Russia: Kremlin Closely Linked to Gazprom Stock Deal

The family of Russia’s first deputy prime minister bought almost US$18 million worth of Gazprom shares through an offshore company just before the government announced that foreigners could purchase stock in the gas company, reports the Financial Times (FT).

First Deputy Prime Minister Igor Shuvalov’s family purchased the shares through an offshore company called Sevenkey in mid-2004, when he was a deputy economic adviser to former and future President Vladimir Putin.

Sevenkey purchased the shares just before a 2005 Russian government decision to allow foreigners to purchase Gazprom shares.  The decision significantly increased the value of Shuvalov’s family shares which  which gained approximately US$100 million in value by 2008.

FT said according to documents it received in relation to the transaction, the purchased shares went through Suleiman Kerimov, one of the richest men in Russia.

The new information raises anew the specter of close relations between business and politics in Russia, and the lack of regulatory framework even fifteen years after the fall of the Soviet Union.

Shuvalov is widely considered a liberal, pro-transparency leader who said he always declared his family’s assets to the letter of the Russian law.

“As a lawyer, I have without fail followed the rules and principles on conflicts of interests. For a lawyer, this is sacred,” he told FT.

“I welcome rigorous journalistic and legal scrutiny. I am confident of my record as both a private businessman and subsequently a government technocrat.”

According to documents obtained by Barrons last year and shared with FT, Shuvalov was a co-investor in a steel business run by business tycoon Alisher Usmanov, who is closely connected to the Kremlin.

Shuvalov bought a 13 percent stake in the company Corus Steel through Sevenkey, an offshore firm registered in the Bahamas by Olga Shuvalova, Shuvalov’s wife.  Sevenkey received US$119 million from Usmanov by 2007, after the latter sold his stake in the company following a rise in Corus’s share price.

The full FT article describes the financial relationship between Sevenkey, Kerimov’s company and the Gazprom shares, and states that those close to Shuvalov say he did no wrong in the transaction because he never lobbied for preferential treatment for those he did business with.  Read it here.