Tag Archives: Yukos

‘Putin’s banker’ Pugachev files $10 billion claim against Russia

Sergei Pugachev, a tycoon once dubbed “Putin’s banker” because of his influence in the Kremlin, has filed a claim against Russia for more than $10 billion after his business empire was carved up when he fell out of favor with President Vladimir Putin.

Lawyers for Pugachev on Monday issued notice of a claim against Russia that is likely to be heard in the Permanent Court of Arbitration in The Hague, a source close to Pugachev told Reuters on condition of anonymity.

Pugachev’s lawyers will outline his claim against Russia on Tuesday in Paris, the source said.

It was not immediately possible to get a response from the Russian government, which is seeking Pugachev’s arrest for embezzlement and misappropriation of assets, charges he denies.

Moscow is already fighting a separate ruling by the same court in 2014, which ordered it to pay $50 billion for expropriating the assets of Yukos, once Russia’s biggest oil producer and run by Mikhail Khodorkovsky.

“Mr Pugachev has patiently waited for this moment to strike with this massive investment claim second only to Yukos,” said a person close to Pugachev who spoke on condition of anonymity.

Sergei Pugachev and Russian President Vladimir Putin in 2000. REUTERS/File

“He wants to ensure that those persons responsible for the unlawful taking of his businesses, including those in the Kremlin, are named and shamed,” the source said.

Since leaving Russia in 2011, Pugachev, 52, has accused Putin’s allies of bringing his multi-billion dollar business empire to its knees before picking off some of its best assets.

Pugachev founded Mezhprombank, or International Industrial Bank, in 1992, just a year after the collapse of the Soviet Union. It grew to become one of Russia’s biggest banks, with stakes in the ‘Northern’ and ‘Baltic’ shipyards, the latter of which built the Tsar’s battleships and Soviet nuclear-powered icebreakers, and a giant Siberian coal deposit.

But having helped Putin ascend to Russia’s top job in 1999 during the last days of Boris Yeltsin’s presidency, Pugachev fell out with some of Putin’s most powerful allies in the years after the 2008 financial crisis.

Russian authorities say Pugachev, who once represented Siberia’s Tuva Republic in the upper house of parliament, helped himself to over $700 million in Russian central bank bailout money intended to help Mezhprombank through the crisis.

At Russia’s request, Interpol has issued an arrest warrant for Pugachev.

Advertisements

Former Yukos shareholders awarded $50bn in damages against Russia

Former leading shareholders of the Yukos oil company have been awarded $50bn in damages against Russia, by far the biggest compensation award ever made in an arbitration case.

The panel in the Permanent Court of Arbitration in The Hague ruled that Russia had destroyed the oil company once headed by jailed oligarch Mikhail Khodorkovsky and expropriated its assets, for political reasons.

“Yukos was the object of a series of politically motivated attacks by the Russian authorities that eventually led to its destruction,” the three-person panel found.

It added that Moscow had aimed to “bankrupt Yukos, assign its assets to a state-controlled company and incarcerate [Mr Khodorkovsky] who gave signs of becoming a political competitor” to Russian president Vladimir Putin.

Former Yukos assets today form the bulk of state-controlled Rosneft, the world’s biggest quoted oil producer, now subject to US sanctions over Russia’s interference in Ukraine.

The ruling in favour of a handful of Russian shareholders and an employee pension fund is set to exacerbate tensions with the west as the US and EU weigh even tougher sanctions against Moscow over its continuing support for separatist rebels in eastern Ukraine.

It will make it difficult for Moscow to sustain its argument that the authorities’ pursuit of Yukos and Mr Khodorkovsky in the middle of the past decade were legitimate actions against fraud and tax evasion by what was then Russia’s biggest oil company.

Mr Khodorkovsky, who served 10 years in jail on fraud charges before being pardoned by Mr Putin last December, said he had learnt of the ruling “with a feeling of satisfaction”.

“From beginning to end, the Yukos case has been an instance of unabashed plundering of a successful company by a mafia with links to the state,” he said.

