He can make you rich.

How to Profit in Putin's Russia

Leonid Bershidsky is a Bloomberg View columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.
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Toxic as Russia's investment climate may have become, it's still possible to make a bit of money in the country's stock market -- if you're good at guessing what President Vladimir Putin might do.

Consider the case of Sistema, the holding company of billionaire Vladimir Evtushenkov, who was placed under house arrest last week on suspicion of money laundering. The move has been widely interpretedas a sign that Putin's close friend Igor Sechin, who runs the state oil company Rosneft, is angling for control of one of Sistema's prize assets, the oil company Bashneft. This, in turn, raised concerns that Evtushenkov could suffer a fate similar to that of former Russian oligarch Mikhail Khodorkovsky, who spent 10 years in prison and saw his vast energy business destroyed. Naturally, Sistema's share price plunged (the chart shows New York time).

Evtushenkov's cause was far from lost, though. A careful, experienced operator, Evtushenkov had never done anything to displease Putin. Unlike Khodorkovsky, he had never meddled in politics, and was careful to coordinate his moves with the right people. When he purchased Bashneft from the son of a regional governor who had a hand in the firm's privatization, then Finance Minister Alexei Kudrin told the state-owned news agency RIA Novosti that the acquisition had been "vetted on all levels." If he simply handed over Bashneft to Sechin for a symbolic price, perhaps he could walk free and Sistema would survive.

Hence, when the state TV channel Rossiya reported, citing a Sistema source, that Evtushenkov had been freed, the market believed the news. Minutes after the news came out at 5:15 p.m. Moscow time on Sept. 19 (9:15 a.m. New York time), some $6 million of Sistema shares were traded and the price spiked 15 percent.

Much confusion followed. At one point, the stock rallied on a reportthat Putin had heard about Evtushenkov's release "from the media:" If Putin knew, no matter how, it must have been true! Then Evtushenkov finally denied that he had been freed -- an assertion that even the reporter had a hard time believing, given that people under house arrest in Russia are not normally allowed to use the phone. Even some of Evtushekov's underlings had believed the rumor after speaking with him that day. Yet there the billionaire still was, at his luxury residence near Moscow, wearing a monitor bracelet.

The Moscow Exchange is currently investigating possible market manipulation related to the report, which appears to have given a lasting lift to Sistema's stock price. In today's Moscow, the mere rumor that Evtushenkov had been freed -- on a state TV channel, no less -- passes for good news.

The incident offers further evidence of what Russia has become: A country with no law, where anything can happen on Putin's whim in a matter of minutes. Nobody is immune, be they country's richest people or an entire neighboring country.

This column does not necessarily reflect the opinion of Bloomberg View's editorial board or Bloomberg LP, its owners and investors.

To contact the author on this story:
Leonid Bershidsky at lbershidsky@bloomberg.net

To contact the editor on this story:
Mark Whitehouse at mwhitehouse1@bloomberg.net