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By John Helmer, Moscow

From the affairs of the state-owned United Shipbuilding Corporation (USC), once chaired by Igor Sechin and run by his protégé Roman Trotsenko, much of significance flows, if not a great many new ships. And if it weren’t for the significance of those two names, not much would follow from the case of Ilya Novoselsky, until recently chief lawyer for USC, and now under arrest in St. Petersburg on charges of abuse of authority and fraud.

For the time being and for that reason, he is incommunicado. So too is Trotsenko (image below). Rosneft, which Sechin has headed since 2011, confirms that “at the moment Trotsenko leads Rosneft Overseas SA.” This entity is registered in Switzerland and maintains an office in Geneva. Trotsenko and a Swiss lawyer named Daniel Richard are the signatories; Richard’s daytime job is at the Geneva law firm of Python & Peter.

A source close to Trotsenko says he is out of Russia for medical treatment; he is preparing for surgery to repair a spinal injury caused some time ago during a hard aircraft landing. Richard confirms that he and Trotsenko run Rosneft Overseas, but adds that Trotsenko is currently not in Geneva. “I am not entitled to say where he is or to comment on his medical condition”, Richard said.

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The spokesman for USC, Alexei Kravchenko, which is now run by Trotsenko’s successors, dismisses publication of a story which appeared in the Moscow Post on April 1. This claims that Novoselsky is negotiating a plea bargain with prosecutors of the Investigative Committee, and will testify in court to larger and graver crimes at USC than the ones he’s presently charged with. Those refer to Rb38 million ($1.1 million). His testimony, and the larger allegations, concern Rb14.2 billion ($406 million) – maybe more — converted, according to the Post, by Novoseksly’s superiors when Trotsenko was in charge.

“A story from such a flushing cistern as MP scarcely deserves serious comment,” said Kravchenko. “The order [for kompromat] is obvious. The outline I have of details of some the episodes mentioned confirm this – that [the story] is based on a false foundation.”

According to Alexander Kraus, one of case investigators at the St. Petersburg Investigative Committee, “we have determined that there was a theft of nearly 40 million rubles on the pretext of alleged legal services when the money was transferred outside the organization [USC]. Criminal charges have been brought against the former director-general of Severnaya Verf [USC subsidiary Northern Shipyard] , Alexander Ushakov, and former head of the legal department of USC, Ilya Novoselsky. Both persons really are former, since the change of ownership of the enterprises there. I do not exclude that there will be more episodes and more people. Let me just say that we are actively working on this case.”

Ushakov was Trotsenko’s appointee to take over the running of Northern Shipyard in St. Petersburg after its previous owner, Sergei Pugachev, ran off to Monaco and London with a billion dollars in Central Bank loans, leaving the yard behind him, bankrupt. That was in 2012; here’s the story.

USC was created by the federal government in 2008 to consolidate Russia’s failing shipbuilding sector, and it has fallen into much the same debt trap that it was designed to repair in its constituent parts. Management infighting triggered three chief executives in its first year. Trotsenko was in charge from November 2009 until July 2011, his departure accelerated by an edict of then-President Dmitry Medvedev to force Sechin off the USC board in 2011. Trotsenko’s successor, Andrei Dyachkov, lasted less than a year; his successor, Vladimir Shmakov, is under pressure at the moment and may not last twelve months himself. At stake in each walking-of-the-plank has been the flow of several billion dollars in shipbuilding money from the state budget, much of it from either the Defence Ministry and the arms exporter, Rosoboronexport, from the state banks, or from state oil companies like Rosneft.

That’s the cashflow which Novoselsky is trying to explain to prosecutors. According to the Post version of what has been alleged by case investigators and prosecutors, Novoselsky arranged a fake contract for legal services which USC paid, though the services were never rendered. Instead, the money went in bribes to settle tax, bank, court and other claims against the shipyard companies controlled by USC, and thus by Trotsenko. The media report doesn’t make clear where the money went, and if it was diverted, how Novoselsky allegedly benefitted. The newspaper and the reporter, Sergei Kotov, refused to respond to questions about their own investigation.

Following the Post publication on April 1, fresh reports appeared elsewhere. These alleged that Novoselsky and Trotsenko had been mixed up in the diversion of Rb14.2 billion in state funds at another USC unit, the Amur Shipbuilding Plant (NEA), over three years, 2009-2012. Based at Komsomolsk-on-Amur, the 90-year old yard has specialized in nuclear submarines.

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Prime Minister Vladimir Putin visiting Amur in May 2009 prior to authorizing substantial new state funding for the yard.

Since court papers and official indictments are also unavailable for these allegations, details of the alleged fraud and embezzlement scheme are hazy. The reports suggest that Amur started in 2009 with a Rb2 billion ($57 million) loan from Sberbank intended to keep the yard operating, its workers employed, and a naval order for two new corvettes on the slips. But annual state budget allocations totalling Rb14.2 billion were supposed to pay off the loan, and return the yard to profitability though the defense procurements. Instead, it is alleged the money was squandered, and Amur forced into bankruptcy. The responsibility, it is alleged, is Trotsenko’s and his subordinates at USC, because they were giving the orders at Amur.

A Russian maritime source says the schemes which have been reported have been tried elsewhere in the maritime sector, and the case against Novoselsky is part of a larger prosecution strategy. He says he doesn’t know how far, or how high, it will go.

Trotsenko has been reported as denying the allegations in the Amur case. Everything that was decided for expenditures at Amur were properly authorized and properly spent, he has said.

The Investigative Committee in St Petersburg was asked to say if Trotsenko is a target of interest or investigation. Colonel Sergei Kapitonov said his branch of the Committee is not allowed to respond to foreign media. The answers must come from the headquarters of the committee in Moscow. So far they haven’t.

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