TAJIK GOVERNMENT TRYING TO STRONG ARM U.S. FIRM

C O N F I D E N T I A L SECTION 01 OF 02 DUSHANBE 001128

SIPDIS

SIPDIS

COMMERCE/ITA FOR RISD; COMMERCE/ITA FOR MAC; STATE FOR SCA/CEN,
STATE FOR EB

E.O. 12958: DECL: 8/3/2017
TAGS: ECON EFIN EINV PGOV PREL TI
SUBJECT: TAJIK GOVERNMENT TRYING TO STRONG ARM U.S. FIRM

CLASSIFIED BY: Tracey Ann Jacobson, Ambassador, U.S. Embassy,
Dushanbe, State.
REASON: 1.4 (b)


1. (C) Summary: Although the antimony mining venture Anzob LLC
privatized in 2006, the Tajik government is trying to dictate
the firm's selling price and select its buyer. The First Deputy
Minister of Energy and Industry admitted that a letter ordering
Anzob to sell its product to a Tajik company was "wrong" and
contradicted Tajik law, but has yet to issue a written
retraction nullifying the order, instead reaffirming the
directive orally through an official telephone message. Anzob's
New Jersey-based parent company Comsup Ltd has been in contact
with post about the case, and post will continue to press the
Tajik government to leave Anzob alone to make its own business
decisions. Unfortunately, the situation adds to growing number
of examples in which the Tajik government has failed to create a
level playing field, and highlights that foreign investments in
Tajikistan are still subject to the government's whim. End
Summary.

SO WHAT IF YOU ARE A PRIVATE COMPANY?


2. (C) Anzob has operated in Tajikistan for 15 years, first as a
joint venture with the Tajik government, and more recently as a
private company, mining antimony in northern Tajikistan. On
June 18, the company received a letter signed by First Deputy
Minister Pulod Mukhiddinov, ordering Anzob to sell certain
quantities of antimony concentrate to the Tajik company "Salosa"
at a below market rate and forbidding Anzob from exporting. As
a private company, under Tajik law, Anzob is free to sell or
export its product as it chooses. Anzob's lawyers have sent an
extensive legal argument to the ministry laying out the fact
that the government had no right under Tajik law to dictate any
terms to Anzob. EmbOff learned that Salosa is likely connected
to Anzob General Manager Kholikov and several other businessmen
from the Aini district where the Anzob mine is located.
Kholikov is rumored to be playing both sides, managing Anzob
while also working with Salosa.


2. (C) PolOff confronted Mukhiddinov with the letter July 10,
and he immediately and sheepishly acknowledged that he should
not have signed the document. "It was a mistake, and we cannot
tell a private company what to do." He explained that Minister
Gulov had been traveling the day the letter came to him, and he
signed it under the assumption that it had been vetted and
cleared by other departments in the ministry. He criticized
Salosa as a "bad company" with no technical capability to
process antimony. He promised to issue a letter rescinding the
order within days.


3. (C) Three weeks later, after no letter had emerged, PolOff
met with Mukhiddinov again July 31. He reported that the
language drafted by his staff had been insufficient and he would
sign a second version soon. Meanwhile, Prime Minister Oqilov,
in the name of President Rahmon, during a meeting with Sughd
province officials July 21, repeated the instructions that Anzob
deliver a "necessary" quantity of its product to Salosa.

PRETTY PLEASE?


4. (C) The Ministry delivered Anzob a "telephonogramma" August
2 that fell far short of Mukhiddinov's promise to rescind the
order. (Note: A telephonogramma is not/not a letter, but an
official message delivered orally by telephone, a means of
communication dating to the Soviet Union. Post received from
the Ministry a written version of the Tajik-language message.
End Note.) The telephonogramma stated: "With the goal to
support the local (motherland) small scale entrepreneurs~The
Ministry of Energy and Industry requests Anzob Company to sign
an agreement with Salosa Company on the supply of antimony
concentrate according to Tajik law and regulation. It should be
noted that the agreement to be signed shall be based on the
principle that Anzob Company is a private and independent legal
entity." (Comment: In other words, we'll ask nicely, but we are
still asking for your antimony. End Comment.)

WHAT NOW?


5. (C) Post has recommended that Anzob send a letter to the
government, thanking it for its suggestion, but noting that as a
private company, under Tajik law it has the right to reject any
partner and will not be selling Salosa any of its antimony.
Post can also send a copy of the letter to the government, and
raise this issue with high-level contacts.

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6. (C) Comment: At the risk of speculating, there appears to
be a hidden relationship between Salosa and the ministry or
government, and the powers behind Salosa remain unclear as well.
Either Pulod Mukhiddinov himself is involved -- unlikely, given
how adamant he was in the July 10 meeting that the government
had no right to interfere in Anzob's business -- or, more
likely, Mukhiddinov is being pressured from other parts of the
ministry or government. Either way, Anzob is another sharp
example of the risks a foreign business takes when operating in
Tajikistan. We anticipate it will take continued high-level
intervention over the coming months before the ministry gives up
its cause and Anzob can export as it see fit. End Comment.
JACOBSON