Windy auction
Abramovich got rich with this deal
By Jan Ganger
03/16/2022, 6:16 p.m
As the Soviet Union collapses, Roman Abramovich sells plastic toys. A few years later, he lays the foundation for his wealth at a remarkable oil company auction.
Roman Abramovich is a typical Russian oligarch. He has become immensely wealthy by dubious means and has always maintained a good relationship with the President. First to Boris Yeltsin and then to Vladimir Putin. However, this proximity has now become a problem for the oligarch. He is being sanctioned, the British government is taking his Chelsea football club away from him, and the Portuguese government is checking whether everything went right with the oligarch’s naturalization. In addition, a BBC report is now causing trouble.
It is about an extremely lucrative business for Abramovich, which laid the foundation for his immense wealth. For context: “Bloomberg” currently estimates his fortune at around $13.7 billion, but it has shrunk by $4.3 billion since the beginning of the year.
In 1989, at the age of 23, Abramovich began selling plastic toys. He later founded companies that traded in petrol, minerals, cement and fertilizers, for example. He met Boris Berezovsky, who at the time was in close contact with Yeltsin.
Abramovich teamed up with Berezovsky when he bought half of the oil company Sibneft from the Russian state in a windy auction in 1995 – during the period of wild privatization after the collapse of the Soviet Union. For this he paid the equivalent of around 250 million dollars and thus obviously much less than the company was actually worth. He continued to increase his stake and in 2003 sold most of his package back to the state – to the state-controlled Gazprom group for a whopping $13 billion.
The first auction was obviously not going well. Abramovich had admitted that a few years ago. The BBC has now received a five-page document from Russia that is intended to provide further evidence. According to the British broadcaster, it is said to be a dossier created by Russian law enforcement agencies. The BBC has not been able to verify the authenticity, but other sources have confirmed many of the claims.
According to the document, the Russian state was cheated out of $2.7 billion at the auction. A review by the Russian parliament in 1997 also found this out. According to the document, the authorities wanted to bring Abramovich to court for “gang fraud”. But it did not get to that. Because he was protected by the then President Yeltsin, it is said. The Kremlin stopped an investigation by the then Prosecutor General Yuri Skuratov.
Zoff with Berezovsky
Skuratov was later dismissed by Yeltsin. A video had previously appeared showing the Attorney General having sex with prostitutes. Skuratov has always maintained that it was a fake. He had previously investigated the government for possible bribery payments. He told the BBC: “The whole thing was obviously political because I got very close to Yeltsin’s family in my investigations – including the investigation into the Sibneft privatization.”
At the first auction, Abramovich allied himself with Berezovsky, who fled to London after Putin took over the presidency. Berezovsky sued Abramovich in the UK in 2012, alleging that his former business partner took the opportunity and forced him to sell him his shares for a fraction of actual value. A British court agreed with Abramovich and dismissed Berezovsky’s allegations.
But at the trial, Abramovich testified that he gave Berezovsky $10 million before the first Sibneft auction to bribe a Kremlin employee. This enabled both of them to buy the shares well below the real value of an estimated several billion.
Chinese are backing down
The document also deals with another auction in which Abramovich was involved. In 2002, the Russian government auctioned off a stake in the Slavneft oil company. The starting price was much lower than requested by Russian authorities. After some bidders had withdrawn before the campaign and other interested parties had not even been admitted, only three companies remained: On the one hand Sibneft and TNK. On the other hand, the Chinese company CNPC.
According to the report, the Russian companies had previously agreed among themselves that Sibneft would get the shares – for just over the minimum bid of the equivalent of $ 1.7 billion. Kremlin officials were also on board. The problem: the Chinese planned to offer twice as much as the Russians at the start.
The Chinese surprisingly withdrew their bid shortly before the auction, and the Slavneft stake went to Sibneft for just under $1.9 billion. The closing auction ended after just seven minutes. The dossier provides an explanation as to why the Chinese backed down: the head of the delegation was kidnapped shortly after landing in Moscow. He was only released after CNPC withdrew from the auction.
The BBC emphasizes that there is no suspicion that Abramovich knew about the kidnapping or had anything to do with it. His lawyers said Abramovich was unaware of the alleged kidnapping. Allegations of corruption in the purchase of shares in Sibneft and Slavneft are wrong. The assertion that her client was under Yeltsin’s protection is also incorrect.