So, Uzbekistan, How Deep Does the Rabbit Hole Go?

by Myles G. Smith on 2/7/2013 · 3 comments

Cynicism will only take you so far. Except in Central Asia, where it can take you basically anywhere.

EurasiaNet has published the highly publishable speculation of local media outlets that the government and Central Bank of Uzbekistan is using a series of ‘improvements’ and ‘simplifications’ (their words) to the foreign exchange market, customs regulations, and the bank transfers to keep hard currency from flowing out of the country.

Publishable, reasonable, and quite possibly true. At least partly, anyway.

Of course, there could be other, more cynical (and less publishable) explanations. Let’s try some on.

Maybe someone who had the ear of the Central Bank decided to make a Wall Street day trader-style killing, pushing through huge trades just before the announcement was made to the unassuming public.

Perhaps big shots at Customs wanted to restrict the flow of imported alcohol, cigarettes, jeans, LCD TVs, car parts, and other consumables. Not for import substitution, of course, but to further consolidate their revenue from brokerages trying to hurdle all that onerous new paperwork. If they’re not doing that, then what they hell are they doing? Everyone else is. Even Rahmon’s son has figured it out.

Also, isn’t it about time to issue replacement sum bank notes? The current ones have been in circulation since at least 2001. Maybe the Central Bank is trying to trigger a shortage of sums, so it can create the need for a lucrative new currency printing contract (and kickback). Maybe they’ve been talking to their Kyrgyz counterparts, who seem to issue new currency with each new collapse of government.

Or maybe the vendors who paid serious kickbacks to get the payment hubs for the Central Bank’s ‘plastic card’ payment racket were seriously annoyed when they were not seeing returns on their investment. Perhaps because their captive clientele of state employees were only getting part of their salary on their plastic cards, the rest paid in chickens. Maybe these vendors in the ‘private sector’ called on the government to demand more money get pushed through the system.

Perhaps government officials / security services officers / organized crime syndicates controlling the ‘black market’ for hard currency exchange through protection rackets and kickbacks decided they could increase their margins by arresting the small-timers and pushing the practice further underground. The larger the difference between the official and black market rates, the more money to be made by those with free access to both. When I was last in Uzbekistan in the fall, the sum had fallen so far (take a guess how far from the pic of the sum-wad on my Twitter profile), that suitcase traders had to call in advance to make sure their luggage was sufficient for the afternoon’s run. Those guys may be in jail by now. Still, in Turkmenistan before the re-denomination, the split was 5,800 bank to 22,500 black. Uzbekistan is at just 1,980 bank to 3,000 black. They can do better.

Maybe cliques of market barons, hakims, and border guards colluded in a classic reverse-Robin Hood routine to restrict access to markets abroad and set up import schemes of their own. Kind of like establishing a prison only to create a customer base. Markets in Uzbekistan would sell their re-exported goods from Kyrgyzstan, with the margins between the Kyrgyzstan purchase price and the Uzbekistan prison-market price wider than ever before.

And, remittances are serious money. Can’t it all be as simple as requiring remittances to be converted to sums at the bank’s devalued rate of 2,000, then selling them dollars through the ‘black market’ when they return to Russia in spring for 3,000?

Of course, reputable news outfits can’t just print what we’re all thinking and maintain their editorial standards. It is a shame, though, that the way those of us who know Central Asia talk about the region basically can’t be published in most Western news outlets. This is, of course, how some local muckrakers write about the region. With the full knowledge that, when an action is taken that seems self-defeating and ill-conceived, the personal logic of the executor almost never matches the logical interests of ‘the State’ or ‘the Citizen’. There may not be any good reason – but there does not have to be.

Something to keep in mind if we eventually start seeing couriers flying to Almaty just to go to the ATM for clients in Tashkent.

As I tried to think through what drove Uzbekistan’s government to this policy, I literally could not think of a cynical, greed-driven motive that did not seem plausible. I’m sure Registan’s readers can come up with even more ludicrously plausible scenarios for how this came about. Go nuts.


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This post was written by...

– author of 12 posts on Registan.net.

Myles G. Smith is a project manager, consultant, and independent analyst based in Central Asia. His writing appears regularly at EurasiaNet.org, the Jamestown Foundation, and the Central Asia and Caucasus Institute. He is currently based in Kyrgyzstan, has lived in Turkmenistan and Russia and worked throughout the former Soviet Union. In the process of his work, he regularly consults a wide range of experts, officials, activists, journalists, academics, diplomats and entrepreneurs in the region. He is proficient in Russian.

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{ 3 comments }

Justin February 8, 2013 at 4:22 am

Myles, Good luck on your next visit to Uzbekistan. But then, of course, your name is not really Smith, is it? can’t be…

Bill February 16, 2013 at 8:27 am

I hear airport interrogations by the NSS are very friendly and relaxed :)

Myles February 16, 2013 at 9:20 am

And what kind of name is Justin, any way?

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