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New Ukraine Sanctions Target Business Interests of Russian-Uzbek Billionaire Usmanov

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New Ukraine Sanctions Target Business Interests of Russian-Uzbek Billionaire Usmanov

Usmanov was personally sanctioned shortly after the invasion of Ukraine began in February 2022, but new sanctions target his “wide network of businesses.”

New Ukraine Sanctions Target Business Interests of Russian-Uzbek Billionaire Usmanov

Russian-Uzbek businessman and founder of USM Holdings, Alisher Usmanov, points while speaking to Russian President Vladimir Putin, left, at the Lebedinsky GOK JSC, in Gubkin, Belgorod Region, Russia, July 14, 2017.

Credit: Mikhail Klimentyev, Sputnik, Kremlin Pool Photo via AP

A new raft of U.S. sanctions related to the Russian war in Ukraine take further aim at Russian-Uzbek billionaire Alisher Usmanov. Usmanov, whose estimated net worth is around $19.5 billion, was targeted personally with sanctions soon after the Russian invasion of Ukraine, but his businesses largely escaped sanctions until now.

In announcing the new sanctions, the U.S. Treasury Department said that “Usmanov has at his disposal a wide network of businesses in financial safe havens and family members through which to conduct financial transactions, enabling him to potentially circumvent sanctions.”

Usmanov reportedly has cushy relations with both Russian President Vladimir Putin and Uzbek President Shavkat Mirziyoyev. Usmanov has been referred to as one of Putin’s “favorite oligarchs.” At the same time, he has close ties to Mirziyoyev. In 2017, Mirziyoyev flew on Usmanov’s private plane to attend the United Nations General Assembly in New York.

On February 28, the EU froze the assets of and imposed travel bans on a list of “oligarchs,” including Usmanov. The United States followed, designating Usmanov personally for sanctions in early March 2022 and putting blocks on his superyacht, Dibar, and his plane, an Airbus A340-300 with the tail-number M-IABU, which it noted “is one of the largest privately owned planes in Russia and was previously leased out for use by Uzbekistan’s president.”

The U.S., however, authorized “all transactions and unblocking all property of any entity owned 50 percent or more, directly or indirectly, by Usmanov, that does not appear on” the U.S. Treasury Department’s Office of Foreign Asset Control’s Specially Designated Nationals (SDN) list. At that juncture, while Usmanov was personally subject to sanctions by the U.S. his businesses were not.

Usmanov has significant interests in the metals and mining, telecommunications, and information technology sectors through USM Holdings, in which he has a 49 percent stake. At the time of the initial sanctions, Metalloinvest — one of USM’s most important companies and a major steel producer — noted that the sanctions would not affect the company

Usmanov’s supporters in the Uzbek government reportedly lobbied their European counterparts to lift the sanctions. As the Financial Times reported in November 2022, “Uzbekistan is lobbying the EU to lift sanctions on Alisher Usmanov and his sister as the Uzbek-Russian billionaire struggles to disentangle himself from the fallout of Moscow’s war in Ukraine.” The report stated that Uzbek officials had used recent meetings with EU officials to raise Usmanov’s case. Those efforts did not yield success, however. 

And now new sanctions in the U.S. and U.K. target Usmanov’s businesses directly, including Metalloinvest. On April 12 the U.S. State Department issued a fact sheet under the headline “Further Curbing Russia’s Efforts to Evade Sanctions and Perpetuate its War against Ukraine,” which outlined the new sanctions. They now designate USM Holdings directly, as well as a number of its constituent entities, many of which are based in Russia, like Metalloinvest and Megafon, one of Russia’s largest telecoms, but at least one company based in Uzbekistan. 

In a statement provided to The Diplomat, USM said, “We consider the U.S. restrictions imposed against USM holding, its subsidiary companies and their management, as well as relatives of Alisher Usmanov and other shareholders to be unjust and unfounded.” The statement went on to argue that Usmanov “stepped down from business activity a long time ago,” owns less than a 50 percent share in the company, and “does not take part in its management.”

The new sanctions also designate a host of new individuals. Some are executives with ties to Usmanov and his network of business interests, and others are relatives: notably a sister and a step-son. The new sanctions shed light on the sneaky practice of transferring business or funds in the names of wives or sisters to escape notice: 

Uzbekistan national Shokhrukh Olimdjonovich Nasirkhodjaev (Nasirkhodjaev) is the CEO of Hamriyah Steel FZC, a United Arab Emirates-based company designated today by the Department of State. OFAC also designated Nasirkhodjaev’s wife, Uzbekistan national Nasiba Erkinovna Narzieva (Nasiba), and Nasiba’s mother, Uzbekistan national Saodat Burxanovna Narzieva (Saodat). Saodat is Usmanov’s sister. 

Usmanov has added Saodat to a number of his bank accounts and has sent her millions of dollars over the years. Saodat has transferred millions of dollars to both Nasirkhodjaev and Nasiba. Saodat has also been sanctioned by the UK.

USM, in the statement provided to The Diplomat, likened sanctioning family members to “hostage taking” and called it “an immoral practice.”

A press release from the U.K. Foreign, Commonwealth & Development Office explaining the complementary British sanctions on Usmanov and others notes that “Today’s package hits a number of family members of other oligarchs, who are used as proxies to hide their assets.”

The November 2022 Financial Times report about Tashkent’s efforts to get Usmanov off the sanctions hook cited a statement from the Uzbek Embassy in Brussels, which called Usmanov one of Uzbekistan’s “most famous citizens” and noted that “[i]t is difficult to identify areas in which Mr Usmanov has not helped his homeland.” While the statement emphasized Uzmanov’s philanthropy, it also ironically underscored the serious risks Uzbekistan perceived in his being targeted for sanctions.

One of the story’s reporters, Marc Filippino, explained in a podcast regarding the report that “Uzbek officials argue the sanctions have restricted the billionaire’s ability to invest some of his fortune in his birth country.” They also put his existing investments there at risk, as the new sanctions illustrate.

Since the start of the war in Ukraine, a major concern among Central Asian governments has been the potential for secondary sanctions given the region’s deep economic integration with Russia. Kazakhstan and Uzbekistan, in particular, worry about being accused of aiding Russia in circumventing sanctions and being targeted with secondary sanctions as a result. The Usmanov case is unique in some ways, given his extraordinary wealth and powerful connections in both Uzbekistan and Russia, but at the same time it serves also to illustrate the very interwoven nature of business interests across the former Soviet Union.

This piece was updated to include USM Holdings’ statement.