.  This action, which the Claimant 
believes was motivated by GKIs desire to sell the 
plant to a Russian company, was compounded by a 
ruling on the matter against the claimant by a 
Tashkent court, causing the claimant to lose its 
initial investment. 
 
Separately, the Claimant is involved in a joint 
venture, having purchased 33.3 percent of the 
shares of another American company.  Due to a 
privatization decree, the GOU sold the governments 
portion of the venture, including the property on 
which the company operates.  The Claimant offered 
to purchase the building with a purchasing price 
based on previous investments.  However, the GKI 
requested double the amount of the independently 
assessed value of the building at $208,000. 
 
In April 2003, the Ambassador sent a letter to 
Prime Minister Sultanov requesting that his staff 
investigate this issue.  As of the Embassys last 
contact with the Claimant in 2005, the company had 
partially resolved some issues.  The Claimant has 
not been in contact with the Embassy since 2005, 
and the Embassy has no information about the 
current status of the Claimant. 
 
¶7. (U) a.  Claimant F 
 
b.  1996 
 
c.  Claimant F, a Swiss company with a U.S.-owned 
subsidiary, entered into a written contract with a 
state-owned enterprise to deliver 50,000 metric 
tons of Kazakh wheat.  According to the Claimant, 
the wheat was delivered, but the Uzbek party never 
remitted payment.  Despite repeated inquiries by 
the Claimant, at times facilitated by the U.S. 
Government, payment was not forthcoming.  In 1997, 
the Claimant brought its case to the Grain and Feed 
Trade Association (GAFTA) under an arbitration 
proceeding required by the written contract 
controlling the grain purchase.  GAFTA ruled on 
this matter, and ordered the Uzbek enterprise to 
pay the Claimant for the value of the shipment plus 
interest, or approximately $18 million.  An appeal 
of this ruling was denied in July 1998.  The U.S. 
Embassy raised the issue with senior government 
officials, including the Deputy Prime Minister.  As 
of the Embassys last contact with the Claimant in 
2004, payment had not been rendered.  The Claimant 
is no longer present in the country. 
 
¶8. (U) None of the claimants have signed privacy 
waivers.  The claimants are: 
 
Claimant A: Ross Trading 
Claimant B: Central Asia Seed Company (CASC) 
Claimant C: Dow AgroSciences 
Claimant D: Troy BioSciences Inc. 
Claimant E: Vergest Ltd. and JV Uzbek Xerox Systems 
Claimant F: ROMAK 
NORLAND