By John Helmer in Moscow
In the chapbooks of the medieval Finns, it was reported that pygmies lived in the Arctic Sea regions. The men there were dwarfed, so the Finns and Lapps thought, because of the effect of the North Pole and ice cap as a low-hanging roof over the world that made it impossible for normal-sized men to walk about. What they lacked in stature, though, the Arctic pygmies were suspected of making up for in aggressiveness. If they couldn’t find men to fight, they would attack flocks of cranes, riding on the backs of goats.
Not a great deal is known about a company called CITCO Waren-Handelsgesellschaft except that it has a handsome office in Vienna at number 8, Nussdorfer Platz; and there trades refined gases in liquid form, such as propane and butane; as well as nitrogenous fertilizers, other petrochemicals, and synthetic rubber. The company website reveals that it employs at least 15 people, and in 2007 had turnover of $1.88 billion. A presentation in Monaco last year claimed that CITCO has a 60% share of the liquefied gas trading market in the world.
Does CITCO’s obscurity rate it a pygmy by Arctic standards?
During May, it was reported in more than one Russian news medium that the company had been bought by Sibur, a petrochemical holding which belongs to Gazprom, the world’s largest producer and exporter of gas, and Russia’s largest company. Sibur spokesman Rashid Nureyev refused repeated questions to confirm this fact, or the price Sibur has paid. Sibur’s financial reports run a year in arrears, and its cross-shareholdings and related-party dealings within the Gazprom group, which include Gazprombank and Gazfond, leave open the possibility that the acquisition will never be publicly accounted for.
The CITCO company website identifies the chief executive as Christian Wilhelm. The Monaco presentation identified Erich Hoop as the president of the board of directors. Hoop may be a shareholder, for a filing at the European Commission’s Competition Directorate this month suggests that Handelshaus Hoop & Partner Est. is the controlling entity and owner of CITCO, which is selling to Sibur.
A spokesman for Wilhelm and Hoop was asked to confirm the Sibur transaction, the beneficiaries, and the deal value. “Please understand that currently no more information can be forwarded to you,“ was the reply. This was disingenuous on the part of both buyer and seller, for two days before the question was put, on May 20, the following deal notice was filed in Brussels:
“COMP/M.5503 SIBUR / CITCO
Description of the concentration
OJSC SIBUR Holding (“Sibur”) intends to acquire 100% of the shares in and sole
control over CITCO Waren-Handelsgesellschaft m.b.H., Citco Holdings Limited and
Westin Trading S.A. (“CITCO”) from Handelshaus Hoop & Partner Est.
The business activities of the undertakings concerned are:
– Sibur: Russian company producing various petrochemical products, fertilizers
– CITCO: independent distributor, which buys and sells inter alia liquid
petroleum gases, rubber, a range of petrochemical products, and fertilizers.
Under para 5(c) of Commission Notice on a simplified procedure for treatment of
certain concentrations under Council Regulation (EC) 139/2004 (OJ C 56, 5 March
2005, p. 32), the concentration is eligible for a simplified procedure.”
According to the EC office, the deadline for its review and action on the deal is June 29.
CITCO’s website says nothing about its owners, except that the company was “established in 2003 by private investors in Vienna.” The Monaco presentation also claims that in the same year CITCO and Gazpromexport “signed their first sales and marketing agreement, which initiated a long-term cooperation between these two companies.” The document details the sources for each of the products CITCO trades. Those listed include Sibur, Gazprom, Rosneft, and the Kirishi refinery; the last of these has been identified and confirmed as an early interest of Timchenko’s.
Wilhelm’s spokesman was asked to clarify the company name, CITCO. She confirmed that this is a form of acronym, whose first three letters, CIT, are the Cyrillic for C i T; in English, that means S and T. What names S and T stand for, and whether these are beneficiaries of the sale to Sibur, are of interest, because there has been published speculation in Moscow that T stands for Gennady Timchenko, owner of the Geneva-based oil trader Gunvor, which currently dominates oil export movement and trading for Rosneft and several other Russian producers.
Until now, there has been little known publicly about Timchenko’s interests in Russian gas. That he, Hoop, and Mr or Mrs S appear to have controlled almost $2 billion worth of yearly gas and petrochemical trading on behalf of Gazprom and Sibur has been something of a surprise. When Timchenko was interrogated in 2008 by intrepid reporters of the Financial Times and Wall Street Journal, they appear not have known about his line of business in gas. The Wall Street Journal discovered a disputed window repair claim in Finland that cost Timchenko $4,000; it missed the multi-billion dollar asset, CITCO. A Reuters Fact-Box on Timchenko, dated as recently as May 27, also missed CITCO.
