As gas outages and power shortages left Uzbekistan freezing during one of its coldest winters in decades, President Shavkat Mirziyoev in January fired senior officials and technocrats he blamed for the crisis. "I worry about every family, every person suffering from the cold," Mirziyoev said at a January 16 emergency meeting at which he announced the firings, including that of the mayor of the capital, Tashkent. "Every leader should feel this. The cold this year showed the state of the entire system."
But an investigation by RFE/RL's Uzbek Service found that Mirziyoev's administration was warned as early as three years ago that his ambitious projects to boost gas and oil output were riddled with problems. Furthermore, reporters found that the key beneficiaries of these projects are opaque companies controlled by Uzbek and Russian political insiders, including a billionaire confidant of Russian President Vladimir Putin.
RFE/RL's Uzbek Service (Radio Ozodlik) has obtained the conclusions of a secret interagency report warning that multibillion-dollar deals struck under the president's major energy initiatives risked the country's energy security.
Four people familiar with the report told Radio Ozodlik that it was submitted to Mirziyoev's administration in January 2020.
The secret report is among thousands of pages of records related to the Uzbek energy sector that reporters reviewed in cooperation with the University of Ulster's Kristian Lasslett. These records include dozens of confidential reports, commercial agreements, internal correspondence, and corporate records of offshore companies in multiple jurisdictions.
These records, together with interviews with government officials and executives in state energy companies, reveal how, under Mirziyoev's program, Uzbek and Russian insiders took control of hundreds of gas and oil fields in the Central Asian nation and were awarded lucrative construction, drilling, and export rights, often with no public evidence of competitive bidding.
Other key findings in the investigation include:
- The public face of the Russian-Uzbek network of insiders, a little-known executive from Samarkand, has business links to relatives of former top Uzbek security-service officials.
- The same businessman, Bakhtiyor Fozilov, controls the key construction and drilling firms operating under Mirziyoev's energy program.
- The secret interagency report accused companies linked to this network of charging exorbitant prices for services that could be provided much more cheaply by state-owned companies.
- Control of the Uzbek gas network's main storage facility has been handed to a Russian firm whose initial nominal owner, a St. Petersburg legal assistant, has business ties to Gennady Timchenko – who is under U.S. and EU sanctions – and appears to be Timchenko's proxy.
As part of its investigation, Ozodlik is releasing hundreds of pages of records -- including confidential reports and presidential decisions never before available to the public -- related to Mirziyoev's energy program and the well-connected companies and individuals who have benefited from it.
These records reveal that the granting of development and extraction rights -- and related construction and drilling contracts -- to obscure offshore firms located in Cyprus, Singapore, China, and Great Britain, among other jurisdictions, are grounded primarily on decrees issued by Mirziyoev himself.
Meanwhile, Gazprom, the Russian state energy giant that the Kremlin has long used as a geopolitical cudgel in the countries of the former Soviet Union and beyond, is the hydra whose many heads surface throughout the network of insiders benefiting from Mirziyoev's energy program.
At the January 16 emergency meeting in Tashkent, Mirziyoev said he had instructed the Uzbek State Security Service (SNB) to investigate the officials he fired amid the latest gas crisis and "hold them strictly accountable" if violations are found.
His words echoed one critical conclusion of the secret report submitted to Mirziyoev's administration in January 2020, though that report gave a list of alleged culprits that was significantly longer.
The report called on Mirziyoev to replace "the entire leadership" of the Energy Ministry and the state energy company Uzbekneftegaz and prosecute them for causing economic damage to the state, "including in collusion with officials in the presidential administration."
Radio Ozodlik sought responses to the findings of this investigation from Mirziyoev's administration, the Uzbek Energy Ministry, and Uzbek state-owned energy Uzbekneftegaz but received none prior to publication.
The Secret Report
Under Mirziyoev's dictatorial predecessor, Islam Karimov, Uzbekistan inked several gas-development and pipeline deals with Russian energy companies, including Gazprom. Karimov, however, viewed Moscow's intentions in Central Asia with suspicion during his more than two decades in power, even refusing to join Putin's Eurasian Economic Union.
