LONDON/ALMATY (Reuters) - The European Bank for Reconstruction and Development will this week signal it is to ready to restart work in Uzbekistan after a decade-long absence, sources at the bank have told Reuters.
The return is expected to get the green light at a board meeting on Wednesday and follows the death last year of Uzbek President Islam Karimov, whose authoritarian leadership and poor human rights record effectively pushed the EBRD out of Central Asia's most populous nation.
Karimov has been succeeded by his former prime minister, Shavkat Mirziyoyev, and the EBRD's return will encourage reformists in his new leadership looking to modernise the country's $70 billion a year economy. Rapprochement with the EBRD had faced resistance from the country's powerful state security chief, diplomatic sources said.
The Uzbek economy is still run largely in the Soviet command style and the EBRD could help in areas from energy efficiency to banking and business support.
The EBRD Board of Directors will discuss Uzbekistan on Wednesday, according to an EBRD source, who requested anonymity. The source said the decision was expected to get the go-ahead, adding: "It is going to happen."
"It would be a good signal," a second EBRD source said, confirming that the bank was likely to signal its return to Uzbekistan. "It is a big country and this is the kind of thing the bank is mandated to do."
Asked about the potential return, an EBRD spokeswoman said the bank did not comment on the agendas of its board meetings.
On the bank's absence from Uzbekistan during the last decade, she said conditions in the country "were such that there were few opportunities for the EBRD to operate".
If the return gets approval as expected, EBRD President Suma Chakrabarti is set to travel to Uzbekistan later this month in what would be another symbolic step.
Ties between the bank and Uzbekistan soured over human rights. The issue came to a head in 2003, when Karimov's government hosted the EBRD annual meeting, seeking to attract foreign investment.
Instead, the event turned into a bitter and public stand-off between Karimov and human rights groups, with EBRD management backing the latter. A year later, the bank restricted lending in Uzbekistan and by 2007 the flow of money for new projects in the country had dried up completely.
The EBRD is likely to restart its Uzbek operations slowly so it can see how the new leadership deals with human rights.
The development bank is expected to test the water with a few smaller-scale projects while it puts together a more formal 'country strategy' of priority projects.
One of the sources at the bank said that according to the EBRD management, Uzbekistan had invited it to return.
The first public sign that a return might be on the cards came last month when an EBRD delegation led by its managing director for Turkey and Central Asia, Natalia Khanjenkova, visited Uzbekistan.
Previous strains between Tashkent and the EBRD could make for a delicate relationship, at least initially.
A leaked United States diplomatic cable described Uzbek Deputy Prime Rustam Azimov - who is Uzbekistan's EBRD governor according to the bank's website - as "a major booster of the disastrous 2003 EBRD annual meeting", adding that he had temporarily fallen out of favour with Karimov because of that.
Azimov later managed to regain good standing with Karimov diplomatic and business sources told Reuters last November, adding that he, along with state security service head Rustam Inoyatov, were men with whom the new president, Shavkat Mirziyoyev, effectively shares power.
According to two diplomatic sources, there had been disagreement within the trio over the EBRD. The Uzbek government and Mirziyoyev's office did not reply to requests for comments on the matter from Reuters.
Additional reporting by Lidia Kelly in Warsaw; editing by Giles Elgood