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Is the Kremlin trying to grab another oligarch’s oil company?

Obsession
Energy Shocks
Obsession
Energy Shocks

The Kremlin is being accused of a big new asset grab in a murky case against Russia’s largest mobile telephone operator.

Russian prosecutors yesterday ordered the house arrest of Vladimir Yevtushenkov, who controls MTS, Russia’s largest mobile phone operator, and Bashneft, an oil company in the region of Bashkortostan. The allegation is that he used illegally acquired assets to buy his 78.8% share of Bashneft, and that he ultimately underpaid for it, according to the pro-state website RT.com.

But the case isn’t clear-cut: Prosecutors have released no details, for example, of the asset allegations. And prosecuting and detaining a member of Russia’s billionaire oligarch class like Yevtushenkov is very rare; it has happened almost exclusively to a few powerful oligarchs who were viewed as economic or political challenges to Putin.

Yevtushenkov is being compared to the most prominent of those cases: the 2003 imprisonment of Mikhail Khodorkovsky, the then-chairman of Yukos Oil, who was released in December after a decade of incarceration.

The Khodorkovsky case was largely the culmination of a power struggle between him and Putin. When it was over, Igor Sechin, an ally of Putin’s going back to their days serving in the St. Petersburg mayor’s office, had dismantled Yukos and transferred many of its most valuable assets to then-sleepy Rosneft. The state-controlled Rosneft is now the world’s largest publicly traded oil company by production, and Sechin is its head.

In July, an arbitration court in The Hague ruled that the Yukos process amounted to theft and ordered Russia to pay its shareholders $50 billion. Moscow has vowed to fight the ruling and both Rosneft and the Kremlin reject any analogy between the Yukos and Yevtushenkov cases.

Yevtushenkov hasn’t been identified as an economic or political challenge to Putin. But Rosneft in June expressed interest in buying Yevtushenkov’s Bashneft, according to Vedomosti, a respected Russian financial daily, and analysts see similarities with what happened to Khodorkovsky.

In a note today, Daragh McDowell of risk analytics firm Maplecroft said the arrest is “most likely” part of an attempt by Sechin, Rosneft and the Kremlin to dismantle Yevtushenkov’s empire, including not only Bashneft but also MTS. The lead prosecutor “has a reputation as Putin’s enforcer,” and, given the prominence of the case, “he would not have moved so publicly against Yevtushenkov without official sanction from the highest levels.”

Andrew Kuchins of the Center on Strategic and International Studies told Quartz that he’s surprised by the detention. “Yevtushenkov had been pretty careful about keeping his head below the radar,” he said. Aleksandr Shokhin, a former vice premier and prominent public figure who now heads a prominent union, said the arrest “undoubtedly looks like Yukos No. 2.”

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