Following Karimov's death in September 2016, Putin and Gazprom almost immediately began courting Mirziyoev, who days later was named the country's interim president by parliament.
It quickly became clear that they had found a willing partner in Uzbekistan's new leader.
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In the ensuing months, Mirziyoev issued a series of decrees handing lucrative exploration and development rights for promising Uzbek gas fields to a joint venture founded in October 2016 by Uzbekneftegaz and a Swiss subsidiary of Gazprom.
Mirziyoev designated that joint venture, Natural Gas-Stream, as the operator of a $3.9 billion program -- financed by Gazprombank -- that he formalized in a March 2017 decree. The program's stated aim was "ensuring the stable provision of hydrocarbons for the needs of the country's population and economy."
A central plank of the program was increasing state-owned Uzbekneftegaz's gas production by more than 6 billion cubic meters annually.
To keep tabs on progress of this program and other major energy initiatives, Mirziyoev in November 2019 set up an interagency working group that analyzed 35 projects -- both planned and under way -- valued at nearly $40 billion, according to multiple sources familiar with the group's work and a copy of its conclusions obtained by Radio Ozodlik.
The conclusions of this working group painted a portrait of the government's oil and gas projects as rife with miscalculation, inefficiency, overpricing, and a lack of transparency.
The group's members -- including experts from state energy companies, the state geology committee, and the audit chamber -- concluded that out of 17 ongoing projects valued at $24.5 billion, two valued at $3.9 billion were unprofitable, six valued at $9 billion did not make economic sense, and three valued at $5.8 billion required a revision of conditions.
Among the 17 projects analyzed was Mirziyoev's own four-year program to boost hydrocarbon production.
British energy giant BP estimates Uzbekistan's total proven gas reserves at around 800 billion cubic meters, and Mirziyoev's program aimed to boost annual gas production by 6.35 billion cubic meters.
The working group's analysis found that the program was lagging in its efforts to boost production, hitting 33 percent of that mark in 2018. Internal data obtained by Radio Ozodlik shows Uzbekneftegaz's gas production continues to lag behind Mirziyoev's goal.
Amid the cold weather and gas shortages in December, the Uzbek Energy Ministry issued a statement saying Uzbekneftegaz's production was declining year-by year, attributing this trend to the depletion of reserves and "accidents" in the fields "belonging to society."
But the working group gave a different assessment in its report three years earlier, saying it had uncovered "numerous significant problems and gross violations that hinder the sustainable development of the oil and gas industry and are contrary to the interests of the state."
Much of the report's harshest criticism centered on the general contractors for Mirziyoev's program, Eriell Group and Enter Engineering, which the authors accused of overcharging for services and failing to uphold contractual obligations to provide and modernize equipment for subcontractors.
Under the first stage of Mirziyoev's program to boost hydrocarbon production, Eriell overcharged for its services by $400 million, according to an analysis of contracts by the working group. Eriell, meanwhile, turned around and subcontracted the actual drilling and repair work to units of Uzbekneftegaz, who carried the work out at "much lower prices than those specified in the contract," the working group report alleges.
That allegation echoed a confidential assessment earlier in 2019 by Boston Consulting Group, a copy of which was obtained by Radio Ozodlik. The report described Eriell as a "monopoly" contractor for Uzbekneftegaz facilities and said that such contracting work costs the state company two to four times what it would cost if Uzbekneftegaz did the work itself.
An analysis of financial records in multiple jurisdictions reveals that Eriell and Enter Engineering are the key corporate operators in a Russian-Uzbek network that includes Kremlin-linked oligarchs, the offspring of top security service officials and executives at state companies, and an obscure businessman from Samarkand with long-standing ties to Gazprom.
'Monopoly' Money
The origins of Eriell date to 1999, when a Samarkand native named Bakhtiyor Fozilov registered a company called Eriell Corporation in Prague. Initially engaged in selling Russian drilling equipment to Uzbekistan, Eriell became a driller itself and, thanks to deals with Uzbekneftegaz, gradually built a monopoly on the drilling of Uzbek oil and gas fields.
