MOSCOW – When the announcement came last Friday that Roman Abramovich had decided to put a temporary stop, possibly a permanent one, to the merger between his Siberian Oil Company (Sibneft), and Mikhail Khodorkovsky’s Yukos, Abramovich’s lawyer, Andrei De Cort, took ill, and stopped taking calls. He then left the country. Yukos board member and lawyer Sarah Carey participated in the Yukos board meeting on Friday. Her state of health isn’t known, but she didn’t return calls either.
Senior Yukos managers, who had been in the pink of condition on Friday morning, switched off their cellphones for fear of being overheard. The company spokesman, Hugo Erikssen, announced that ” you will be kept informed as appropriate”, but nothing was appropriate, so Yukos had no more to add. In a Moscow prison, Khodorkovsky was incommunicado, to say the least; and in one of his offshore palatial retreats, so was Abramovich.
In other words, when the single most important piece of news affecting the Russian stock market, Russia’s largest oil company, Russian oil exports, and two of the wealthiest men in the country, was announced, not a single person could be found in Moscow to confirm what exactly had happened. If ever there was an argument for relieving the country’s dependence on oil and the oligarchs, this, finally, should be it.
The merger between the two companies was to be finalized on Saturday, creating the world’s fourth-largest energy company. Yukos is the largest Russian oil company. But it has also been under investigation from prosecutors over the past six months, eventually leading to the arrest of its chief executive Khodorkovsky.
Soviet satirist Mikhail Zoshchenko has explained the difficulty of simple Russian remedies, back in 1925. An ordinary citizen, traveling on an overnight train, is warned to beware of thieves so desperate that they will steal the boots off a man’s feet. Finland had eliminated the problem, he is told, because there the law cut off a thief s hand. During the journey, the citizen foils a boot thief, but in his exertion he doesn’t notice that his suitcase has been snatched. When he reports the theft at the militia office, he proposes the Finnish remedy. The policeman agrees, but adds: “Put that pencil back where it was.” Zoshchenko’s victim admits he’d unwittingly taken the policeman’s pencil. “Yes,” he decides, “If we start cutting off hands, there’ll be a hell of a lot of invalids.”
Since it now appears that Abramovich couldn’t manage to discuss with Khodorkovsky any of the shareholding or management concerns he reportedly has, and since none of their subordinates in either company was authorized to speak on their behalf, the simple way to avoid the kind of nationally destabilizing action that was taken would have been to put Abramovich in the same accommodation with Khodorkovsky.
Of course, face to face negotiations could have obviated the impression that Russia’s model corporations are still the playthings of their core shareholders, and are nothing resembling transparent Western-style institutions. Even before Sibneft’s announcement, it was becoming increasingly obvious that the Yukos management cannot operate in the normal oil company fashion – cannot trade and ship oil; pay bills and bonuses; make acquisitions and disposals-when a handful of shareholders are in prison, or on the run. But as Zoshchenko’s percipient citizen complained, a simple remedy might go too far, and fill Russia’s jails to overflowing. The last public official who said as much, Prime Minister Yevgeny Primakov, famously didn’t last long in office. This time, the only public official to say anything at all was Economic Development and Trade Minister German Gref, who has so far managed only two words – “nothing dramatic”. They are too cautious to be knowledgeable. Most other officials, who rely on the Kremlin for their employment, are following suit.
In short, the ground on which the Russian economy stands is shaking. But ministers, bureaucrats, advisors, consultants, executives, lawyers, corporate accountants and elected politicians alike do not know enough to breathe a word.
All the breath that can be interpreted adds up to one reported telephone conversation between two core shareholders – Leonid Nevzlin, a 3.56 percent stakeholder in Yukos now in exile in Israel; with Mikhail Shvidler, a bigger stakeholder in Sibneft, currently residing in Moscow. According to Nevzlin’s version of what was said – reported by Kommersant newspaper – the conversation was “in general terms, reasonably calm”, although he concedes he put the receiver down on Shvidler. Nevzlin said he asked Shvidler why the “initiative of the Sibneft shareholders” was announced unilaterally, and in such a hurry, without waiting for Yukos shareholders to discuss it at their joint board meeting on Friday. Shvidler’s answer, Nevzlin says, “was unclear for me”.
That indicates that Nevzlin didn’t quite believe what he was told. Shvidler reportedly said that Sibneft’s haste was instigated by “the leadership of the presidential administration”. “We must announce the stopping of the deal, and it must be known before Tuesday,” is what Nevzlin claims he heard Shvidler say was “the point of view of the leadership of the presidential administration -that it is necessary to do it urgently.” When Shvidler added that the presidential administration viewed Tuesday (December 2) as a deadline connected to the following Sunday elections, Nevzlin asked what possible connection the business had to do with the poll. Shvidler, he claims, then replied: “I don’t know. I’m not involved in politics.” That was when Nevzlin terminated the telephone call.
Nevzlin leaves little doubt that he, and other Yukos shareholders, were desperate to delay Abramovich’s move, if they heard of it in advance. Nevzlin wasn’t sure what Khodorkovsky knew, or when. If Nevzlin’s record of his telephone chat is accurate, it also appears that Shvidler was desperate – at least to execute Abramovich’s instruction as soon as it was dispatched. If there is any truth to Shvidler’s claim about the presidential administration, then it could only refer to Abramovich talking to President Vladimir Putin. For the time being, neither man’s subordinates have the authority to deal.
That contact, if it happened, must have been made a day or two before Friday’s announcement. Is it thus a coincidence that on Thursday morning (November 27), in Khabarovsk, a senior police official, Deputy Interior Minister Lieutenant-General Sergei Veryovkin-Rokhalsky, announced at a conference of law enforcement officials: “We have no evidence that Roman Abramovich made his fortune by dishonest means.”
The substance and the timing of the remark, and the speed at which it was moved on the Russian newswires, suggested the very opposite of the general’s assurance. Could it be that Abramovich is under investigation, and that, for the moment, one member of one investigative branch hasn’t come up with evidence of wrongdoing? When asked on Friday to say what the federal prosecutor general’s office knew, a spokesman told this correspondent that Veryovkin-Rokhalsky was not speaking for the prosecutor general. But as to what the latter is doing on the subject, the spokesman for the prosecutor general says it will be necessary to wait for an answer.
It may be Putin’s idea that we should all, Abramovich included, wait for the answer. If so, it is fear, not business acumen, that has driven Abramovich to make the break with Khodorkovsky, and appear to position himself to do the Kremlin a big favor. For Shvidlerto admit that he is “not involved in politics” is another way of saying that this business isn’t business either. Neither Shvidler on Abramovich’s side, nor Simon Kukes, Khodorkovsky’s chief executive, can be said to be involved in either the politics or the business that counts right now. When Russian corporations misbehave, it may not be possible to cut off their hands. But a credible fear of amputation, simple remedy though it may be, may work wonders in the direction Westerners like to call reform.
by John Helmer - Monday, May 12th, 2003
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