Vagit Alekperov is even cooler than he seems

Putin's team has a present for the oligarchs
LUKoil President Vagit Alekperov unexpectedly became Russia’s richest man, and another oil oligarch, Mikhail Khodorkovsky, is now number two. It is an open secret that Russian oligarchs are even richer and more powerful than they want to seem. It was they who managed to privatize the whole of the country on the dawn of the economic reforms carried out by Yegor Gaidar, and now they are quarrelling because of the rest of the country. The weak and irresolute authorities can’t stop the quarrelling so far.

The Russian newspaper Kommersant obtained LUKoil’s report designed for potential GDR buyers; the Global Depository Receipts are to be floated on the London Stock Exchange. According to the report, Vagit Alekperov, who founded LUKoil in 1991, is its main actual private shareholder. The report says that he owns 10.38% of the company, which makes up about $1.3 billion of LUKoil’s current capital. Forbes estimated Alekperov fortune to be about $1,4 billion as of March 2002.

Foreigners may be certainly naive in the way they understand Russian reality. It is certainly no secret in Russia that the LUKoil president controls no less than 50% of the comapany's shares. These shares are registered as belonging to foreign off-shore companies, and the latter, in their turn belong to other companies. These companies are in the end controlled either by Alekperov or by people close to him. The same can be said about almost all Russian oligarchs.

Methods of initial capital making in Russia are very likely the same as those used in so-called "developed" western countries. Competent sources that used to be connected with the oil business (and Vagit Alekperov’s business in particular) told PRAVDA.Ru that capital accumulation had been a large-scale process at the beginning of the 1990s; businessmen resorted to all kinds of means for their own purposes. For example, oil industry workers pumped oil, and LUKoil sold it abroad; however, the workers were paid no wages for a rather long period. Instead, people connected with Cyprus offshore companies arrived to the oil derricks and bought out shares belonging to the workers for small sums. Ordinary Russian workers certainly knew little about initial capital accumulation. These people had to sell their shares to provide for their families. Moreover, working under severe conditions in Siberia is rather hard, and people need good nutrition and warm clothes to survive there. Such was Russia’s reality of that period; people had little money for life. This was the way that unknown offshore companies became the owners of privatized oil producing companies, which are now the pride of LUKoil and other raw stock producing giants. Now, when we see these oligarchs, full of importance and dignity, instructing Prime Minister Kasyanov what Russian policy should be, the words of a a French socialist living of the 19th century, Pierre Joseph Proudhon, come to memory: “Property is larceny.”

Russian authorities certainly understand the situation rather well. Attempts of the authorities to establish order in such giants as Gazprom are gaining sympathy. However, LUKoil is a much more honest company as compared to Gazprom and no reasons can be found to appoint a new leader there, which was done with Gazprom (we mean Alexey Miller’s appointment). Probably, that is why the authorities try to curb the disorder caused by the oligarchs with historically proved methods. It is well known that President Vladimir Putin has been keeping an eye on the domestic oil industry for a rather long period. Recent information reveals that the interest especially intensified recently. This is proved by a new variant of the law “On natural resources” developed by the presidential administration. Amendments to the law deprive oligarchs from the raw resource sphere of their licenses on fields of natural resources, raw materials they produce become the property of the state, and producing companies become ordinary concessionaires. If the amendments are passed, the former masters of Russia may suddenly turn into insignificant people, and shares of leading Russian companies may turn into ordinary paper. This will also attract foreign investors to invest in Russia. On the other hand, the above-mentioned conditions are mandatory for oil production in many Arab countries, where the state is the owner of the fields and the end products. And these countries are living rather well, by the way. Nevertheless, enough imagining the Doomsday. Russian oligarchs are powerful, and it is more likely that they will once again reach a compromise with the government. Alexey Volin, second in charge of the RF Government staff, disavowed the sensation at once. Oligarchs themselves understand perfectly well that they should play ball, because presidential elections are not far off.

Dmitry Slobodyanyuk PRAVDA.Ru

Translated by Maria Gousseva

Read the original in Russian: http://www.pravda.ru/main/2002/07/26/44753.html

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