After Eriell entered the Russian market in 2008 and secured contracts with Russian giants like Gazprom, Rosneft, and Timchenko's gas company Novatek, Gazprombank bought a 46 percent stake in Fozilov's company for $100 million.
While Eriell continued to operate in Uzbekistan, it was after Karimov's death and Mirziyoev's ascent in 2016 that the company's -- and Fozilov's -- fortunes began to soar.
Over the past six years, these two companies, Eriell and Enter Engineering -- another company owned on paper by Fozilov, together with Gazprombank -- were selected as general contractors, either together or separately, on at least nine major oil-and-gas projects valued in total at around $23 billion.
Uzbek procurement records show that in 2017 and 2018 the two companies were awarded at least $1.9 billion in construction and repair contracts for work at oil and gas fields in the country.
"Since September 2016, not a single cubic meter of gas leaving Uzbekistan has been released without the permission of Bakhtiyor Fazilov," an associate of the businessman told Radio Ozodlik on condition of anonymity.
Financial filings show that Eriell's parent company -- based in the self-governing British dependency of Jersey -- consistently notches an annual turnover of $1 billion.
Due to the use of nominee companies and individuals, it is difficult to discern exactly who the beneficial owners of Eriell are, though on paper it is jointly owned -- through offshore companies -- by Fozilov, Gazprombank, and a Russian company called AMGA Consulting that shares a Moscow address with companies owned by Timchenko and his son-in-law. Business associates of Timchenko have also played roles in companies that previously held stakes in Eriell.
In its December 2019 financial filing, Enter Engineering -- in which Fozilov owns a majority stake through a Cypriot company -- declared nearly $1 billion in revenue linked to projects in Uzbekistan, $670 million of which involved energy infrastructure.
Independently of one another, multiple sources involved in Uzbekistan’s energy sector described Fozilov as Gazprom's key associate for its work in Uzbekistan.
"All gas sales in Uzbekistan go through him," his associate told Radio Ozodlik.
Fozilov also has documented business ties with the sons of two former senior officials with the SNB, an analysis of corporate records shows.
In Russia, Fozilov has partnered in multiple Russian companies with Ravshan and Erkin Ubaidullaev, sons of former SNB Colonel Umar Ubaidullaev, and Sharif Inoyatov, son of Rustam Inoyatov, who headed the SNB from 1991 to 2018.
Both Ravshan Ubaidullaev and Sharif Inoyatov have previously had financial ties to the Cypriot company through which Fozilov currently owns Eriell. Financial filings show that in January 2016 a Cypriot firm called Erilico Limited -- through which Fozilov holds his stake in Eriell -- provided a loan to another Cypriot firm called Rilves Limited. An Eriell subsidiary called Gillard Middle East FZE also provided a loan to Rilves.
At the time of the loan, the beneficial owners of Rilves included Ravshan Ubaidullaev and Sharif Inoyatov.
Erkin Ubaidullaev, meanwhile, was listed as the ultimate controlling party of a Cyprus company called C.E. Civil Engines, which between 2016 and 2019 received 91 gas-pumping and booster-compressor units from Uzbekneftegaz subsidiaries for repair work costing $133 million, according to the secret working-group report.
The report alleges that delays in the repair work by C.E. Civil Engines led to the loss in production of 11.3 billion cubic meters of gas.
A separate assessment in a confidential report by Boston Consulting Group said that in 2017-18 the cost of repairs and deliveries of gas turbine engines through C.E. Civil Engines were overpriced by $37 million.
Neither the Ubaidullaev brothers nor Sharif Inoyatov responded to requests for comment.
Other business partners of Fozilov in Russia include Kirill Matveyev, the son of Aleksei Matveyev, the deputy chairman of Gazprombank and a chairman of Eriell's board of directors since 2012 who was hit by sanctions by the United States in May 2022. Neither the elder Matveyev nor his son responded to a request for comment.
Fozilov did not respond to Radio Ozodlik's request to comment on a list of questions about his business operations and financial stake in the Uzbek energy sector. But in a response to Radio Ozodlik's collaborator on this investigation, the University of Ulster's Kristian Lasslett, Fozilov claimed the questions related to his business interests and partners in Uzbekistan contained "grossly incorrect, inaccurate, and incomplete" information.