*RUSSIA OUT* (FILES) Picture taken 04 April 2003 shows Leonid Nevzlin, a key owner of Russia's largest oil company Yukos as he talks to journalists outside the General Office of Public Prosecutor in Moscow. A Moscow court issued an arrest warrant for of one of the top shareholders in the Yukos oil giant on suspicion of murder, the Interfax news agency reported, dealing a new blow to Russia's largest oil producer. Nevzlin, the second largest shareholder in Yukos, who is currently living in exile in Israel, stands accused of ordering the murder of a married couple in 2002, Interfax reported quoting officials at a Moscow district court. AFP PHOTO / VASSILY SHAPOSHNIKOV / KOMMERSANT (Photo credit should read VASSILY SHAPOSHNIKOV/AFP/Getty Images)
Leonid Nevzlin is the biggest beneficiary

Russian shares and the rouble weakened further on Monday morning, extending recent falls prompted by the expectation of tougher sanctions.

Though there is no formal right of appeal, Russia confirmed on Monday it would appeal against the Dutch courts ruling. If the court’s decision is upheld, and Moscow refuses to pay shareholders have the right to pursue Russian state property in other countries through the courts to satisfy the claim.

Rosneft said it did not believe any claim could be brought against the company in connection with the ruling, which it said would not adversely affect its business or assets.

The company was “neither a party nor a participant in these disputes nor a defendant in any published decision”, it said in a statement. Rosneft said it believed that all its acquisitions of former Yukos assets as well as all its other actions in relation to Yukos were legal.

The biggest single beneficiary is the now Israel-based Leonid Nevzlin, a former Yukos vice-president, who owns 70 per cent of GML, the former Yukos holding company that brought the case. Mr Khodorkovsky signed over his Yukos stake to Mr Nevzlin in 2005 during his trial for fraud and tax evasion.

Mr Khodorkovsky reiterated on Monday that he had no further claim over the stake.

Four other Russians – including Platon Lebedev, who was tried and sentenced alongside Mr Khodorkovsky and also pardoned in January – hold the remaining 30 per cent of GML. GML held 60 per cent of Yukos. An employee pension fund that is also party to the litigation owned 10 per cent.

Mikhail Khodorkovsky's co-defendant Platon Lebedev, left, reacts from a court room glass dock, in Moscow, Russia, Wednesday, Dec. 23, 2009. Russia's Supreme Court has ruled that a lower court's 2003 decision to arrest Mikhail Khodorkovsky's business partner Platon Lebedev was illegal on procedural grounds.The review was done in response to a ruling two years ago in the European Court of Human Rights that found Lebedev's rights had been violated during his arrest and pretrial detention. (AP Photo/Mikhail Metzel)
Platon Lebedev and three others hold 30 per cent of GML, the former Yukos holding company

The ruling does not benefit the 55,000 former minority shareholders of Yukos, though it could set a precedent that would help them bring further arbitration cases against Russia.

The European Court of Human Rights is expected on Thursday to issue a damages ruling in a separate case brought by 2004 by Yukos’s then management on behalf of all shareholders.

Mr Khodorkovsky and associates acquired Yukos for a knockdown price in a controversial round of post-communist privatisations in 1995 and built it into Russia’s biggest oil producer. It was the first to embrace western technology and corporate governance standards.

But the oligarch was arrested on corruption charges in 2003 after he became a political threat to Mr Putin. Yukos was pursued by multibillion-dollar back tax claims and penalties and eventually bankrupted.

The three-person arbitration panel backed the claimants’ expropriation claim, brought under the Energy Charter Treaty, which sets rules for cross-border energy co-operation. Russia signed the treaty in 1994 but never ratified it, and withdrew in 2009.

The panel did conclude that “certain facets of [Yukos’s] tax optimisation scheme” had left the main shareholders “vulnerable” to actions by the Russian authorities. It reduced its total putative damages assessment of $67bn by 25 per cent to reflect that.

