Wall Street Journal exposes Lukoil insiders

“On the last day of August in 1997, a Russian oil tycoon named Vitaly Schmidt sat down to lunch at his Moscow apartment with his woman friend and his sister. The 48-year-old engineer downed a large helping of boiled-meat dumplings and a couple of shots of vodka. Three hours later, he was dead.
Mr. Schmidt was a multimillionaire with luxury residences in four countries. Much of his fortune came from a group of small offshore energy companies he oversaw on behalf of himself and a few fellow executives of a big Russian oil company, OAO Lukoil.”

• This compelling 3,000-word story, titled “At Lukoil, an Executive’s Death Exposes Network of Inside Deals,” by Glenn R. Simpson, was published by The Wall Sreet Journal on December 6th, 2006.
  
• Thanks to permission from The WSJ, you can read the article here in English and here in Russian.

Poisoning the business air

There is no doubt the poisoning in London of former KGB officer Alexander Litvinenko, will further damage Western investor confidence in Russia. Not that there is much confidence to write home about anyhow, given the corruption, chicanery, dishonesty and downright criminality of some of the top sectors of Russian business under Vladimir Putin and the goons of the Kremlin, security services and oligarchies.

There is unprecedented interest in Russian companies raising money on the London Stock Exchange at present. A huge list of Russian companies – many coming from the energy sector such as Rosneft – have had full shares or depository receipts listed on the London Stock Exchange.

While we must wait to see who is responsible, this bizaare murder will add fuel to the smouldering fires of distrust in the western media about the rule of law in Russia and the activities of the Russian state.

Investors read more and more reports about Russia being an authoritarian state where opposition is stifled, and where the legal system is controlled by the government and used mainly for taking over cash generating companies.

The Organisation for Economic Co-operation and Development (OECD) this week criticized the Russian government for its expansion into important economic sectors. It also noted concerns about Gazprom the state-run energy company, and its insatiable appetite for acquiring assets.

The fact is, the Kremlin is more concerned about asserting its own political power than worrying about what foreign politicians or investors think.

Last week Putin said business in Russia has improved its sense of social responsibility, and that “business has become much more responsible than in the mid-1990s. The state, too, has toughened its response to businesses’ antisocial behavior.”

Pardon those of us trying to do honest business in Russia for spluttering in disbelief. There is an old saying the the fish rots from the head, and here we have the head speaking to us about business ethics, while the FSB is running around with its dirty tricks, implementing the Kremlin’s own antisocial policies of industrial grab, smash and burn.