"Regarding answering your questions -- due to [the] confidential nature of business relations, we unfortunately cannot answer your questions. We, however, reiterate and confirm that you have been seriously misled either (sic) by people who presented this information to you," Fozilov wrote in his e-mailed response.
Gazprombank spokesman Anton Trifonov claimed in an e-mailed response to Lasslett's list of questions about the lender's business activities and partners in Uzbekistan that the inquiry was "premised on [the] unsubstantiated assumption that Gazprombank is involved in economic projects in Uzbekistan on unfair and inappropriate terms."
"Therefore, we are forced to assume that many other 'factual' statements in your letter regarding the bank and other entities and individuals are equally baseless and misleading," Trifonov said.
'Not In The Interest Of The State'
Eriell and Enter Engineering are not the only companies linked to Fozilov and Russian business interests that have cashed in on Mirziyoev's major energy project.
Fozilov is the founder and shareholder of a Cypriot company called Altmax, which has a stake in some of the most ambitious gas projects undertaken during Mirziyoev's reign -- including the Uzbek president's four-year program to boost hydrocarbon production.
Altmax holds a 49 percent stake in Natural Gas-Stream, the joint venture with Uzbekneftgaz that Mirziyoev designated the operator of the $3.9 billion program.
Natural Gas-Stream was originally founded by Uzbekneftegaz and a Gazprom subsidiary in Switzerland -- Gas Project Development Central Asia AG -- whose previous board members have included Matthias Warnig, a former East German spy-turned-banker and a longtime friend of Putin. The Swiss company is now controlled by a Cypriot company that Fozilov owns, and Altmax has taken over most of the shares it had in Natural Gas-Stream.
An Altmax financial filing submitted in 2017 highlighted the weight the company carries in Mirziyoev's energy plans. The filing states that in April of that year, Altmax and its partners in Natural Gas-Stream had signed a production-sharing agreement with the Uzbek government granting them "the exclusive right to exercise and lead all oil and gas operations" in Uzbekistan for 35 years.
But the secret working-group report paints a less-than-rosy picture of Natural Gas-Stream's handling of Mirziyoev's program.
It states that Natural Gas-Stream bought gas from Uzbekneftegaz's Mubarek gas-processing plant -- designed for domestic supply -- in the country's southeast at rock-bottom prices, sold it abroad with a massive mark-up, and used the proceeds on allegedly inflated operating expenses and servicing loans from Russian state lender Gazprombank earmarked for the general contractor, Eriell.
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"As a result, the activity of Natural Gas-Stream does not actually create additional profit or resources, but rather generates a loss for Uzbekneftegaz," the report states.
Altmax has undergone multiple changes in its ownership structure since Fozilov founded it in 2015. He currently owns 50 percent of it through a Singaporean company, while the other half is owned by a Cypriot firm that Russian billionaire Andrei Filatov -- president of the Russian Chess Federation and a business associate of Timchenko -- has claimed is his.
Two days after Radio Ozodlik requested comment from Filatov about Altmax and his links to Fozilov, the Russian businessman released a statement on the website of the Russian Chess Federation stating that he owns a 50 percent stake in the Cypriot company that he bought from Fozilov.
"As a businessman, I have a wide range of business interests including the oil and gas sector. However, while I do not doubt Mr. [Fozilov's] integrity, I am not a partner in his operating business," Filatov said in the February 3 statement.
The secret working-group report also flagged multiple problems in other energy projects that Mirziyoev awarded to Altmax -- including red flags about the Cypriot company's corporate transparency.
The company that Mirziyoev designated the operator of an $5.8 billion exploration-and-development program at the M25 gas field in the southeastern Surxondaryo region is 75 percent owned by Altmax through a Hong Kong offshore company. Eriell and Enter Engineering are the project's main contractors.
The working group wrote that the ownership structure does not allow "conducting transparent financial activities and assessing the contribution of foreign founders," adding that under the production-sharing agreement the Uzbek side would receive 10 percent of the profit product, which is "not in the interest of the state."