“This is a mega-litigation”, said Emmanuel Gaillard, head of Shearman & Sterling’s International Arbitration Group, which represented the claimants. He added that he expected Russia ultimately to pay the damages.

“Russia cares about being a powerful international player, and to be an international player it has to respect the rules of the game,” he said.

Analysts said that with international reserves at $470bn, $175bn of which are government reserves, the Russian government had enough cash in its sovereign funds to pay the damages.

“However, this is a significant amount of money – it is equal to around one-ninth of the annual federal budget and 2.5 per cent of GDP. I am sure the government will do its best to resist paying these damages,” said Vladimir Tikhomirov, chief economist at BCS Prime, the Moscow brokerage.

Moscow vows tit-for-tat asset seizures in $50bn Yukos dispute

Moscow has warned Washington that it is ready to seize US assets if American courts freeze Russian ones to enforce a $50bn damages award to shareholders of defunct oil company Yukos.

The warning, revealed on Monday, comes just weeks after France and Belgium froze some Russian state assets as part of efforts by Yukos shareholders to collect the damages, despite Moscow’s refusal to pay.

Russia’s government approved a draft bill last month that would enable it to seize foreign state assets without warning, proportional to the amount of any Russian assets frozen in other countries.

The developments raise the risk of new tensions between the west and Moscow. They also create potential new dangers for foreign businesses operating in Russia, which already have to navigate their way through EU and US sanctions imposed over Moscow’s intervention in Ukraine.

An arbitration panel in The Hague last year awarded $50bn damages against Russia — by far the biggest compensation award in an arbitration case — to five former controlling shareholders of Yukos and an employee pension fund.

It found that a decade ago Moscow deliberately destroyed what was then Russia’s biggest oil company through punitive tax claims after its former owner, Mikhail Khodorkovsky, fell out with the Kremlin.

Russia’s refusal to pay has forced the shareholders to ask other countries to enforce the ruling by allowing them to seize Russian state assets in compensation.

After France and Belgium, lawyers for GML, the former Yukos holding company, have sought to get the award recognised by US and UK courts.

A letter from the US state department to former Yukos shareholders quoted Russia’s foreign ministry as warning America:

“Any attempts to apply injunctive and executive measures with respect to the Russian assets located in the US will be regarded as a ground for taking adequate and commensurate reciprocal measures against the US, its citizens and legal entities.”

People close to the shareholders confirmed the existence of the letter, first reported by Russia’s Kommersant newspaper.

The Russian letter was a response to a US note that gave Moscow until August 21, 60 days after it was written, to reply or object to a lawsuit brought by the former Yukos shareholders in the District of Columbia to enforce the arbitration ruling.

The shareholders do not include Mr Khodorkovsky, who served 10 years in a Russian jail on politically tinged fraud charges. He transferred his stake to a colleague during his trial and has renounced any claim.

Moscow has portrayed as politically motivated the huge Yukos damages — which were awarded in July last year, as the US and EU were stepping up sanctions on Russia.

Moscow’s justice ministry said the draft bill on foreign state asset seizures would correct a “jurisdictional imbalance” between Russia and other countries.

Russia has rejected the Yukos award, arguing that the Hague panel did not have jurisdiction and that the ruling was based on the Energy Charter Treaty, to which Moscow was not a party.

Russia signed the treaty, which sets rules for cross-border energy co-operation, but never ratified it and later pulled out. An interim arbitration ruling in 2009, however, found Russia was bound by its rules during the Yukos affair.

Europe Takes Over Putin TV

Europe Is Seizing Russian State Assets

Assets from state media seized after Kremlin refuses to pay $50 billion in civil damages.

In what is arguably the most significant move against Russian wealth and influence in Europe, Belgium, France and Austria today all froze various assets belonging Russian state-owned enterprises in connection to civil case the Kremlin lost a year ago and for which it has refused to ante up damages.

The winner of that case, Yukos, once Russia’s largest oil company, was awarded $50 billion in July 2014 after an international arbitration court found that it had had its own assets expropriated by the Russian government over a decade ago.

