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Haste Makes Waste – The Rush to Close Deals in Russia Creates Instability

Today the AFP is reporting on the flurry of mega-deals hastily going down in Russia as businesses and investors, large and small, look to grab what they can, while they can. This near panic is contributing to a greater sense of instability and political risk, not least to mention the exacerbating effect on the Kremlin’s internal power struggles. The analyst Denis Maslov told AFP that “We do know this rivalry is intensifying, there is definitely some change of assets taking place, there is a realignment. … Now that the succession is very close, some people are in more of a hurry.

AFP:

Kremlin transition fuels race for Russia’s richesMOSCOW (AFP) — President Vladimir Putin’s rule is coming to an end in a blaze of last-minute business deals, top-level firings and even claims of a bid by hawks in the security services to seize key assets, analysts said.As Putin prepares to leave office after a presidential election in March next year, observers see Kremlin allies and the tycoons he has favoured during his rule as rushing to cement their control of a share of Russia’s riches.The fierce competition risks upsetting a tightly-controlled system in which state officials and businesses are deeply intertwined, with infighting between rival elites spilling out of the corridors of the Kremlin.Signs of trouble surfaced last month with the arrest of a deputy to the country’s powerful Finance Minister Alexei Kudrin, seen by analysts as a bid to weaken Kudrin and force him to loosen the purse strings on Russia’s oil wealth.Then came the announcement of two major deals in the booming minerals sector by Oleg Deripaska and Roman Abramovich — Russian metals tycoons who have become ever wealthier under Putin.Deripaska is also waiting for approval from the state to purchase oil firm Russneft, whose former CEO fled Russia in August after the authorities opened a tax investigation against him.”We do know this rivalry is intensifying, there is definitely some change of assets taking place, there is a realignment,” said Denis Maslov, Russia analyst at Eurasia Group in New York.”Now that the succession is very close, some people are in more of a hurry.”The transition of power from Boris Yeltsin to Putin eight years ago was accompanied by a massive turnover in Russia’s elites, with the chasing out of former favourites such as oligarchs Boris Berezovsky and Vladimir Gusinsky.While few expect the change to be as radical this time, even the Kremlin is saying that the heads of major state-controlled companies will have to change when Putin goes.In the last few days the power struggle appeared to hit state oil giant Rosneft, which announced the departure of three vice-presidents, a move seen as strengthening the control of company chairman Igor Sechin.Sechin is the deputy head of the Kremlin administration and is considered an influential power-broker who helped engineer the demise of Yukos, once Russia’s biggest oil producer, and of its CEO Mikhail Khodorkovsky.Then this week a little-known financier shocked the market by claiming involvement in a bid by an association of former security operatives to take control of major assets.”I believe that the consequences of the chaos of the 1990s should be cleaned up and put in order,” Oleg Shvartsman, the financier, said in an interview on Echo of Moscow radio on Tuesday.Shvartsman, said by business daily Kommersant to be the head of a 3.8-billion-dollar investment company, described the programme as a “velvet reprivatisation” that would bring back key assets into the hands of the state and pro-Kremlin businessmen.The claims have rattled the business community. Oleg Sysuyev, deputy chairman of Alfa Bank, was quoted by Kommersant as saying the allegations were “very serious, close to the truth and frightening.”Anatoly Chubais, a top businessman who heads up electricity monopoly UES, said: “Intentionally or not, Mr. Shvartsman told the truth. The truth about the inevitable diseases of these types of socio-political systems.”Lilia Shevtsova, an analyst at the Carnegie Moscow Center, said Shvartsman’s proclamations and the arrest of Kudrin deputy Sergei Storchak were signs of infighting between rival Kremlin clans.”A battle has started in the upper echelons of power,” said Shevtsova, author of the acclaimed “Putin’s Russia.” “The clans are attacking, they are jumping at each other’s throats like vampires.”