The Timchenko Proxy
On October 19, 2018, Mirziyoev sat across from Putin at a roundtable in Tashkent, both men flanked by officials as businessmen from their respective countries looked on.
Addressing Putin, Mirziyoev touted bilateral trade projected to reach $10 billion within two years, and reeled off a list of what he called "leading" Russian companies with which Uzbekistan had signed major deals totaling some $25 billion over the next five years.
The list included familiar Russian corporate behemoths: energy majors Gazprom and LUKoil, state nuclear agency Rosatom, and lenders Gazprombank and VEB. But there was an outlier in the list recounted by Mirziyoev, a little-known Russian company whose name the Uzbek president mispronounced as "Vorus."
The company's name is, in fact, Forus, and it had been incorporated in St. Petersburg the previous year by a 27-year-old legal assistant who, at the time Mirziyoev publicly mispronounced the company's name, remained its sole shareholder -- on paper at least.
Just two days before the Mirziyoev-Putin talks, Forus had created a joint venture -- together with an Uzbekneftegaz subsidiary -- called Gazli Gas Storage. Forus took a 60 percent stake in the firm, while the Uzbek state energy company took a 40 percent stake -- an ownership structure that remains unchanged.
Mirziyoev spelled out his government's collaboration with this obscure Russian company two weeks later in a decree that has never been released to the public, but which RFE/RL obtained. The project spells out plans for Uzbekneftegaz and Forus to increase the capacity of Uzbekistan's main underground gas-storage facility, located near the town of Gazli in the southwestern Bukhara region.
The plan was to boost capacity from 3 billion cubic meters of gas to 10 billion cubic meters, as well as explore and develop hydrocarbons located in the nearby Gazli fields. The listed project cost was $850 million -- a seemingly heady sum for Forus, whose initial charter capital totaled just $155.
The Gazli storage facility lies at the heart of Uzbekistan's gas-transport network, situated at the intersection of pipeline routes running to Russia, Turkmenistan, Kazakhstan, and China.
The secret interagency working group report submitted to Mirziyoev's administration raised multiple concerns about the $850 million Gazli expansion and development deal, given the Gazli facility's strategic importance for Uzbekistan.
It said the expansion of the facility did not make economic sense, a view echoed in the 2019 confidential report by Boston Consulting Group that called the project "impractical." The working group also said the deal placed the country's energy security at risk by allowing control over this strategic asset to a company of "dubious origin."
So who, precisely, is the owner of the small Russian company in control of this crucial Uzbek energy asset?
Evidence reviewed by Radio Ozodlik indicates the founder of Forus, who remained the company's 100 percent listed shareholder until December 2021, is a proxy for Russian billionaire Timchenko, the longtime friend of Putin who has been under U.S. and EU sanctions since 2014.
Data from official Russian records show that the founder of Forus, Aida Chachkhalia, has worked as a legal assistant at the St. Petersburg law firm Ivanyan and Partners, which has represented both Timchenko and the Russian government in foreign legal matters.
Chachkhalia, now 33, also co-founded with Timchenko a company established to manage his business interests in wineries -- and later took over all of the company's shares. She also has documented business partnerships with Timchenko's son-in-law, Gleb Frank, who was hit with U.S. sanctions last year.
Multiple sources working in the Uzbek energy sector, including an Uzbekneftegaz expert who spoke on condition of anonymity, also told Radio Ozodlik that Timchenko was the ultimate beneficiary of Forus and the Gazli project.
Timchenko did not respond to a request for comment on his involvement in Forus and the Gazli project.
Radio Ozodlik reached Chachkhalia by telephone at Ivanyan and Partners. Asked about her role as founder and former 100 percent owner of Forus, she said, "As far as I recall, I am no longer the founder." Chachkhalia said she believed she exited the company's ownership "a few years ago."
The current listed ownership of Forus is shielded in public records by a Gazprom-owned company that maintains the register of shareholders of major Russian companies.
Asked about her interest in investing in Uzbekistan, Chachkhalia said she would not like to comment and recommended that a reporter contact the company's "current leaders," whom she did not identify. Asked if she was the real founder and owner of Forus, Chachkhalia hung up.
By RFE/RL
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