Wed, 20 Oct 2021

An investigation by RFE/RL's Tajik Service suggests that top managers of Tajikistan's debt-plagued national airline, Tajik Air, have been orchestrating the firm's downfall to the benefit of the family of President Emomali Rahmon.

The collapse of Tajik Air would leave Tajikistan's air-transportation sector dominated by Somon Air -- a private company linked to Rahmon's family, which controls almost all of Tajikistan's major businesses.

The Tajik Finance Ministry said in August that with Tajik Air now facing imminent bankruptcy, the government will no longer provide funds to prop up the firm. The ministry also said the fate of Tajik Air will be decided at 'higher government levels.'

In Tajikistan, such decisions are ultimately made by President Rahmon -- who wields enormous clout in the authoritarian former Soviet republic.

Numerous insiders and other knowledgeable sources have told RFE/RL that Tajik Air is being deliberately pushed out of business in order to benefit the airline owned by Rahmon's family.

The Finance Ministry first warned about the risk of Tajik Air going bankrupt in 2016, noting that the airline's revenues had plunged by 1,118 percent from the previous year.

Since then, there have been multiple opportunities to save Tajik Air. But every top manager has brought the airline closer to destruction instead of saving it.

Somon Air is owned by the president's brother-in-law, Hasan Asadullozoda.

Three former managers since 2006 have faced separate criminal investigations in recent years. But no serious legal actions were brought against them. Some have gone on to become successful entrepreneurs with multimillion-dollar portfolios.

Four sources at different levels of the company's management, as well as one government official, have told RFE/RL on condition of anonymity that the former managers intentionally ran the company into bankruptcy in order to eliminate Somon Air's only domestic rival.

Somon Air is owned by Rahmon's brother-in-law, Hasan Asadullozoda. His ownership was confirmed by a court in London in a case involving the Tajik aluminum plant Talco.

Meanwhile, a U.S. diplomatic cable from 2009 that was published by WikiLeaks suggests Somon Air is directly controlled by Rahmon. The U.S. diplomatic cable says, 'Somon Air seems to be in the process of replacing state-owned Tajik Air, which would presumably go out of business when Somon Air becomes large enough to take over its traffic.'

Hasan Asadullozoda

Since 2015, Tajikistan's government has written off more than $2.6 million of Tajik Air's debts. But Tajik Air is still owes about $40 million to the tax authorities, various banks, airports, and service providers.

A court in Vilnius has ordered Tajik Air to pay more than $20 million to the Lithuania-based company Skyroad Leasing. Skyroad has threatened to take the Tajik government to an international court if Tajik Air fails to pay.

In August 2019, the Moscow Arbitration Court ordered Tajik Air to pay the Russian federal air transport regulator about $555,000 in debt and fines. The court also supported the Skyroad claim.

Courts in Russia also have agreed to hear more than two dozen other cases against Tajik Air, with claims totaling about $1.5 million.

Tajik Air temporarily halted all of its scheduled flights in early 2019 and Somon Air took over the national carrier's routes. The majority of Tajik Air's 520 employees were sent home on unpaid leave -- a financially crippling situation for them, as they were already owed about a year's worth of unpaid back wages. Several of Tajik Air's most experienced pilots were also hired by Somon Air.

The suspension of Tajik Air's operations left Somon Air with an effective monopoly on the domestic market. It immediately raised its passenger ticket prices.

'Unhealthy Competition'

Launched in 2008, Somon Air quickly took over Tajikistan's most lucrative flight routes. It presented a serious challenge to Tajik Air, which was operating with 16 Soviet-era aircraft at the time.

However, Tajik Air was a conglomerate with control of several airports, a fuel business, Tajikistan's air-traffic-control system, an airline food business, and ticket offices. That helped the company withstand competition from the new player in the market. Tajik Air's debts at the time were about $1.3 million, a sum the company could easily pay off with its sizeable revenues.

But it has never been fair competition between the two companies.

