UPDATE 7: Russian court puts economic minister under house arrest

(Rewrites headline, lede, adds details in paragraph 5)

MOSCOW, Nov 15 (PRIME) -- Moscow’s Basmanny District Court has put Economic Development Minister Alexei Ulyukayev under house arrest on Tuesday over bribery accusations.

The Investigative Committee earlier detained 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.

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 minister was charged with bribery and money extortion. “Ulyukayev has illegally demanded money from a representative of Rosneft for a legitimate provision of a positive report and valuation of Rosneft’s purchase of the government’s stake in Bashneft. The accused also used his powers to threat to block the company’s operations further,” she said.

Later on Tuesday, Ulyukayev was interrogated at the Basmanny District Court, he claimed not guilty but according to investigators, the minister’s involvement can be confirmed by witnesses’ story details.

Investigators believe that the minister can flee as he is often on business trips abroad.

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.

OFFICIAL COMMENT

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, adding that investigators monitored Ulyukayev for a very long time.

Putin and Medvedev were aware of the investigation and exchanged data on it between them.

When asked whether this may lead to revision of the Rosneft–Bashneft deal, he said that there is no connection between the current case and the deal. “As far as we are concerned, there is no connection here,” he 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.

Regarding the possible dismissal of Ulyukayev, he said that he is unaware of Putin making such a decision on his own or on request from the government. Before making such a decision, Putin has to receive data that has been proven with corresponding relevant arguments, he said.

The Kremlin also sees no connection with media talks about possible resignation of the government and charges against Ulyukayev.

“I don’t think it will happen, I see no connection here as the issue is about personal charges, which are not a basis to acknowledge any individual or minister guilty and corrupt…It is absurd to speak about shared responsibility in this case,” he said.

Peskov said he does not think that the case will hurt Russia’s investment climate. “On the contrary, the understanding that regular fight against corruption regardless of the position is a plus for investment attractiveness of any country as there are no countries in the world that are free from corruption,” he said, adding that it is wrong to use Ulyukayev’s case as an example of corruption, as only a court may make such a definition.

Natalya Timakova, press secretary of Prime Minister Dmitry Medvedev, said that Medvedev temporarily appointed Deputy Economic Development Minister Yevgeny Yelin as acting economic development minister.

REACTION

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.

Alexei Kudrin, a former finance minister and the current head of the Center for Strategic Research, said on his Twitter page that the case calls for a thorough investigation. “The Rosneft–Ulyukayev case has triggered too many questions. We need a thorough investigation of that,” he said.

Petrenko said that Ulyukayev was caught red-handed due to a well-timed request filed by Rosneft. Currently, investigators filed a petition to a court in requesting it to change the restrictive measures against him. But the legitimacy of Rosneft buying the stake in Bashneft is not disputed by anyone and the deal is not a part of investigation, she 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.

A banking source close to organizers of privatization deals told PRIME that the government gave no signals on any changes in the so-called big privatization. “Everything is silent so far, but big things are usually seen from the distance,” the source said.

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.

End