Date: 16 May 2017

One More Victim of Sechin

The man frequently referred to as the second one after Putin, continues his aggressive business expansion. Using his political influence and his connections in special services, this time he’s selected AFK Sistema holding as his target. Igor Sechin is building up the strength of Rosneft, the company that he is heading, at the expense of another Russian oligarch. This time however it’s not about the assets, as Sistema is not a player on the oil and gas market. Instead Sechin wants to get a kind of protection money, since money is what Rosneft needs most today.


Rosneft and Bashneft filed a lawsuit against AFK Sistema. They are seeking 106.6 billion rubles, which Bashneft (taken over by Rosneft last year) allegedly lost when it was stripped of its assets by its former majority stakeholder. The case was registered on May 2 in Moscow Arbitration Court. However, on May 10, the court declined to hear the lawsuit, stating that it was a commercial dispute that should be examined at the place where the aggrieved party, i.e. Bashneft, is headquartered. This means that the proceedings will take place before the court in Ufa, the capital of the Republic of Bashkortostan, which is a part of Russian Federation.

AFK Sistema held a majority stake in Bashneft until 2014. However, in October 2014, following court’s decision, 50.08% of shares in this oil company was seized by the state (Agency for State Property). 25% were held by the Republic of Bashkortostan. This “nationalization” was just a pretext invented so that Bashneft could be acquired by Rosneft, Russia’s largest oil producer; the origins of Rosneft’s might should be linked with its taking over the most precious assets of Yukos, more than decade ago. On October 12, 2016, Rosneft bought a controlling stake in the oil company from Bashkortostan for 329.7 rubles, and immediately replaced its entire management. Soon after that, it announced that it would audit Bashneft to explain the reasons behind the high increase of its economic indicators. Rosneft’s CEO, Igor Sechin, stated in turn that in 2013 Bashneft had sold its oil service assets twice below their market value (for 4 billion rubles). After having acquired the controlling stake in Bashneft, Sechin tempted Bashkortostan president with a place in Bashneft’s management, as Bashkortostan hold a 25% blocking stake in Bashneft. In October, a draft amendment of the Act on the head of the Republic was filed in the Bashkir parliament (Kurultai) that would allow its president to accept Sechin’s proposal. However, it has appeared now that the amendments will not be adopted.

When the news about the lawsuit became public, shares of Sistema lost almost 40% at Moscow stock exchange, and its capitalization dropped to 136 billion rubles. Vladimir Yevtushenko, who owns the controlling stake in the holding, lost 900 million dollars in one day (drop from 3.5 to 2.6 billion). Current lawsuit may be dangerous for Sistema, especially since the company has been attacked several times in the past and its owner was placed under arrest when the conflict around Bashneft sharpened. Yet Sechin does not want to take over Sistema or to destroy it, but rather to get some “protection money”. At the end of 2016 Sistema had 60 million rubles on its accounts. The lawsuit for over 100 billion rubles would force the company get into serious debt – even if finally it should win the case.

The situation is untypical and unprecedented: for the first time a lawsuit is filed not against the seller of shares (the state in the form of Agency for State Property), but against the shareholder who had hold said shares earlier. But the Russian law does not forbid filing a lawsuit against an entity that caused material damage, even if the petitioner had not concluded any agreements with the defendant. The lawsuit against Sistema is a subsequent stage in the very aggressive expansion of Rosneft whose CEO, Sechin, has considerable political influence, making him one of the most powerful men in the country. (We have written about it in Russia Monitor). In recent months he has had a series of successes, starting from the takeover of Bashneft and the elimination of the minster of economy (using his friends FBS generals to this end) and ending with winning the dispute with Ramazon Kadyrov about Chechen oil assets.

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TAGS: migration crisis, NATO, Belarus, Russia


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