The freeze affects the state wire service TASS, the state media holding company Rossiya Segodnya, and other state media abroad.

“We are working on this issue within the framework of a common government policy,” TASS said in a press statement, refusing to provide more details.

Gazeta.ru learned that court notices about the freeze were received at TASS editorial bureaus in Belgium and France.

Margarita Simonyan, editor-in-chief of Rossiya Segodyna, which publishesRT.com, told Gazeta.ru the situation with her company was similar. “The arrest was place on our account in France,” she said.

“As for the other countries, after the situation in France, the company was concerned to take measures not to allow the halt of our radio and online broadcasting work there.”

Simonyan, however, disputed the account of the freeze given by Russian Forbes, which initially claimed that properties were frozen. She confirmed to Forbes.ruwhat Gazeta.ru also reported, that it was RT’s bank account in France that was frozen, not any property.

Simonyan went a long Twitter tirade today against the magazine, demanding it issue a correction or retraction to its claim. In a press statement, she said that “neither RT nor its subsidiaries own buildings in France…

Furthermore, RT is an autonomous non-commercial organization which is not a Russian state institution. they have not made any claims to RT in this case.”

But Forbes.ru has not changed its story, although it currently contains some quotes from Simonyan, which apparently were added after the piece first broke. She claimed that Russia state media had taken precautions earlier to prevent just such blocking of their broadcasting abroad, although she declined to reveal the details.

Meanwhile, Tim Osborne, the head of Group Menatep Ltd, the holding company for Yukos, confirmed the asset seizures to Forbes:

“According to my information, it’s a question of seizure of a building in which the television channel RT (the former Russia Today) is located in Paris, said Osborne. There are also several buildings in Paris which are the property of the Russian Federation, and that is one of them, he explained. Furthermore, in the event that the television channel does not pay damages to the government, it will also be frozen. Regarding the salary of employees, Osborne explained that the freeze would not affect them since they are employees and not property of the state.”

“[I]n the event that the television channel does not pay damages to the government, it will also be frozen.”

Meanwhile, Andrei Kostin, head of state-controlled VTB Bank, said that a week ago, accounts of Russia companies and diplomatic missions were frozen at his bank’s French subsidiary. The accounts of the missions were then unfrozen in keeping with the Vienna Convention but the rest of the properties were seized.

European authorities have cast a wide net with their determination to freeze Russian assets, and some are arguing that it may be too wide.

Aleksandr Mineyev, Novaya Gazeta‘s correspondent in Brussels, said a process-server came to his door this morning and served him notice that he must report any Russian Federation state property or funds in his possession. He explained that Novaya Gazeta, an independent non-state paper, doesn’t have any Russian state assets.

Attached to the notice was a list of all the other persons served, including Aeroflot, the archbishop of the Russian Orthodox Church in Brussels and the Belgian Orthodox church and other non-governmental media. Diplomatic missions were excluded. The document stated that the court notices were from a Belgian arbitration court regarding the Yukos judgment.

Since the Russian government had not responded to the judgement in more than a year, authorities were freezing Russian assets, the notice said.

Mineyev said many in the list were not Russian organizations, but banks or other institutions such as insurance companies or Eurocontrol, which manages air traffic control in Europe, that might have Russian accounts.

The Belgian court cited a decision from the European Court of Human Rights which demanded that the Russian Federation submit a plan to pay all the sums indicated in its decision and to make the payments no later than June 15, 2015.

Yukos was founded by former political prisoner and businessman Mikhail Khodorkovsky who is today a major critic of Vladimir Putin. Khodorkovsky was arrested in 2003 and convicted of theft and tax evasion in 2005. He ultimately served 10 years in jail before being pardoned by Putin over a year ago.

And while he was not a plaintiff or beneficiary in the arbitration case, he nonetheless welcomed the asset freezes today in a tweet reading, “Happy over the arrests of property of our bureaucracy in Belgium. I expect that the funds recovered will go to projects useful for Russian society.”

