UPDATE 3: Russian investigators detain economic minister on bribery charges

(Adds details in paragraphs 16-17, 24-25)

MOSCOW, Nov 15 (PRIME) -- Russia’s Investigative Committee has detained Economic Development Minister Alexei Ulyukayev and launched a criminal case on charges of receiving a U.S. $2 million bribe for granting the ministry’s approval that allowed oil major Rosneft to buy the state’s 50.08% stake in Bashneft, the committee said in a statement on Tuesday.

Svetlana Petrenko, the acting head of the committee’s public relations department, told PRIME that Ulyukayev was caught on Monday night red-handed when receiving the bribe, and he was also involved in extorting money from Rosneft.

The purchase of Bashneft was legitimate, and the case does not investigate the deal’s legitimacy, Petrenko added.

A source in the law enforcement authorities told PRIME that Ulyukayev has been monitored by the Federal Security Service FSB for more than a year, and the investigation was launched on the basis of results of the monitoring report.

REACTION

Dmitry Peskov, spokesman for President Vladimir Putin, said the president knew about the detainment.

“Of course, it was reported to the president. He is aware of that. They reported to him since the very beginning of the operative cultivation. He received all the information,” Peskov said.

Ulyukayev is now in the building of the Investigative Committee and investigators are interrogating him, another source in the law enforcement authorities said.

A spokesperson for Prime Minister Dmitry Medvedev said the Medvedev was also aware of the detention of Ulyukayev and he discussed it with Putin.

“The head of the government believes that the most meticulous investigation of the case should be carried out,” the spokesperson said.

Peskov that the charges are very serious and have to be proven. “Anyway, it is only court that is able to decide here,” he said.

President of the Russian Union of Industrialists and Entrepreneurs Alexander Shokhin said he was shocked to hear the news as he has known Ulyukayev for about 30 years, who has been a key figure and policy maker in the Russian economy.

“I think that Alexei Valentinovich (Ulyukayev) is a very honorable and well-known man, they could have avoided the detention and chosen a house arrest or other ways of pre-trial restrictions, and not putting in prison a man who is so well-known that it is very unlikely that he would try to cross the border,” Shokhin said.

Business ombudsman Boris Titov said that Ulyukayev was not a figure that represented corruption. “Our view does not correlate with Ulyukayev being corrupted or a bribe-taker. His views were aimed at development of the economy, and our hopes were connected with that. Still, if the investigation and the court prove that he is guilty, these actions should not be tolerated,” he said.

POSSIBLE IMPACT

Mikhail Leontyev, an official representative of Rosneft, said that he sees no risks for the Bashneft deal. “This is absurd. What are you talking about? The deal was brilliant and superbly correct. This event will have an absolute zero of impact on the deal. Listen to the Investigative Committee. They have clearly and explicitly stated that there are no and may be no claims against Rosneft,” he said.

Sergei Shatirov, a deputy chairman of the economic policy committee of the parliament’s upper house Federation Council, told PRIME that the detention will not affect consideration and approval of the 2017–2019 budget by parliament. “The approval of the federal budget is an established state process, it does not depend on individuals,” he said.

Investment company Aton said in a research note that the closing of privatization of 19.5% in Rosneft, which was slated for December, may be threatened if investigators arrest the minister. “Ulyukayev plays one of the key roles in privatization of Rosneft, this is why his arrest may jeopardize the closing of the deal until the end of the year, and it should be closed by December 5 according to a recent government ruling,” the research note read.

Aton analyst Alexander Kornilov told PRIME that the arrest, if implemented, may lead to a reshuffling in the ministry, which may affect the deal’s terms. But other analysts said that the price of shares of Rosneft and Bashneft will not be directly affected as the criminal case against Ulyukayev contains no claims against the two companies.

Anna Nesterova, member of the presidium of the general council of Business Russia, said that the event will not hurt Russia’s investment climate as there are too many significant external factors impacting it. “I know that it is too early to make any conclusions. I think it will not have a direct impact on the investment climate,” she said.

“There are so many factors, both internal and external, starting with the victory of Donald Trump in the U.S. elections, and ending with us understanding that we will have negative growth dynamics. I am absolutely sure that this situation will not affect the internal investment climate,” Nesterova said.

Alexander Kalinin, president of small and medium business support organization Opora Rossii, also said that the country’s investment climate will not be hurt by the event.

“The investment climate is created by many people in regions. The system (of investment activity standards) has been recently approved, and it will be implemented, so this event will not be of importance for the investment climate,” he said, adding that the climate will improve fast.

Philippe Pegorier, chairman of the Association of European Businesses (AEB), speaks of both positive and negative tendencies for the Russian business climate. “A negative factor is that they may prove that this could happen even at the minister level. His position is very important, he has connections not only to Russian colleagues, but to foreign ones. This is an unfavorable event for the country’s image,” he said.

“A positive factor is that fighting against corruption is going on after all, even despite the level.”

But Kirill Kabanov, member of the presidential Council for Civil Society and Human Rights, said that the Ulyukayev’s case may become an incentive to reorganize the ministry.

“Of course, there will be some reshuffling…But there also is a position regarding the general relevancy of the ministry, the reasonability of its existence. I think redistribution of functions may follow,” he said, adding that the ministry may be disembodied.

End