By Oleg Salimov (04/23/2014 issue of the CACI Analyst)

Tajikistan’s Anti-corruption agency has initiated legal proceedings against Ukrainian businessman Dmitry Firtash, the owner of Group DF. Firtash, recently arrested in Austria on bribery charges at the request of the FBI, maintains economic ties with Tajikistan through ownership of the clothing factory Guliston and the joint-stock company TajikAzot (TajikNitrogen), one of the largest producers of agricultural fertilizers in Central Asia. Allegedly possessing high political connections throughout Central Asia, Ukraine, and Russia, Firtash is in Tajikistan linked to the businessman Zaid Saidov, who was recently imprisoned in a case widely considered to be politically motivated.

Firtash was arrested in Vienna on March 12, 2014, and released on a 125 million Euro bail two days later. Firtash is accused of criminal collusion and bribery of state officials in India, allowing him access to titanium mining business. Following Firtash’s arrest, Tajikistan’s Anticorruption agency charged him on March 15 with the illegal privatization of the Guliston clothing factory in 2002. Firtash owned 95 percent of the stock, while Zaid Saidov owned the remaining 5 percent. In a swift decision, the Economic Court of Dushanbe granted the claim on April 2, in the absence of either the defendants or their representatives. The Economic Court transferred the factory ownership to the Tajik Ministry of Industry and Innovations.

The second set of actions taken against Firtash was the revision of the joint-stock company TajikAzot, one fourth of which belongs to Tajikistan while Firtash owns the rest. The Anticorruption agency accuses Firtash of illegal privatization of the company in 2002 and misappropriation of funds. TajikAzot was modernized Under Firtash’s ownership but experienced production difficulties from 2008 to 2011 due to energy shortages and high input expenses. In 2011, the Tajik parliament reduced the value-added tax for TajikAzot from 18 to 9 percent in an effort to reignite the production and increase the company’s competitiveness. Currently, the company’s economic profile looks bleak and can be revitalized only if Tajikistan resolves its energy problems.

The motivations behind the Tajik government’s actions against Firtash can be economic as well as political. From an economic standpoint, the Tajik government is afraid that the U.S. will freeze Firtash’s assets in Tajikistan as part of a far ranging investigation. In such a case, Tajikistan risks losing everything and thus decided to act first. Also, the Tajik government interpreted Firtash’s arrest as an opportunity for financial gain. In 2012, Tajikistan’s Anticorruption agency successfully claimed the Special Engineering Bureau on Construction and Technology owned by Kazakh businessmen.

From a political standpoint, the Tajik government continues to persecute Saidov’s supporters and business partners. Saidov’s lawyer, Fakhriddin Zokirov was arrested on charges of fraud on March 10, 2014, at the request of the Anticorruption agency, three months after Saidov was convicted to a 26-year prison sentence. Saidov’s other lawyers have also complained about anonymous threats and warnings. Therefore, the expropriation of Firtash’s assets serves as demonstration by the Tajik government of its persistence in dealing with political opposition.

The Anticorruption agency argued that Saidov was involved in the fraudulent privatization of Guliston and TajikAzot. Since Saidov’s trial was classified by Tajikistan’s Supreme Court, it is difficult to ascertain whether the companies were part of the accusations against Saidov. Saidov’s verdict contains unspecified counts of bribery and fraud, which provide an opportunity for selective investigations of his activities and a-priori assumptions of their illegal character, as seen in Firtash’s case.

The timing is another question in the Guliston and TajikAzot cases. Article 206 of Tajikistan’s Civil Code defines a three-year limitation of action term on void contracts from the start of the contract. The privatization of Guliston and TajikAzot took place in 2002 – well beyond the three-year limitation term. Presumably, the Anticorruption agency used Saidov’s verdict to return property obtained as a result of illegal activity. Yet, there is little clarity, as required by legal norms, what property and activities are to be considered illegal. Saidov’s case reveals serious deficiencies and ambiguities, which are in turn transferred into Firtash’s case.

The number of legal ambiguities regarding the foundation of the accusations, the rapid decisions, and the timing of the accusations raise questions regarding the Tajik government’s actions. Firtash’s case undoubtedly provided an opportunity for the Tajik government. Not only did Firtash compromise his standing with the Tajik ruling elite through his connections with Zaid Saidov, but Firtash is also allegedly arrested for financial crimes at the FBI’s request. Although Firtash’s case has yet to be tried in court, it seems that the Tajik government saw his conviction as a done deal and have already decided the fate of his assets in Tajikistan. However, the Tajik government’s actions send a strong repulsive message to businessmen and potential investors in the Tajik economy. The outcome of fast but poorly thought-out decisions can negatively affect the fragile Tajik economy.