Yukos, once worth $40 billion, was broken up and nationalized, with most assets handed to Rosneft, headed by Putin crony Igor Sechin. Rosneft has been placed under E.U. and U.S. sanctions for its role in the Ukrainian war, and Sechin has been additionally sanctioned by the U.S.

(Note: This article is adapted from two posts published at The Interpreter, an online translation and analysis journal sponsored by the Institute of Modern Russia, which Mikhail Khodorkovsky’s son heads.)

The Biggest Losers: These 4 Billionaires Have Had The Roughest Road So Far

Stocks have stumbled around the world over the past couple weeks, cutting billions – at least temporarily – from many of the world’s wealthiest individuals. Just in the past week Google GOOGL -1.39% head honchos Larry Page and Sergey Brin each lost about $1.4 billion as the tech giant’s stock dropped 6%.

But who has sustained the biggest losses, even when markets were up?  Using the annual billionaires list as a benchmark, we looked at which tycoons’ fortunes have dropped the most over an eight-month period from Feb. 14 through Oct. 15.

The biggest billionaire losers (by percentage of net worth) weren’t victims of a random market dip, but rather are facing serious risks that threaten their companies’ financial future.

From Russia, But No Love – Vladimir Yevtushenkov
  • Net Worth: $2.7 billion, down from $9 billion
  • Wealth Lost: 70%; -$6.3 billion

If you’re a Russian oligarch, a surefire way to see your fortune crumble is to run afoul of Vladimir Putin’s administration. Yevtushenkov, owner of oil and telecom conglomerate Sistema, is currently under house arrest after beingarrested in early September as part of a money-laundering scheme.

Sistema’s stock has plummeted 65% since the beginning of September. Many assume politics played a role, and the development has drawn comparisons to the 2003 arrest and subsequent imprisonment of Mikhail Khodorkovsky, whose oil company Yukos was broken up and absorbed by the government (he waspardoned and released late last year). Here’s John Lough, a reporter for The Moscow Times:

“It is hard to escape the conclusion that Putin has deliberately chosen to make an example of Yevtushenkov and send a signal to keep big business on its toes. The core message is that there are new rules and no one is untouchable.

Why has Putin chosen now to remind the business elite who is in charge? The answer is almost certainly related to the multiple pressures on the Russian economy resulting from sluggish growth, the increasingly visible effects of Western sanctions and recognition that the boom years are over. This is increasing the competition for rents among business groups.

In these circumstances, it is logical for Putin to fear dissent among the business elite and the formation of interest groups that could unite to challenge his course in Ukraine.

By showing that a loyal figure such as Yevtushenkov is not invulnerable, Russia’s business leaders have been put on notice that the slightest sign of protest could lead straight to a prison cell.”

Forgive Us Our Debts – Brij Bhushan Singal
  • Net Worth: $429 million, down from $1.15 billion
  • Wealth Lost: 63%; -$720 million

Singal owns steel company Bhushan Steel, a major supplier to automakers that has been struggling of late under the weight of extensive debts. The company reportedly owes some $6 billion in loans to banks, and had to fend off rumors just this week that it was being put up for sale.

To make matters worse, his son and company vice-chairman Neeraj Singal is embroiled in a bribery scandal with Syndicate Bank, and was allegedly arrested in August after a six-day search by authorities.  The company’s stock is down 75% since March.

No Formula For Success – Luo Fei
  • Net Worth: $407 million, down from $1.1 billion
  • Wealth Lost: 63%; -$693 million

No Formula For Success – Wu Xiong
  • Net Worth: $369 million, down from $1 billion
  • Wealth Lost: 63%; -$631 million

Luo Fei and Wu Xiong are both large shareholders of Biostime Pharmaceuticals, one of the largest suppliers of baby formula in China. Fei is CEO of the company, which about one year ago brushed off a $27 million fine as part of a price fixing scandal and saw its shares continue to soar, earning Fei and Xiong each spots on the Billionaires List.

But since March, Biostime shares have steadily dropped on the company’s poor financial performance. Analysts for Standard Chartered downgraded the company to ‘underperform’ in August after its half-year results missed expectations.