Shortly after Somon Air was launched, the government divided Tajik Air's holdings into eight separate entities. Airports in Dushanbe and major cities like Khujand, Bokhtar, and Kulob were given the status of international airports and were taken away from Tajik Air. Smaller airports across the country were placed under the control of local governments.

Other businesses that provided airline services have always been separate from Tajik Air. Some have since been privatized. RFE/RL's investigation found that the new managers of some of these companies have links to Somon Air.

The company TZK, for example, was appointed as the exclusive fuel provider for aircraft. TZK has been linked to Rahmon's brother-in-law, Asadullozoda. It is run through a British offshore company, Menford Holdings LTD.

Using its monopoly of the market, TZK raised the fuel price -- making it 40 percent more expensive than in neighboring Kyrgyzstan.

Tahmina Rahmonova

Likewise, the sale of the airline's tickets has been monopolized by President Rahmon's family. Control of that service was handed over to an offshore company called Air Service Agency without any tender or public announcement.

Air Service Agency is controlled by Rahmon's daughter, Tahmina Rahmonova, and her husband, Zarifbek Davlatov. According to reports in several publications, Air Service Agency was given exclusive rights to sell Tajik Air tickets and received 14 percent of the revenues.

Fergana.ru reported in 2019 that nearly all the managers who run the businesses that were once part of the Tajik Air conglomerate have had links to Asadullozoda. Ferghana.ru has also quoted sources saying their ultimate aim was to 'destroy Tajik Air.'

Valery Sharifov, former deputy head of Tajik Air, said in 2018 that subsidiary companies providing services for Tajik Air had tripled their prices, a move that buried the airline in debt.

Meanwhile, Somon Air continued to take over more lucrative routes from the national carrier.

In 2014, the head of Tajik Air, Firuz Hamroev, complained about what he described as 'unhealthy competition' between the two airlines. But the criticism cost Hamroev his job. He was fired in July 2014 after two years as Tajik Air's top manager.

Somon Air left Tajik Air far behind in the number of flights and passengers just six years after it had been launched, and the trend continued in the following years.

President Rahmon flies with Somon Air for all his official trips. Somon is the name of Rahmon's youngest son, although it's not known whether that is a coincidence or not.

Thus, Tajikistan's oldest airline has fallen deeper into crisis while the newly established one was able to take its place in less than six years. In fact, Tajik Air operated all flights to and from Tajikistan until 2008 -- despite facing intense pressure from Russian companies.

President Emomali Rahmon flies with Somon Air for all his official trips.

Slap On The Wrist

Tensions between Tajik Air's management and President Rahmon surfaced during a government meeting on January 21, 2019, when Rahmon harshly criticized the head of the company at the time, Khairullo Rahimov. Rahmon demanded that Rahimov leave the meeting and ordered a probe into his work as the head of the company.

Shortly after that, Rahimov was detained and charged with embezzlement and abuse of office. But Rahimov's case never reached court. Despite being accused of misappropriating $374,000, among other crimes, Rahimov was released after paying $200,000.

Instead, the authorities arrested Azizullo Safarov, who worked as Rahimov's driver and as the company's steward. Safarov was charged with misappropriation of about $256,000 -- an accusation he now describes as baseless 'slander.' Safarov, who has since left Tajikistan, says he was made a scapegoat.

'Tajik Air officials and investigators from the prosecution told me to plead guilty,' Safarov told RFE/RL. 'They promised that they would repay the money on my behalf and set me free from prison.'

Tajik Air chief Khairullo Rahimov holds a press conference in Dushanbe in 2016.

Safarov was released in September 2020 after six months in prison. Authorities said he was pardoned after repaying the funds he embezzled. 'They paid the money on my brothers' behalf,' Safarov said.

RFE/RL contacted Rahimov, but he declined to comment on the case. He said that Tajik Air's troubles occurred before his tenure began in January 2016.

What Happened Before?

