Corruptistan

The government of Uzbekistan recently declared 2012 the Year of the Strong Family. As part of this official campaign, Uzbek citizens are being compelled to participate in a “1,000 Weddings and 1,000 Circumcisions” campaign being held throughout the country. Given that the festival was organized by a foundation run by autocratic President Islam Karimov’s ever-present daughter Gulnara, Uzbeks could be forgiven for wondering whether the bizarre event was actually meant to celebrate one family in particular. In fact, the country’s citizens have been compelled to celebrate the strength of the Karimovs for the last two decades.

Uzbekistan is not alone in its region. In the absence of democratic institutions, the power of presidential families is often the bond that holds many Eurasian dictatorships together. Commentators often speculate on whether post-Soviet leaders are grooming their children as successors, in the style of the Kims or Qaddafis, but the scions of these regimes are already playing their part. In addition to serving as occasional ambassadors abroad or members of rubber-stamp parliaments, these children often function as crucial players in the regimes’ tight grip on the economy, acting as extensions of their fathers’ administrations in the business sector and beyond.

Here’s a tour through the stories of Eurasia’s wealthiest ruling families.

UZBEKISTAN

According to WikiLeaked U.S. diplomatic cables, the general public views Gulnara Karimova as a “robber baron,” having reputedly pushed her way into nearly every business sector in Uzbekistan. While she denies widespread suspicions of her involvement, Karimova has been reported to be a key force behind a sprawling Swiss-registered conglomerate known as Zeromax, which was mysteriously shut down by the authorities in 2010. Zeromax had been Uzbekistan’s largest private-sector employer, with holdings in agriculture, textiles, construction, mining, and energy.

Karimova is believed to control Uzbekistan’s Coca-Cola bottling plant, which was partly owned by her New Jersey-based husband until they divorced and the Uzbek courts seized his stake. In July, officials at Russian mobile-phone operator MTS claimed that Karimova was behind the hostile takeover of the company’s Uzbek branch, Uzdunrobita. The branch belonged to Karimova until 2004, when she sold it to MTS. Now that it is valued at close to $1 billion and holds some 40 percent of Uzbekistan’s mobile market, MTS executives have complained that regime elites, especially Karimova, are keen to expropriate it, making use of the state’s typical tactics (i.e., tax and licensing violations) to do so. The Uzbek seizure upset Russian authorities to the point that it reportedly became the main topic of telephone conversations between the two countries’ foreign ministers in August.

Surprisingly, given her controversial business activities, Karimova has acted as an international PR agent for her father’s regime, a tough assignment for a government with a well-earned reputation for massacring protesters and engaging in torture tactics that have allegedly included boiling people alive. As chairwoman of the supposedly nongovernmental Forum of Culture and Arts of Uzbekistan Foundation, or Fund Forum, Karimova has devoted herself to “uniting of efforts by diplomatic and public bodies to set up socio-humanitarian and universal ties among countries and diverse national entities,” according to the organization’s website. The forum’s domestic projects include art and cultural festivals with talent handpicked by Karimova, as well as the 1,000-weddings campaign and the Style.uz Art Week — a Tashkent version of New York’s Fashion Week. Internationally, the Fund Forum has built partnerships with the Louvre Museum in Paris, the British Council, the Japan International Cooperation Agency, the Susan G. Komen for the Cure foundation, and UNESCO.

Karimova has also worked to get her high-priced “Guli” clothing brand carried in elite stores and showcased at fashion shows around the world, though some of these attempts have been thwarted by human rights advocates who have tried to link Karimova’s label to the abuses of her father’s regime and particularly to the use of compulsory child labor in Uzbek cotton fields. When she is not pushing Guli, Karimova performs as “Googoosha,” her pop-music alter ego.

Karimova’s younger sister, Lola Karimova-Tillyaeva, is a business mogul in her own right. Her commercial enterprises reportedly include Abu Sahiy Nur, a company that controls imports of Chinese goods and boasts a daily turnover of at least $250,000. In addition to businesses, the sisters also own multimillion-dollar properties in Switzerland. Both sisters made Bilan magazine’s list of Switzerland’s 300 richest residents in 2011. Even after reported losses that year dented their fortunes by $200 million, the magazine estimated that the two still had a combined fortune of $1 billion. More recently, others have estimated that Karimova alone could be worth $3 billion. While the sisters’ assets may be hard to quantify accurately, the primary reason for their wealth — the coercive power of their father’s regime — seems obvious, leading Harper’s contributing editor Scott Horton to call Uzbekistan “the biggest family business in the world.”

