Navalny to join Khodorkovsky as another victim in Putin’s world of hypocrisy

In the Guardian in a comment posted by opposition leader and blogger http://www.guardian.co.uk/commentisfree/2013/apr/11/vladimir-putin-alaexei-navalny-corruption, Alexei Navalny points out how he has been targeted for his opposition to President Vladimir Putin. Some people comment that he deserves this treatment for opposing Putin, for holding what would appear to be nationalist views. However, the commentators fail to justify the onslaught on members of his family, who have been arrested or subject to other forms of pressure. Why are they being pressurised? What crime have they committed?

Have they been siphoning off state assets abroad, embezzling state assets? No. The Kremlin elite has. However, they are not sanctioned in the world of hypocrisy typifying the Russian oligarchs and bureaucrats, from the servile State Duma and Council of the Federation to the  obedient police, military, KGB, regional authorities.

Whatever his views, if Navalny does go to jail, this will provide further proof that this regime has lost its bearings and has put self-interest before society and common sense.

 

Russia and the theatre of the absurd – trying the dead

According to the most recent reports, the posthumous trial of Sergei Magnitsky, who died while in police custody, has been delayed further to a request from the defence for more time. What defence you ask? Well obviously defence attorneys selected by the state, so you can be assured of their objectiveness….

It beggars belief that President Putin, Prime Minister Medvedev and other cronies would want to raise the spotlight on one of the most blatant instances of state corruption, when various state officials, including from the police, scammed tax payments to their benefit and then laid the blame with a foreign investor. Magnitsky had uncovered the crimes, only to be arrested on trumped-up charges and to die in mysterious circumstances in prison.

Medvedev, who was President at the time, promised to look into his death and to punish those responsible. Nothing has happened since. This led to sanctions on travel imposed by the USA against various Russian politicians

And now in response, the Russian authorities have decided to try a Russian citizen who died in police custody in Russia, an individual who had uncovered corruption, a well educated lawyer trying to make things better for everyone in Russia, representing a foreign investor (Hermitage Capital).

You would have thought that the Russian authorities, the Sechins of this world, would want to put this episode behind them. You would have thought that the powers that be in Russia would understand the adverse impact on Russia and the country’s investments.

You would have been wrong. This regime doesn’t care. The various clans in power have already stolen so much that they really don’t care what happens to Russia – they have already got their escape routes should they be required, buying property in Florida, the UK, France, Germany, Italy, Spain, Greece.

If they did care, they wouldn’t try a dead man who was killed by the regime.

State Duma ethics chairman Vladimir Pehtin found to be lacking any

As reported in the Russian media in February, and in particular in the blog by anti-corruption blogger Alexei Navalny, the longstanding chairman of the State Duma’s parliamentary committee of ethics Vladimir Pehtin would appear to have some ethical issues of his own. 

Despite working as a member of parliament since 1999, Pehtin has amassed considerable real estate in Russia, a fleet of expensive cars (Porsche, Mercedes-Benz, etc.) and also real estate in… America. Furthermore, for some reason Pehtin omitted to mention the existence of this prime real estate in Florida in his tax reason.

Subsequent to the disclosure on 13 February, Pehtin resigned his post during the investigating, while adamantly denying ownership of the property, claiming that it was owned by his son Alexei Pehtin, an alleged 35-year old businessman.

However, as Navalny noted in response, Pehtin has been receiving a state salary since 2004 from the State Duma. He would appear to be his father’s “advisor”. Moreover, Pehtin senior has allegedly been paying tax on the Miami real estate in the USA, which is strange behaviour if he doesn’t own any property in the country! If you ever hear this “ethical” deputy lambasting America, you will have to laugh even more at the utter hypocrisy of the Russian state official. 

So yet another parliamentary deputy and state official has been found out. The corruption reeks more and more. The officials are so convinced that they won’t be caught that they flaunt their wealth.

Interestingly, when you type in Vladimir Peshtin in the Internet in English, Google assumes you have made a mistake and meant to write Vladimir Putin. Maybe this is not so surprising, if Putin lets such corrupt people assume leading roles in his parliament. He is not the first deputy to be caught and clearly won’t be the last.

Welcome to President Putin’s Russia. Vive la corruption!

Angstrem linking up with AF-Group

According to Kommersant (13 February 2013), leading manufacturer of prepackaged grain Angstrem and  agricultural holding AF-Group, which focuses on rice, have announced plans to merger their businesses in the new company AFG National, with the value of the merged assets estimated at over RUB 8 billion.

The partners may also acquire production facilities from Razgulyai and Mistral, with the goal of transforming AFG National into a major rice supplier, accounting for 25 per cent of the market.

According to analysts, it remains unclear how powerful the holding will be, in view of the reduction in rice import duties following Russia’s accessing to the WTO.

 

 

Ukrainian bank subsidiary turns to Russian state-owned parent for support

As reported in Kommersant on 13 February 2013, Ukraine’s Prominvestbank, one of the country’s oldest banks and regularly ranked in the top ten in terms of retail savings, has appealed to its parent, Russian state-owned corporation Vnesheconombank (official English name – Bank for Development and Foreign Economic Affairs), for almost USD 800 million in financial assistance, including USD 400 million in the first quarter of 2013, as it is undercapitalised based on the requirements stipulated by International Financial Reporting Standards [IFRS]. The bank needs to create 100 per cent provisions for bad debt, thereby adversely affecting its capital.

Vnesheconombank owns 98 per cent of the bank and will no doubt adhere to this request. This is the first time, however, that the Russian state, represented by Vnesheconombank, has had to provide assistance of this kind to a foreign subsidiary.