A source at Tajik Air confirmed Rahimov's claim that the crisis at the company began much earlier. Speaking on condition of anonymity, the source said that although Tajik Air flights were suspended during Rahimov's tenure, the company was facing major problems when his predecessor, Rustam Kholiqov, was in charge.

Kholiqov, the head of Dushanbe International Airport, was appointed as manager of Tajik Air in 2014 after Hamroev's departure. His appointment came as Tajik Air was being merged with the capital's airport.

However, the authorities prohibited using the airport's funds to resolve Tajik Air's financial woes. Tajik Air was more than $1.4 million in debt at the time, according to Kholiqov.

Rustam Kholiqov (left), the former head of Tajik Air, is seen with President Emomali Rahmon at an official event in September 2020.

Less than six months later, Kholiqov announced that Tajik Air had repaid all its debts. He also announced plans to obtain modern aircraft and open new flight routes.

But in January 2016, Kholiqov was dismissed. No reason was given publicly for Kholiqov's removal. The plans to merge Tajik Air with Dushanbe International Airport were also abandoned.

Court Battles

In April 2018, a court in Vilnius ordered Tajik Air to pay more than $20 million to Skyroad Leasing after the airline failed to pay fees for two aircraft it had leased from the Lithuania-based company. The ruling was issued due to inactivity on the part of Zafar Hafizov, the head of the legal affairs department in Tajikistan's Transport Ministry.

Hafizov was in Europe to represent Tajik Air at the trial and pay the court fees of more than $9,000. It's not known why Hafizov failed to pay the court fines. RFE/RL investigations showed that Hafizov has since been living in Europe.

Tajikistan's anti-fraud agency opened an investigation into Hafizov, but the case was eventually dropped.

In a report to the government, seen by RFE/RL, the anti-fraud agency concluded that 'negligence' by the leadership of Tajik Air was the main reason the company lost the court case in Lithuania. The agency also found that all of the top managers of Tajik Air since 2008 were responsible for the airline's growing troubles.

In 2019, Skyroad Leasing took Tajik Air to the Economic Crimes Court in Dushanbe to demand the airline pay the $20 million as ordered by the Lithuanian court. The court in Dushanbe ruled that the contract between Tajik Air and Skyroad Leasing breached Tajik law. Therefore, the Dushanbe court ruled, the Lithuanian company had no right to demand any payment.

Skyroad Leasing then took the matter to Tajikistan's Supreme Economic Court, which in August 2019 overturned the lower court's ruling and ordered it to review the case. Two separate sources familiar with the situation told RFE/RL that the Supreme Economic Court's ruling was secured with the meddling of top managers at Tajik Air.

The sources at the court said the managers were not happy with the lower court's decision, even though it ruled in Tajik Air's favor and effectively saved the airline from having to pay a massive debt. Some of the managers are known to be associates of Ozoda Rahmon, the president's daughter and chief of staff, the sources said.

They requested that the Supreme Economic Court annul the lower court's ruling on Ozoda Rahmon's behalf, the sources told RFE/RL on condition of anonymity. RFE/RL contacted Tajik Air for comment on this claim. They denied it as a 'complete lie.'

'Bad Contract'

Tajik Air signed a contract with Skyroad Leasing in 2009 to lease two aging Boeing airplanes from the company.

The Prosecutor-General's Office, the anti-fraud agency, and the Transport Ministry accused Tajik Air of negligence and failing to secure a proper contract that protects the company's interests. For example, they claim that the price of the aircraft stated in the contract is far too high for old planes.

They say Tajik Air didn't even use the planes much, but didn't make any effort to return the aircraft or make amendments to the contract. Instead, it just stopped paying the rental fees.

Lithuanian law firm Magnusson, which represented Tajik Air in the court case, described the ruling as unfair. It said in 2018 that the amount of money the airline was ordered to pay was unreasonably high. In a document seen by RFE/RL, Magnusson advised Tajik Air to counter-sue Skyroad Leasing. But Tajik Air decided not to take legal action.