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AZERBAIJAN

The presidential family of Azerbaijan has made its fortune in the country’s lucrative oil sector. During the rule of President Heydar Aliyev, a former KGB chief who seized power in 1993, his son Ilham served as vice president of the state oil company, SOCAR, which controls the country’s 7 billion barrels of oil reserves. When Heydar died in 2003, the presidency passed to Ilham in a tightly controlled election. SOCAR remains a state-owned firm, despite attempts by foreign investors to bribe Azerbaijan’s rulers into a privatization deal. The sovereign wealth fund that receives Azerbaijan’s oil revenues is essentially controlled by the president, and SOCAR itself has spawned subsidiaries and contractors with opaque private ownership structures.

Azerbaijani law prohibits government officials, including the president, from owning businesses, but there are no such restrictions on family members. A recent investigative series by Radio Free Europe/Radio Liberty uncovered a long list of offshore companies and luxury properties registered in the names of Ilham Aliyev’s children. For example, his daughters, Leyla and Arzu Aliyeva, ages 27 and 23, respectively, are literally sitting on a gold mine. In 2007, the regime gave the Azerbaijan International Mineral Resources Operating Company (AIMROC) a 70 percent stake in a gold field near the western village of Chovdar as well as five other sites. The state retains the remaining 30 percent. The Chovdar mine alone boasts 44 tons of gold and 164 tons of silver reserves worth $2.5 billion. AIMROC is a joint venture of four companies, one of which — Britain-based Globex International, with an 11 percent stake worth about $200 million — is in turn owned by three Panama-registered holding companies that all list the two Aliyeva sisters as senior managers.

Other investigations have uncovered similar structures in other industries. Panamanian records list Leyla and Arzu Aliyeva as top executives on the registries of three holding companies: Hughson Management, Grinnell Management, and Gladwin Management. Hughson reportedly owns a 51 percent stake in ATA Holdings, one of Azerbaijan’s largest conglomerates, with units in the financial services, insurance, and construction industries. Moreover, Hughson, Grinnell, and Gladwin each own 24 percent stakes in Azerfon, a major Azerbaijani telecommunications company with nearly 1.7 million mobile subscribers. Azerbaijan’s Communications Ministry has repeatedly claimed that Azerfon is owned by Siemens, though the German company denies ever owning shares. Arzu also owns a large stake in SW Holdings, an airline industry monopoly that was formed through the privatization of the state airline AZAL.

According to a 2010 Washington Post article, Azerbaijani citizens with the same names and ages as the president’s children owned a number of properties in Dubai valued at $75 million. Real estate officials said that at least some of the purchases were paid for upfront by a representative of the president’s family. In early 2009, the article reported, within a period of two weeks, nine waterfront mansions in Dubai’s luxury Palm Jumeirah development were purchased for $44 million by one Heydar Aliyev, who has the same name and birth date as the president’s 11-year-old son.

Like Karimova, Leyla has worked to improve her family’s image — tarnished by violent crackdowns on the opposition and the jailing of critical bloggers and journalists — through charity work. She is vice president of the Heydar Aliyev Foundation (HAF), a “nongovernmental” organization dedicated to development of science, technology, health, and education. The HAF was established by Leyla’s mother, first lady Mehriban Aliyeva. According to her website, it “builds more schools than Azerbaijan’s Ministry of Education, more hospitals than the Ministry of Health, and conducts more cultural events than the Ministry of Culture.” The foundation effectively stamps the Aliyev name on services that touch the lives of everyday Azerbaijanis — services that might otherwise be provided by the government using public funds, as entitlements rather than gifts.

Leyla recently launched the art and fashion magazine Baku, which is published in Moscow. Her husband, pop star Emin Agalarov, had the privilege of performing in a coveted slot at the 2012 Eurovision Song Contest, hosted in Azerbaijan’s capital.

A few years ago, Arzu became the face of tourism in Azerbaijan when she appeared in a promotional video that aired on major world networks, including CNN, in a bid to attract international visitors and burnish the country’s image. The 46-second clip shows a blonde Arzu amid glamorous surroundings, luxury cars, elaborate mansions, and seaside resorts.

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KAZAKHSTAN

In Kazakhstan, where President Nursultan Nazarbayev has ruled since the fall of the Soviet Union, the president’s three children also enjoy significant political and financial power. Nazarbayev had the bad luck of having only daughters, which in Kazakhstan’s traditional culture forces him to rely heavily on his sons-in-law to build the family’s fortune — at least until he no longer favors them.

