Russian Law Enforcers' Meddling in Private Sector on the Rise PR Newswire MOSCOW, Feb. 28, 2013 MOSCOW, Feb. 28, 2013 /PRNewswire/ --The year 2012 was a record year for Russian law enforcement agencies' meddling in the private sector, RUXX Analytics Center reports. The number of searches, police raids, corporate records withdrawals, and criminal cases against entrepreneurs is up more than 20% year-over-year, to a level exceeding even that seen in the 1990s, when law enforcers were frequently used as a tool for pressuring competition and to oust current owners from a desirable company. "On the surface, it would seem that the government's pressure on the private sector has increased recently, through increasingly active involvement of law enforcement agencies," says RUXX analyst Michael Thompson. "However, this is not actually the case: law enforcers are just a tool some private industrial groups are using to gain control over assets of other private groups. The government is not exercising more stringent control; in fact, if anything, it has become weaker," Thompson adds. The most recent egregious example of law enforcers brought in to solve a commercial dispute between private parties is the conflict between core shareholders in Tolyattiazot, a major global ammonia producer, and Uralchem Holding Company and its affiliated company Belport Investments Limited registered in the British Virgin Islands. Tolyattiazot's lawyers have sent an open letter to Chairman of Russia's Investigative Committee Alexander Bastrykin after the local police investigators initiated criminal proceedings against the company based on Belport's unverified claims, which may cost the ammonia producer $200 million in additional expenses. The significant amount at stake is typical of a corporate blackmailers' "raid," when core shareholders are usually offered a chance to see charges dropped for a smaller amount. In another high-profile case, the conflict between key partners in TNK-BP, a Russian-British major oil joint venture, has seen many police searches, denied and withdrawn Russian entry visas, and other actions by law enforcers to stymie the efforts of British executives at the company and BP as a major shareholder to promote their strategy for the joint venture, and to support the case of ARR – the Russian partner in the venture, essentially a group of some of the most powerful Russian tycoons. BP was eventually forced to sell its stake in TNK-BP to Rosneft in 2012. "There are numerous examples with law enforcers' attempts to put pressure on business," says Thompson: "Cases against Alexander Lebedev, owner of NRC bank, against Ikea and other major businesses are well-known." Business ombudsmen, an institution recently established in Russia to protect business rights, is swamped with complaints. More than 700 companies have turned to business ombudsmen in a year, predominantly with complaints against law enforcers. The Russian leadership is attempting to win back the trust of domestic and international companies and entrepreneurs by improving the available infrastructure and enacting new business-friendly laws, but until the corrupt link between the private sector and law enforcers is broken or at least severely limited, trumped-up criminal charges, even if they do not stand up in court, still can damage the reputation of companies and their managers, and will interfere with operation of both Russian companies and international investors in Russia. "Criminal investigations against industrial companies have become a fact of life in 2013 Russia. The mere fact of a criminal investigation can cause trouble for a company by making debt more difficult to procure, and affect the stock price, and corporate raiders and blackmail artists take advantage of that," Michael Thompson comments on the general situation. According to the RUXX Index, which includes a majority of publicly traded Russian companies, inflow of investment in Russia is on decline. "We explain this primarily by the pressure from law enforcement agencies getting out of control." RUXX Index Michael Thompson Michael.email@example.com +1 646 257 2003 www.ruxxindex.com SOURCE RUXX Index Website: http://www.ruxxindex.com
Russian Law Enforcers' Meddling in Private Sector on the Rise
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