Novorossiysk Commercial Sea Port
The arrest of one of Russia’s best-connected billionaires on charges
of fraud and embezzlement knocked shares in his companies lower and
fueled speculation it could be the harbinger of a shake-up in the
cabinet this spring.
Tycoon was arrested Saturday along with his brother
Magomed and jailed as he prepared to fly to the U.S. In court, he denied
the charges but was ordered held without bail for two months.
Ziyavudin Magomedov
Photographer: Simon Dawson/Bloomberg
The
unexpected legal troubles set off fears among investors that the Summa
Group of which he’s a co-owner could be under threat. At the same time,
political analysts said his jailing could mean problems for top
officials thought to be close to him, in particular Prime Minister
Dmitry Medvedev, who faces reappointment with the start of a new
presidential term in May.
“The main immediate problem is the fight over the formation
of the new government,” said Igor Bunin, head of the Center for
Political Technologies, a Moscow political consultancy. “Until the
Magomedovs’ detention, the most likely scenario was that Medvedev would
retain the premier’s post. Chances of that now are falling steadily.”
Investors read the arrest as bad news for Summa’s companies, especially Far Eastern Shipping Co.,
which sank to a September low, dropping as much as 21 percent.
Novorossiysk Commercial Sea Port PJSC had its biggest intraday loss
since May. TransContainer PJSC and Novorossiysk Grain Plant PJSC
retreated as much as 4.5 percent and 4.2 percent, respectively, before
paring declines. The benchmark MOEX Russia Index was trading 0.9 percent
higher as of 1:38 p.m. in Moscow.
“Investors are exiting Summa’s
assets amid uncertainty about the future of these companies,” said Oleg
Popov, a money manager who oversees $300 million of assets at April
Capital in Moscow. “It looks like someone is after Magomedov’s business
and this case of course doesn’t increase the appeal of the Russian
market.”
Transneft Conflict
Summa had been in a
long-running conflict with state-owned oil pipeline operator Transneft
PJSC over control of Novorossiysk Commercial Sea Port. The
Dagestani-born tycoon’s wealth surged during the years when Medvedev
held the presidency, in part thanks to state contracts.
Popov
compared Magomedov’s arrest to that of billionaire Vladimir Evtushenkov,
who spent three months under house arrest in 2014 on charges of money
laundering during a probe of his acquisition of Bashneft PJSC, which was
later taken over by the state-owned Rosneft PJSC.
“It looks like a redistribution of property, but it’s unclear
who stands behind this case and who wants Summa’s assets,” said Popov.
Prosecutors
denied any political motivation in the case and Kremlin spokesman
Dmitry Peskov said any possible impact on cabinet appointments was
speculation.
Evgeny Minchenko, a political consultant who often
works for the Kremlin, said Magomedov was under pressure from other
influential groups and that the arrest would likely benefit rivals,
including Rosneft Chief Executive Officer Igor Sechin.
But he said Medvedev might be able to ride out the storm,
given that Vladimir Putin, who starts his fourth presidential term in
May, is unlikely to want a strong figure in the prime minister post.
Medvedev’s
job prospects have benefited in the past from his apparent weakness, he
said, “because if you’re weak, then you won’t try to become a rival
power center” to the president, he said.
— With assistance by Stepan Kravchenko
No comments:
Post a Comment