The president’s oldest daughter, Dariga, is best known for her work in the parliament, where she headed her own political party until it merged with her father’s, Nur Otan, in 2006. She fell out of the spotlight for a few years after her then-husband, Rakhat Aliyev — businessman, public official, and former partner of the billionaire oil magnate Rashid Sarsenov — was driven into exile in 2007 and convicted in absentia for plotting a coup d’état, a charge he has denied. Dariga and Aliyev divorced, and his role in the family business was dissolved. She, however, remains a multimillionaire. Until 2010, Dariga held a majority share in Nurbank, Kazakhstan’s ninth-largest lending institution, along with her son Nurali. In 2012, she ranked 13th on Forbes‘s Kazakh rich list with an estimated fortune of $585 million. Nurali was the youngest Kazakh on the list, in 25th position with $190 million. As a sign of her father’s forgiveness, this year Dariga also resumed her political activities as chair of Nur Otan.

Dinara, the middle daughter, has repeatedly made the Forbes billionaire list with a fortune estimated in 2011 at $1.3 billion. That made her the third-richest person in Kazakhstan in a tie with her husband, Timur Kulibayev. The magazine lists the source of her wealth as “banking,” and her only known business activity is the couple’s controlling stake in Kazakhstan’s second-largest bank, Halyk. Kulibayev plays a more prominent role in the business world, having held a number of commanding positions in the Kazakh economy, including the chairmanships of the sovereign wealth fund, the national oil and gas company, and the national railway company. In his spare time, Kulibayev sits on the board of Russian state-owned energy giant Gazprom.

Leaked U.S. diplomatic cables alleged that Dinara’s husband was the “ultimate controller of 90 percent” of Kazakhstan’s economy. However, in late 2011, he was pushed out as head of the sovereign wealth fund in the wake of rioting by striking oil workers, suggesting that his privileged position in the Kazakh economy may be just as precarious as that of Dariga’s former husband.

In 1998, at age 18, Aliya — the president’s youngest daughter — married then president of Kyrgyzstan Askar Akayev’s eldest son, Aidar. At the time, the marriage was celebrated as Central Asia’s first dynastic union, reflecting the regional tradition of solidifying political relations through family ties. The couple divorced shortly thereafter, and in 2002 Aliya married businessman Daniyar Khassenov, who keeps a low profile. When she was in her early 20s, Aliya established a high-end spa in Almaty called Luxor after being inspired by a trip to Egypt. Annual family memberships cost $7,950 in 2005 — more than double the average per capita income in Kazakhstan at the time of its opening that year. More recently, Aliya, now 32, has followed in Karimova’s footsteps by promoting her own high-end jewelry line, carried internationally by luxury Italian jewelry retailer Damiani. The 20-piece collection ranges from $25,000 to $100,000.

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KYRGYZSTAN

Sometimes, even when autocratic leaders are removed from power, the economic power of the children lingers on. In the case of Kyrgyzstan, authoritarian President Kurmanbek Bakiyev was overthrown in 2010, but the new government is still scrambling to recover state assets it says were siphoned off through the country’s largest bank, AsiaUniversalBank (AUB), which allegedly was engaged in laundering hundreds of millions of dollars in suspicious transactions prior to Bakiyev’s removal. (The bank’s former management has denied the allegations, claiming the charges are politically motivated.)

The new Kyrgyz authorities have accused the ousted president’s son Maksim of involvement in the scheme, among other economic activities. According advocacy group Global Witness, he maintained a close personal relationship with AUB’s chairman and was believed to have a hidden interest in the institution. Moreover, in 2009 the elder Bakiyev had appointed Maksim as head of the Central Agency for Development, Investment, and Innovations, giving him direct access to public funds. Two years after the collapse of his father’s regime, Maksim lives in Britain, having claimed political asylum and so far avoided extradition.

Taken together, the economic, cultural, and charitable activities of presidential families in the authoritarian states of Eurasia suggest that many of them have come to regard their countries’ wealth as personal property. They paper over the origins of their riches and power and attempt to win acceptance among the elites of democratic countries, crudely mimicking legitimate business enterprises and philanthropic interests.

Nobody should be fooled by all this. Many of these businesses and charities are founded on abusive and inherently unstable authoritarian systems. The families spend money arbitrarily and opaquely, without the input of freely elected lawmakers or the scrutiny of independent media. They are doing lasting damage to their respective national economies, sidelining public and private competitors and hampering broad-based development.

Despite speculation that certain members of these presidential families are being groomed for the presidency, concrete plans for succession remain elusive, and some senior regime figures may oppose a dynastic power transfer. In that sense, the presidential offspring may have good reason to enjoy themselves while they can. One hopes that the rest of the world is thinking further ahead.

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