/ 18 September 2014

Kremlin targets tycoon as pie of prosperity shrinks

Vladimir Yevtushenkov is Russia's 15th richest businessperson
Vladimir Yevtushenkov is Russia's 15th richest businessperson

The arrest of one of Russia’s richest men, whose empire spans oil production and the country’s largest cellphone network, could send further shock waves through an economy already reeling from Western sanctions.

Analysts said the moves against Vladimir Yevtushenkov this week looked like a raid on his business by Kremlin-connected forces, and is a sign of an intensifying battle for a “shrinking pie” of resources. Yevtushenkov, Russia’s 15th richest businessperson with a fortune of around $9-billion according to Forbes magazine, has been placed under house arrest after allegations of money laundering.

A report in the Izvestiya newspaper said prison officials visited Yevtushenkov’s mansion outside Moscow and fitted an electronic bracelet around his ankle. He is banned from leaving his home, speaking with anyone except his lawyers, and using the telephone or internet.

Yevtushenkov’s holding company Sistema saw its shares slump 38% by Wednesday afternoon. The allegations against Yevtushenkov relate to the purchase of Bashneft, one of the few privately owned oil companies in Russia, in 2009. Sistema also controls MTS, a major mobile network operating in Russia and many post-Soviet nations.

There were suggestions that Rosneft, the state-controlled oil company run by Igor Sechin, a close associate of President Vladimir Putin, wants to buy out Bashneft. The arrest brought accusations from the fallen oligarch Mikhail Khodorkovsky, released from prison by Putin last year, that the move was linked to Kremlin interest in Yevtushenkov’s oil assets.

‘Absurd’ comments
Khodorkovsky was arrested in 2003, spent years in jail, and his oil company Yukos was disbanded, much of it snapped up by Rosneft. The company dismissed Khodorkovsky’s comments as “absurd”.

Sergei Aleksashenko, an economist and former deputy finance minister, agreed that there was no political subtext to the decision, but framed it as a simple economic raid on the company.

“This is not even a racket; this is simple, undisguised theft. The item that the thieves are interested in is there for all to see. An oil company in Russia is too much of an attractive business for those close to power not to get interested in. Who are they in this case? We will soon find out, right at the moment when Bashneft changes its owner. This will happen, I have no doubt.”

Aleksashenko said there are now essentially two choices for Yevtushenkov: sell up quickly and flee the country, like former cellphone magnate Yevgeny Chichvarkin, who now runs a wine shop in London, or go down the path of Khodorkovsky and possibly end up in prison.

“Maybe they first made him an offer of 10% of what it’s worth and then when he said no decided to escalate,” said Chichvarkin from London.

‘Ideal scenario’
“It’s absolutely clear that the ideal scenario for them is for him to flee and sell all his remaining companies. MTS would be a really juicy prize. He has the choice of fleeing and selling or something much worse.”

Alexander Shokhin, the normally cautious head of Russia’s largest business union, said the move “looked like Yukos 2.0” and would damage trust in the Russian business climate.

What will be particularly worrying for businessmen in Russia is that Yevtushenkov, unlike Khodorkovsky, was in no way a political figure.

Khodorkovsky was widely regarded as challenging the unwritten rule that Putin imposed on the oligarchs when he took over: stay out of politics and you can keep your fortunes. The Yukos head began to finance opposition political parties and complained about official corruption at Kremlin meetings; his opponents in the Kremlin saw the chance to move against him. – © Guardian News & Media 2014