The Brothers Zaslavsky – Legal Nihilism to the Third Power

Alexander Zaslavsky and Ilya Zaslavsky, two brothers, both dual U.S.-Russian citizens, have found themselves arrested this week, prisoners of the Russian government under charges of “corporate oil espionage,” and at the center of what might be the next forced partial nationalization of an oil company, pawns in the deepening UK-Russia diplomatic spat, or both or neither. What seems clear is that no one believes the government’s straight story on this case, further eroding the credibility of the procuracy (not that there was too much left beforehand). Perhaps the first sign that triggered widespread speculation and conspiracy theories was the fact that Russia’s normally subservient and docile television media was allowed by the Kremlin to play up the arrests as a lead story. In such a tightly controlled and censored media market, whenever a story like this makes it to TV, it is meant to send a message – much like the arrest of the gas mobster Semyon Mogilevich or even the neat and tidy trial of Alexi Frenkel for the murder of central banker Andrei Kozlov. There is certainly far too little information available about the brothers and the state’s plans to take over TNK-BP to jump to conclusions, but it is understandable why so many are floating their own theories.

Even UralSib’s Chris Weafer, the man of the golden quote, pulled no punches in characterizing the arrests as a threatening prelude to expropriation – much like the asset grab the Kremlin pulled against Royal Dutch Shell: “This is another example of the way the Kremlin negotiates … This is a similar approach to what we saw with Sakhalin-2. … It looks like they are upping the pressure to get a deal,” he said. If it was an escalation of a political row between Russia and the west “that would raise a lot of questions for other companies in foreign hands.”Perhaps Weafer spoke too soon. Just one day after the rumor mills called the attack on BP the next Sakhalin siege, here comes environmental inspector Oleg Mitvol today, announcing the beginning of a new investigation into TNK-BP’s SamotlorNeftegaz production unit, which is developing the firm’s biggest Samotlor field. Mitvol usually doesn’t investigate any company that the government doesn’t wish to acquire (and then the environmental problems tend to immediately disappear once Gazprom controls the project), so now the pressure is really on: a perfect, Yukos-like trifecta of office raids, arrests, and bureaucratic harassment. All they need now is to slap TNK-BP with some invented back taxes, and Gazprom will have the company hand over fist.The Russians trying their best to de-politicize the spy case, arguing that it is not related to the previous British Council spat. Duma member Pavel Krasheninnikov told Interfax: “I believe this case does not have any political background. We should not look for political motives, we should look for proof of the people’s guilt or innocence.” Call me a cynic, but there is no such thing as an apolitical arrest of foreign spies.TNK-BP has also reacted with a statement refuting the accusations that they employed a corporate spy to gain an unfair advantage over the competition: “We are a Russian company and we work successfully on a fair commercial basis with many other Russian companies — both State and privately owned. We operate within the Russian legal framework and we do not condone illegal activities, nor do we rely on unfair competitive practices. The company has never countenanced or supported any action designed to contradict or damage the interests of Russia.“As we learned from the spy wars and the increasingly public clan disputes during the transition to Medvedev, there have been reports that corruption entrepreneurs within the Kremlin are taking advantage of the little time they have left under Putin’s outgoing regime to “velvet reprivatize” everything in sight while they still can. For many bureaucrats, the upcoming Medvedev presidency brings some some uncertainty, despite Putin’s assurances of continuity, and therefore it is conceivable that the move against TNK-BP might have been rushed forward by those within the Kremlin positioned to benefit the most from squeezing the company. An alternate and less likely theory is that a partial nationalization of TNK-BP to force a golden share over to Gazprom may be an attempt to discredit the next president.BP has remained almost unbelievably amicable in its negotiations. In February, BP chief Tony Hayward said “We remain optimistic, not stupidly optimistic, but optimistic that something good will come of it” and CEO Robert Dudley said “We understand what we can contribute to Russia, and we believe TNK-BP has much to offer as a partner to Russian government and to the state companies.“It remains less clear whether or not the private Russian owners of TNK-BP, Mikhail Fridman, Leonid Blavatnik and Viktor Vekselberg, have been similarly jovial about the situation, but there’s no doubt that this side enjoys many more points of leverage within the Kremlin to make things happen. The real fight most likely isn’t the beef between the United Kingdom and the Kremlin, but rather between these three men and the Gazoviki. However, if a major stake in TNK-BP is going to be cut somewhere, one of the two parties will have to take the hit.For now, all eyes are fixed on the Duma, which today approved the second reading of the new legislation on foreign investment in so-called “strategic” sectors, which could cover more than half of Russia’s GDP. If Friedfman and co. can hold their positions, then likely a change in this law would be the fastest way for the Russians to seize the golden share in TNK-BP, as well as that of ConocoPhillips in Lukoil.