Strategic Sectors Law Update – Second Commission Meeting of 2012

On July 30, 2012, PM Medvedev chaired a session of the Commission on Foreign Investment. This is the second Commission meeting of 2012, but the first chaired by Medvedev. In his remarks, Medvedev largely rehashed Putin’s presentation at his last Commission meeting, specifically describing the general situation of foreign investment in Russia.

Below is a list of deals that, according to public sources, were considered at the meeting:

  • Astrakhan, Chita, and Tomsk Airports - the Commission approved the acquisition of shares in OOO “Aeroport Tomsk”, OAO “Aeroport Chita”, and OAO “Aeroport Astrakhan by T.S. Trans Siberia Co. Ltd. (Cyprus),which is believed to be affiliated with Roman Trotsenko, founder of Aeon Corporation and former President of state-owned United Shipbuilding Corporation (“USC”). Aeon Corporation’s airport holdings are in turn owned and managed by Novaport. T.S. Trans Siberia won an auction to purchase a majority of the Astrakhan airport held by the Federal Property Management Agency (Rosimuschestvo) late last year (it’s unclear whether similar auctions were held for the other airports).  The interesting thing about T.S. Trans Siberia is that it is not entirely clear who owns it. According to Izvestia, in the Cypriot corporate registry, two owners are listed: Golburn Trading Ltd. and Mittelmeer Nominees Ltd. The actual owner of Golburn is Anatoly Matveenko, about whom little is known aside from his frequent affiliations with companies owned or controlled by Roman Trotsenko or Trotsenko family members. Mittelmeer Nominees – the other 50 percent owner of T.S. Trans Siberia – is reportedly a nominal owner. The real owner is in fact another Cyprus company – Legniton Ltd., which is apparently owned by Saut Mynbaev, the Minister of Oil and Gas of Kazakhstan, and two other Kazakh businessmen. These individuals also allegedly own Meridian Capital, which in turn owns 50 percent of Novaport (the other 50 percent reportedly controlled by Trotsenko). Formally, Novaport has one owner: yet another Cyprus company, M.M. Airport Management Company Ltd. Trotsenko, for his part, abruptly resigned from USC last month, apparently resulting from a dispute with Vladimir Lisin, who replaced Igor Sechin on the USC board. Trotsenko will reportedly move into a new position as advisor to Sechin on the Rosneft board.
  • TNK-BP Purchase of Refueling Complex at Sheremetyevo - the Commission approved LLC TNK-Sheremetyevo – a subsidiary of TNK-BP Holing - acquiring a 74.9% stake in ZAO “Toplivozapravochny Kompleks Sheremetyevo,” a jet fuel storage and refueling operator for $200mln.
  • Telenor Dispute - FAS reported on its attempts to negotiate with the shareholders of Vimpelcom on resolving violations of the Strategic Sectors Law. FAS reportedly agreed to withdraw claims that the Norwegian Telenor illegally increased its stake in Vimpelcom under one condition: a Russian citizen must head Vimpelcom. So far, this offer does not seem to have settled the dispute.
  • Chinese Fishing Scofflaws - the Commission took note of Pacific Andes Int’l Holdings Ltd., a HK/PRC company, which has allegedly obtained control over several Russian fishery companies (specifically, those harvesting Pollock). At the meeting, the Commission instructed unspecified “ministries and governmental agencies” to undertake “certain measures to bring operations of these companies in line with the current law of the Russian Federation.”
  • Iranian Sanctions Evaders - the Commission also reviewed an issue involving Iranian companies that reportedly established control of OAO “Astrakhan Port,” in violation of sanctions imposed on Iran. The Commission stated that documents are being prepared to file a lawsuit in order to hold the transactions void.
  • Helivert-AgustaWestland Deal - for some reason, the Helivert joint venture was mentioned at this Commission meeting, even though it was already approved at the previous meeting.

Comments

First, this being PM Medvedev’s first Commission meeting, the amount of bad news dealt with at the meeting is significant. It’s almost as if they decided to discuss the Helivert deal – which was approved at the last meeting – in order to brighten up the mood. My personal guess is that Putin left all of the unsavory issues for Medvedev to deal with.

Second, it is worth noting that not a single “genuine” foreign direct investment was approved/announced at the meeting – if memory serves, Putin always had at least one deal to hold up as an example of the Strategic Sectors Law facilitating investment into Russia.

Third, the airports deal involving the multitude of Cypriot companies is yet another shady deal involving offshore companies controlled by Russian government officials/oligarchs. The structure of these deals, which often involve the sale of government shares, suggest that privatization is alive and well in Putin’s Russia, and is just as non-transparent as in the Yeltsin era.

As always, we end with some video from the meeting:

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