Biostime’s earnings per share declined 35% year-over-year to 0.47 renminbi (USD $.08) and sales grew a slight 6.2% to 2.19 billion renminbi (USD $360 million). According to the bank, the company’s outlook is “dim” thanks to slowing growth in infant formula sales and higher raw materials prices.

Russian Oligarch Yevtushenkov Arrested; Putin, Khodorkovsky Weigh In

Vladimir Yevtushenkov, CEO of Sistema (file photo)

Russian billionaire Vladimir Yevtushenkov has been placed under house arrest on suspicion of money-laundering, prompting shares in his company Sistema to plunge.

The Moscow Exchange temporarily restricted trading in Sistema as shares in the oil and telecom group fell 37%.

The head of a top business group has questioned the reason behind the arrest of Mr Yevtushenkov, 65.

But President Vladimir Putin’s spokesman denied any political motive.

Mr Yevtushenkov has an estimated fortune of $4.4bn (£2.6bn; 3.4bn euros), according to Forbes.

His AFK Sistema group owns Russia’s biggest mobile operator MTS as well as oil firm Bashneft. Bashneft shares also fell by more than 20% on Wednesday and trading was temporarily restricted.

Russia’s Federal Investigative Committee said he had been accused of money laundering that involved the illegal acquisition of oil assets in the BashTek group in the Russian republic of Bashkortostan. In 2009, Sistema bought six BashTek companies, which were then taken over by Bashneft.

Mikhail Khodorkovsky. File photo

If found guilty he could face up to 10 years in jail, reports say. Sistema said in a statement that the acquisition of BashTek was “legal and transparent”.

The arrest was immediately compared by Alexander Shokhin, head of Russia’s Union of Industrialists and Entrepreneurs, with the detention of another billionaire, Mikhail Khodorkovsky, in 2003.

The former owner of oil giant Yukos spent 10 years in jail before being pardoned and leaving Russia last December.

“Without doubt this looks very like Yukos 2.0, because the charges apply to the head of a company that paid $2.5bn for assets and is now accused of stealing shares and money-laundering,” Mr Shokhin told Ria Novosti.

Yukos was at one point Russia’s biggest oil company but its assets were eventually broken up, many of them bought by Rosneft, now the world’s largest oil producer.

Rosneft was earlier this year reported to be keen to buy Bashneft.

Vladimir Yevtushenkov  (file photo May 2014)

The state-run oil and gas company is controlled by Igor Sechin, who for years has been a close ally of President Putin. Mr Sechin has been targeted by US sanctions in response to the crisis in Ukraine.

Mr Khodorkovsky, in an interview with Russian business daily Vedomosti, said the Sistema chairman’s arrest involved “purely commercial interests” rather than political motives. It also showed that President Putin had lost control and was not aware of what was happening, he said.

Mr Putin’s spokesman, Dmitry Peskov said it was “absolutely untrue and absurd to try to paint this story with any political colours”, Ria Novosti reported.

Khodorkovsky says Moscow lying about Ukraine, urges protests

Aug 29 (Reuters) – Former Russian oil tycoon Mikhail Khodorkovsky, an opponent of President Vladimir Putin, said on Friday that Moscow is lying about its involvement in Ukraine and he urged Russians to take action to stop an “unequal” war.

“We could and we can stop what is happening. It would be enough to take to the streets, to go on strike,” the former oil baron, who now lives in Switzerland, said in a statement.

Moscow, accused of sending troops and weapons into the former Soviet republic to shore up a separatist insurgency, has not acknowledged any involvement. The Russian defence ministry has repeatedly denied the presence of its soldiers in Ukraine.

“We are fighting Ukraine – for real,” he said.

Russian authorities were lying “just like they did about Afghanistan back in the ’80s and about Chechnya in the ’90s,” he said.

Once Russia’s richest man and head of the now defunct Yukos oil company, 51-year-old Khodorkovsky was freed by presidential pardon last December after spending a decade in prison.

Advertisements
%d bloggers like this: