Bashneft Ruling Lifts Evtushenkov’s MTS: Russia Overnight

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OAO Mobile TeleSystems rallied the most in six months as concern faded that the Russian company’s controlling shareholder may need to tap it for cash to settle money-laundering charges.

Vladimir Evtushenkov, the billionaire who controls the mobile-phone carrier through AFK Sistema, has been under house arrest since Sept. 16 on charges linked to the investment company’s purchase of shares in oil producer OAO Bashneft. While a Moscow court today ruled in favor of nationalizing the billionaire’s stake, prosecutors didn’t broaden the state’s demands after investigators petitioned to sue the company for $4.75 billion of what they said were illegal dividends received from Bashneft.

“Investors are relieved as they assume there will be no additional claims against Sistema and it won’t have to use MTS to raise capital,” Anvar Gilyazitdinov, who manages $10 million at Rye, Man & Gor in Moscow, said by phone today. “However, the question is how sustainable the rally is, as the case against Evtushenkov is not over yet and MTS remains at risk, although it has not been implicated in the case.”

The Moscow-based company’s American depositary receipts advanced 6 percent to $14.42 in New York yesterday, the highest since Oct. 7. Trading volume of 5.7 million shares was 2.2 times the daily average of the past three months. The Bloomberg Russia-US Equity Index rose 2.9 percent to 75.54. Sistema surged 14 percent to $8.15 in London, the biggest gain since May 2010. United Co. Rusal lost 1.8 percent to HK$4.27 at 10:41 a.m. in Hong Kong trading.

Diminishing Fortune

MTS, the least indebted of Evtushenkov’s companies, has fallen 33 percent in New York this year as investment banks including Raiffeisen Bank AG and BCS Financial Corp. said the billionaire may be forced to use MTS to raise cash if the government demanded that the dividend payments be returned.

The investment company has one month to appeal the order to turn the shares over to the state, Judge Olga Alexandrova said today at a hearing in the Moscow Arbitration Court.

Sistema bought a controlling stake in Bashneft, the nation’s sixth-biggest oil producer, in 2009. Russian investigators opened in April a case linked to deals with Bashneft shares between 2002 and 2009, Sergey Makarenko, a lawyer for a former president of the Bashkortostan republic, said last month. Sistema’s shares in Bashneft were frozen in July.

Evtushenkov, who maintains his innocence, has seen his fortune fall to $3.1 billion from $6.9 billion since his arrest, according to the Bloomberg Billionaires Index. He is the richest Russian to face criminal charges since Mikhail Khodorkovsky, the Yukos Oil Co. founder who was arrested in 2003 and released last year.

ETF Gains

Oil, which together with natural gas provides about half of Russia’s budget revenue, decreased 1.3 percent to $81.12 a barrel in New York after the Federal Reserve ended its asset-purchase program and U.S. crude production surged to the highest level since the 1980s. Brent fell 1 percent to $86.24 a barrel in London.

The Market Vectors Russia ETF, the largest U.S. dedicated ETF tracking the nation’s stocks, gained 4 percent to $22.22, the biggest gain in eight weeks. Future contracts on the dollar-denominated RTS index expiring in December increased 0.1 percent to 108,940 in U.S. hours. MTS rose 3.4 percent to 247.55 rubles in Moscow yesterday. One ADR equals two Moscow-listed shares.

“Investors are freed of the fear that MTS would be used as a piggy bank,” Luis Saenz, the head of equity sales and trading at BCS Financial Group in London, said by phone yesterday. “It seems that authorities are not going to demand the back dividends, at least for now. The question is whether the new owner of Bashneft will still demand that. MTS is not out of the woods yet.”