#9 - JRL 7286
Rosbalt
August 12, 2003
Yukos Precedent Freezes Business
The Kremlin's attack on Yukos in July affected all of Russian business activity
last month.
According to reports in the media, the Yukos affair has completely halted the activity of Russian businessmen and brought their activity over the last month to a grounding halt. The popular phrase from a Russian movie hero "a thief must sit in prison" hovered in the air from the very moment when on July 2 Menatep CEO Platon Lebedev was detained in jail under suspicion of embezzling shares in the Apatita company back in 1994. The fact that the government woke up and acted on the purchase of a large Russian company for next to nothing almost 10 years ago had a dubious effect on past, present and future business dealings.
Moreover, observers were surprised by the activity or rather non-activity of
the leadership of the Russian Union of Industrialists and Entrepreneurs
(RSPP) in the Yukos affair. They expected the RSPP to react quickly and
decisively in regard to Lebedev. Indeed, this sort of affair seems exactly what
the RSPP was created for and is therefore often referred to as the
"Oligarch's trade union." However, if the proletariat of all countries
can still unite the oligarchy of one country showed itself incapable of uniting
to defend itself from a common threat.
In July the Russian newspaper Vedemosti conducted a sad inventory of those who the RSPP has defended. In the summer of 2000, the RSPP leadership sent a petition to Attorney General Vladimir Ustinov requesting that Media-Most Director Vladimir Gusinsky be released from jail. Gusinsky was finally released but afterwards the RSPP made a statement condemning the attempt by Gusinsky to influence the political process and recommended that his investment be confiscated. In January 2002 the RSPP came to the defence of Sibur President Yakov Goldovsky and Vice President Yevgeny Koshchits, who were also detained in jail by Mr Ustinov. After one week, Ustinov threatened the RSPP delegation of six people that each of them could also end up behind bars, and the fate of Goldovsky and Koshchits went unchanged.
Then only those who already had nothing to lose announced their positions, including exiled oligarch Boris Berezovsky. The Russian newspaper Kommersant published Berezovsky's letter in which he explained in his own unique manner a thesis about the new limits to private property imposed by Russian President Vladimir Putin. He also said the attack on Yukos was a regular link in the chain of the Kremlin's activity directed at refusing to admit big business in politics. He also appealed to business leaders not to be afraid to become active in politics and to learn from his own sour experiences and Gusinky's.
RSPP oligarchs who could not influence the conflict between the Attorney General and Yukos began to engage in more urgent problems. They discussed how to deprive the Russian state savings bank Sberbank of its privileges. They also set tariff limits for services of the so-called natural monopolies, and began to decide who must leave the organization's leadership in October.
Business deals over the last month have been few and far between with the biggest deal being the acquisition of the British football club Chelsea by Roman Abramovich. At the beginning of July, Abramovich bought a controlling stake in Chelsea Village for USD 97 million. The deal caused a stormy reaction in Russia and abroad. Former British Sports Minister Tony Banks said that he wanted to initiate a government investigation into the circumstances of the sale of the shares in Chelsea to Abramovich. Banks also told the BBC that "I want to know if Abramovich has the necessary distinguishing merits to own a football club like Chelsea."Berezovsky, a former business partner of Abramovich's, called the move a "big mistake." He went on to say "the reaction of surprise will gradually turn into great irritation in Russia and Britain. Every loss by a Russian football club will be blamed on Abramovich because if he had invested in that team they would have won. On the other hand, each loss by Chelsea will also be blamed on Abramovich, said Berezovsky.
The other large deal this past month, which did not get as much attention from the media as Abramovich's purchase of Chelsea, was the purchase of a controlling stake (75%) in Pechorugol by Severstal, which is part of the MDM group. Pechorugol's regional shareholders include Intaugol (29.4%) and Vorkutaugol (23%). Republic of Komi government representatives say that at a special meeting in August, shareholders of Intaugol may transfer administration of the company to Severstal.
In the past month, Severstal also announced that all of its first quarter profits of USD 140 million would be issued to shareholders as dividends. The Severstal press services said that the company will hold a special shareholder's meeting on August 15 to deal with the question of paying interim dividends for the work conducted in the first quarter of 2003. The board of directors has recommended paying USD 6.4 per share. The charter capital of the plant is valued at approximately 22 million shares. Severstal says that they will begin issuing dividends on September 15. Approximately 84% of the dividends will be issued to the structure which is under the control of Severstal CEO Alexey Mordashov, who personally owns a 16.63% stake in the plant.
Vladimir Potanin's Interros holding bought the OVK banking group headed by Alexander Smolensky. After the successful completion of the deal, Interros will own an entire banking network, which includes six banks and more than 350 branches in Moscow and the regions. The deal is valued at USD 200 million.
Potanin's Norilsk Nickel has taken control of the Arkhangelsk seaport. Approximately 56% of the port's shares now belong to Norilsk Nickel. This is already the company's second purchase of a transportation center in the past year. Last year it took a controlling interest in the Yeniseysky River Steamship Company, which transports the freight of Norilsk Nickel along rivers.
President of Kuzbassrazrezugol Iskander Makhmudov re-organised his company in July. All the coal extraction output has become the property of a new company Kuzbassrazrezugol coal company. Moreover, Kuzbassrazrezugol company created a new structure Transmash Holding, which unites the shares of five different railroad factories with a total annual turnover of USD 300 million.
Moreover, Oleg Deripaski's financial empire has begun to buy up press kiosks in the larger regions of Russia. Rumours about this began in May 2002 when Deripaski's Bazovy Element bought Rospechat, which was the leader in the Russian newspaper subscription market. However, only in July did representatives of Bazovy Element begin to openly express their ambitions on the Russian periodicals market.
In July Ruben Vardanyan's Rosgosstrakh purchased the Sibir insurance company, which is a major player on the Moscow market. Experts say the purchase means Rosgosstrakh is attempting to strengthen its position in the auto insurance market.
In June Sistema company agreed with Adamant Advisory Services about the purchase of 50% of the shares in Komstar. Sistema CEO Vladimir Yevtushenkov said that the purchase of the Komstar shares was necessary for the creation of one digital operator to compete with MTU-Inform, Telmos, Golden Line and MTU-Intel. Sistema did not disclose the amount of the proposed shares sale. At the present time Sistema already controls 50% of the shares in Komstar through the Moscow City Telephone Network (MGTS).
July is a traditionally quiet time in business activity, but the especially quiet July can not be blamed on the hot sun. And so far the weather is not expected to change. What awaits Russian business people in August?
Lyudmila Tusova, Agency for Conflict Situations, for Rosbalt news agency.
Translated by Richard Sleder.
Aug. 12, 2003:
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