According to the contract, Tajik Air would pay Skyroad Leasing $17 million over 60 months. Tajik Air could then become the owner of the two planes by paying another $4 million.

Paulius Docka, a lawyer and representative of Skyroad Leasing said that his company contacted Tajik Air when it stopped paying the rental fees in 2013. However, Tajik Air didn't respond to Skyroad Leasing's multiple attempts to resolve the issue, Docka said. Skyroad Leasing was left with no choice but take legal action, according to its representative.

Several sources, including legal experts with knowledge of the situation, told RFE/RL that the managers of Tajik Air had 'certain interests' in the company's failure. Otherwise, they would have relatively easily resolved the problem in its early stages, the sources told RFE/RL on condition of anonymity.

Tajik Air managers didn't explain why they failed to pay the lease or return the aircraft. They also didn't say why the company didn't respond to Skyroad Leasing's attempts to contact them, or why they didn't want to challenge the Vilnius court's ruling.

In another unexplained move in 2014, Tajik Air paid the FL Technics company -- a partner of Skyroad Leasing -- nearly $500,000 more than it was ordered to pay in a separate court case. FL Technics took Tajik Air to court for failing to pay for its services. The court ordered Tajik Air to pay $1.2 million in unpaid fees. Instead, Tajik Air paid the Lithuania-based company $1.65 million -- $453,000 more than the amount ordered by the court.

Tajik Air officials have not publicly explained the decision. Kholiqov, who was the head of the company at the time, didn't respond to RFE/RL's requests for comment.

The Curious Case Of Kholiqov

Kholiqov was detained by the security services in August 2019, as he was about to board an Istanbul-bound flight at Dushanbe's airport. The authorities announced that Kholiqov was banned from leaving the country, pending a criminal probe into alleged embezzlement at Tajik Air.

In January 2016, the Tajik independent publication Nigoh reported that Kholiqov had caused Tajik Air to suffer more than $19.2 million in damages in just one year.

Nigoh's investigative report was published two weeks before Kholiqov's dismissal. There was no comment from either Kholiqov or the authorities regarding the publication's revelations.

In an open letter published by the Prague-based Akhbor news agency in 2019, Tajik Air employees demanded that their former boss return millions of dollars they said he had illegally taken from the company.

A look at Kholiqov's activities in recent years shows that Kholiqov was an entrepreneur at the same time he held government jobs. Tajik law prohibits government officials from being involved in private business while in office.

In 2015, the president's official website posted a report showing Rahmon 'officially opening' a special storage facility owned by Sitabr-Agro, a company founded and run by Kholiqov in the Hisor district outside Dushanbe. Although Kholiqov was the head of Tajik Air at the time, the report described him as a private entrepreneur.

In September 2020, a report on state television showed President Rahmon 'officially launching' a food production company that was also owned by Sitabr-Agro. That report suggested Kholiqov had 'created the company with the president's instructions.'

Sitabr-Agro was established in 2008, when Kholiqov was the head of the Dushanbe airport.

Asadullozoda's 'People'

Sources told RFE/RL that many of those who facilitated Tajik Air's demise were linked to Asadullozoda and his circle.

For example, Rahimov had worked as the deputy head of Somon Air before becoming the chief of Tajik Air.

Tajik Air keeps all its official bank accounts at OrienBank, which is owned and run by Asadullozoda. The brother of Dilshod Ismatullozoda, the current head of Tajik Air, is Asadullozoda's deputy at OrienBank.

Akbar Sharifov, Tajik Air's chief financial officer and one of the main negotiators with Skyroad Leasing, is now employed by Asadullozoda's TalCO subsidiary.

Asadullozoda attends most meetings of a special government task force that is meant to save Tajik Air. It's not clear if the task force was created as just a smokescreen or if the government is genuinely trying to salvage the flag carrier.

Copyright (c) 2018. RFE/RL, Inc. Republished with the permission of Radio Free Europe/Radio Liberty, Washington DC 20036

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