MOSCOW, Feb. 28, 2013 /PRNewswire/ -- The year 2012 was a record year for Russian law enforcement agencies' meddling in the private sector, RUXX Analytics Center reports. The number of searches, police raids, corporate records withdrawals, and criminal cases against entrepreneurs is up more than 20% year-over-year, to a level exceeding even that seen in the 1990s, when law enforcers were frequently used as a tool for pressuring competition and to oust current owners from a desirable company.
"On the surface, it would seem that the government's pressure on the private sector has increased recently, through increasingly active involvement of law enforcement agencies," says RUXX analyst Michael Thompson. "However, this is not actually the case: law enforcers are just a tool some private industrial groups are using to gain control over assets of other private groups. The government is not exercising more stringent control; in fact, if anything, it has become weaker," Thompson adds.
The most recent egregious example of law enforcers brought in to solve a commercial dispute between private parties is the conflict between core shareholders in Tolyattiazot, a major global ammonia producer, and Uralchem Holding Company and its affiliated company Belport Investments Limited registered in the British Virgin Islands. Tolyattiazot's lawyers have sent an open letter to Chairman of Russia's Investigative Committee Alexander Bastrykin after the local police investigators initiated criminal proceedings against the company based on Belport's unverified claims, which may cost the ammonia producer $200 million in additional expenses. The significant amount at stake is typical of a corporate blackmailers' "raid," when core shareholders are usually offered a chance to see charges dropped for a smaller amount.
In another high-profile case, the conflict between key partners in TNK-BP, a Russian-British major oil joint venture, has seen many police searches, denied and withdrawn Russian entry visas, and other actions by law enforcers to stymie the efforts of British executives at the company and BP as a major shareholder to promote their strategy for the joint venture, and to support the case of ARR – the Russian partner in the venture, essentially a group of some of the most powerful Russian tycoons. BP was eventually forced to sell its stake in TNK-BP to Rosneft in 2012.