Timchenko’s London and Moscow public relations agents, Michael Prescott and Dominique Winther, were asked to clarify Timchenko’s relationship with CITCO, and whether he is selling. They refused to respond. They were also asked to confirm whether a rare photograph in the public domain, identified as Timchenko, is indeed his image; and when the photograph was taken. They refused. A source close to Timchenko claims the picture dates from around 2003.
There is speculation that the owners of CITCO have decided to cash out, and that Timchenko may be planning to take his money into retirement from active business. There is nothing to substantiate this claim, except other uncorroborated rumours that Timchenko may be selling Gunvor to Rosneft.
Another theory of the Sibur-CITCO transaction is that it marks a break from the centralized Gazprom trading system in the direction of greater independence for Sibur. Since Sibur isn’t even admitting in Moscow what it has already said in Brussels, it is unsurprising that there is no corroboration for what Sibur’s management is thinking of doing in any direction.
The speculation on Timchenko’s retirement would be small, flat beer, were it not for the belief that whither he may go, so might go his friends. Since Timchenko has engaged lawyers in London to litigate against publishers and reporters who make ill-intentioned mistakes about who those friends might be, and who slur Timchenko’s reputation, the speculation stakes are high.
Timchenko has made clear himself what he is not. In a letter to the Financial Times in May 2008, he described the newspaper’s claims about him as containing “many inaccuracies and false claims….time and again, the media wrongly jump to the conclusion that the judo club connection means that Mr Putin and I are “close”, then leaps into conspiracy-theory mode.”
The London Times has admitted its egregious mistakes, and on March 1, 2009, published this apology: “ we stated wrongly that Gennady Timchenko is a close friend of Vladimir Putin and is a former KGB agent. The true position is that, though Mr Timchenko and Mr Putin do know one another, the relationship is more one of casual acquaintanceship than of friendship or of the two men being “close friends”. Mr Timchenko has never been a member of the KGB nor any other Russian security service. We are happy to set the record straight and apologise to Mr Timchenko for the error.”
The stubbornly prejudiced, anti-Russian weekly Economist is to face a court trial for its mistakes in Timchenko’s direction.
There also appears to be solid new evidence that Timchenko isn’t retiring from the gas business at all. On February 9, Leonid Mikhelson, the chief executive of Novatek, the largest independent gas producer in Russia, announced that Novatek shareholders had proposed Timchenko to join the Novatek board of directors at the scheduled AGM on May 27. In this week’s balloting, Timchenko won his seat on the 9-man board, with 10.2% of the votes cast. He placed 6th, ahead of the representatives of Vnescheconombank, the state bailout house; Troika Dialog Bank; and a German independent. In its new board presentation, Novatek identifies Timchenko as chairman of the board of directors of Transoil. This is a St.Petersburg based rail haulier of oil; according to the company website, in 2007 the company shifted about 30 million tonnes of oil.
In the runup to the seating of the new board, Novatek has also disclosed that Timchenko has sold, and Novatek bought, one of the largest undeveloped gas fields in Russia; while in parallel, Timchenko has lifted his stake in Novatek to 18.2%.
Novatek trades its gas liquids and other products through RUNITEK, a trading company of its own; there was no trading connexion with CITCO. Timchenko started building his stake in Novatek last year, according to Novatek’s head of investor relations, Greg Madick. Madick says that on October 3 last, Volga Resources, a Timchenko investment vehicle reportedly registered in Luxemburg, notified Novatek it had bought 5.07% of the company’s shares. The timing was near-perfect: Novatek hit its price peak of $9.15 in mid-June, and then fell rapidly. It was sliding between $5 and $4 in the first days of October, bottoming at $1.54 before Christmas.
This week, as the share price moved from $4 and $4.31, Novatek announced that Volga Resources had added another 13.13%, making the apparent Timchenko stake in Novatek, 18.2%.
There have been public announcements from both Novatek and Volga Resources on this transaction; and also the related one, disclosed on May 26, in which Volga Resources sold a 51% share in Yamal LNG, a Russian company holding the licence to the South Tambeiskoye gas field in the Arctic Yamal region. The enormous field has had a curious history of ownership before coming into Timchenko’s hands — but that’s another story that Novatek has promised to tell. The prospect of this field, to be developed as an LNG source independently of Gazprom’s plans for the Arctic, is another tale that remains to be told.
Novatek and Volga Resources say the two deals were done in cash — $650 million from Novatek to Volga Resources for the gas field, and a market price paid by Volga Resources for the Novatek shares. The latter has been estimated to have cost about $1.52 billion. Subtracting his takings for South Tambeiskoye, it appears that Timchenko has agreed to stump up almost $900 million. Depending on what Sibur has paid for CITCO, and what share Timchenko was entitled to, it appears that Timchenko’s withdrawal from CITCO has helped him pay his entry into Novatek.
Far from a retirement move, according to Troika Dialog, “this would indicate that Timchenko is committed to Novatek’s future and gainsay any concerns that a core shareholder is taking cash out of the company.”