As Ukrainian banks have only just had to start making the transition to IFRS (effective from 1 January 2013), there has to be cause for concern for other institutions that don’t have such a wealthy patron, given the sorry state of Ukraine’s economy.

Of course, this might lead to some interesting M&A transactions/share swaps.

 

Notes from the Underground – excellent review of work ahead of its time

Observer journalist Anita Sethi posted an excellent review on one of my favourite works of literature, Notes from the Underground – Notes from Underground by Fyodor Dostoevsky – review. This has always been an underappreciated and little-known novella penned by Fyodor Dostoevsky before he wrote the classics – Crime and Punishment, Idiot and Brothers Karamazov. The review concerns a new English translation of the novella and erudite introduction from DBC Pierre.

It is a pity that the work has been ignored so much by both Western and Russian audiences, as Dostoevsky not only lays down the framework for the ideas in subsequent novels, but also goes further in exploring the mind.

The novella also manages to cover such a wide range of issues – the desire for a utopia and the simultaneous desire to destroy this utopia, as man finds perfection unbearable to hold (example of Crystal Palace) ; the endless possibilities of technology and the way they can be used to cause more havoc – the better the technology, the greater the death caused through military action; the yearning for independence and freedom contrasted with the desire for some kind of security and state support; free will and existentialism; and many other ideas, including enlightened self-interest.

Going through the motions – again…

The New York Times posted an interesting piece on 12 February on alleged attempts by President Putin to force Russian officials to bring their cash back home entitled Russia May Restrict Investing Abroad

Putin has submitted a draft law to parliament, which will naturally be adopted by the servile members of the State Duma. According to the law, all top state officials, including in government, their spouses and young children (what young means is not defined at present) will be expected to close down any bank accounts or shares held outside Russia.

The apparent goal is to crack down on corruption – however, it would appear more likely to be another way of pressurising officials at all levels to toe the party line and also make them share more the backhanders that they receive with other senior officials.

Furthermore, the law has loopholes – surprise, surprise – officials can as in the past retain money in foreign accounts linked to offshore companies that will not be accessible by the ban or by using the names of proxies and friends – a measure that has, by the way, proved quiet handy for UK businessmen seeking to avoid paying high rates of tax in the UK.

So this would appear to be another measure aimed at appeasing public anger over the high levels of corruption in Russia, while at the same time leveraging more control over officials and inevitably increasing corruption levels, as they seek to offset the cost of sharing their illegal earnings with other government figures now aware of the scale of their theft.

 

Contrasting issues

To date this blog has focused perhaps too much on the issues facing Russia, the widespread poverty, corruption and indifference of the powers-that-be.

However, things aren’t much better in Europe and the US, as a new hard-hitting documentary points out, covered in an excellent article in the Guardian http://www.guardian.co.uk/film/2013/feb/02/inequality-for-all-us-economy-robert-reich

Just like Russia, a small minority in the US and UK own the majority of assets. Unfortunately, this is rarely reported. As well as highlighting inequality and the squeeze on the middle class and poor, the documentary stresses the negative impact that such government policies have on the economy, with all hopes of growth destroyed by futile austerity.

Meanwhile, as indicated in another report recently, based on Sberbank data, almost 90 per cent of Russians own their properties – compared to a far lower figure in the US and Europe. This has historical roots (decree by Russia’s first President Boris Yeltsin to allow Russian citizens to privatise the state properties where they live). At the same time, to date Russians have to a large extent abhorred debt (I am not talking here about the dishonest oligarchs, but instead the general public), preferring either to pay cash for property or to repay loans/mortgages early.

And given the high budget deficit issues in the West, compared to Russia, it remains unclear how the situation will develop over time. A recent Economist report focused on the unsustainable nature of the welfare state in the UK and highlighted successes in Nordic countries.

Mostotrest General Director talks about Russian infrastructure risks

In an interview given to the Russian business daily Kommersant (13 November 2012), Mostotrest General Director Vladimir Vlasov discussed the issues that you face if you attempt to build infrastructure in Russia. He should know:  Mostotrest is a major diversified transport infrastructure construction company in the country, inter alia the largest bridge builder in the Russian Federation in terms of revenue.

He also disclosed that the company planned to buy from businessman Arkady Rotenberg for RUB 7.87 billion (approximately GBP 160 million)  the North-West Concession Company, which is the concessionaire of the high-profile construction project – the paid highway Moscow-Saint Petersburg, as part of plans to diversify the business.  At the same time, it is worth noting that Rotenberg is the main shareholder in Mostotrest.

Vlasov explains that, while there are no obstacles blocking the access of foreign companies on the Russian infrastructure construction market, there is one issue that may hold them back – the inability in Russian conditions to plan for all the potential risks that may arise and the fact that from the very outset in Russia sites are not ready for construction and necessitate a completely different approach: to build at extremely rapid tempos once the sites are ready to compensate for lost time.

Kerimov comes to rescue of SMP-Bank again

According to Russian business daily Kommersant (13 November 2012), billionaire oligarch and Dagestan Senator Suleiman Kerimov is once again providing funds for SMP-Bank, which is owned primarily by brothers Boris and Arkady Rotenberg (with interests of 37.27 per cent each), who allegedly have close ties with President Vladimir Putin.

As in August 2012, Kerimov is placing a USD 50 million subordinated deposit at the bank, which will subsequently be classified as capital further to a request filed with the Central Bank by SMP-Bank. This move will enable the bank to keep its capital adequacy ratio at above 10 per cent.