Radio Appearance

I was interviewed about murder and death in Russia on My Technology Lawyer, a radio show hosted by Andrew Kreig and Scott Draughton.

Russia: Nobel, Browder, and the Annals of the Pull to Gamble

Some nine decades ago, Emanuel Nobel, a nephew of Alfred Nobel -- founder of the prizes being awarded this week in Oslo -- fled Baku disguised as a peasant in order to escape the Bolshevik Revolution. As O&G readers know, Alfred Nobels' brothers were the biggest oil barons of all in Baku's 19th-century heyday. In the end, for the Nobels all was lost.

It wasn't a huge surprise. The story of Western investment in Russia is that of a crapshoot. Pockets laden with cash, all say they are entering with a realistic grasp of the country's perils. All say they are therefore taking precautions. Yet the outcome is always the same -- on the way out, some are wealthier than anyone could dream; others, no longer cash-laden, are wearing no shirt. The trick has been to avoid being the latter.

So the narrative continues. Hermitage kingpin Bill Browder had been on a soapbox about Russian investment even before Moscow kicked him out of the country three years ago. Now, he is out with a glossy new, 10-minute video detailing his fall as Russia's biggest foreign investor, to his current status as victim of Russia's unpredictable winds.



The release of the video coincides with a story in yesterday's Kommersant that the Russians intend to issue an international arrest warrant against him. Over at the Reuters blog, my former Business Week colleague Jason Bush notes that Kommersant claimed the very same thing last year, only for the Moscow police to repudiate the report. Still, the public brinksmanship well illustrates the stakes at play in the country.

Update: Jason Bush has just emailed me an MVD report -- Browder is indeed on Russia's international warrant list for arrest.

This is a big news week for foreign investors in Russia. On Monday, Norway's Telenor aped the throw-up-your-arms strategy of BP, and caved in to Alfa Group's Mikhail Fridman. After a prolonged court battle in which Telenor initially seemed ultra-confident that it would prevail, it has changed its mind and will embrace the original peace agreement offered by Alfa, its business partner, which will now run the show. As regards BP, the following day, Reuters' Dmitry Zhdannikov reported that the British oil company is resigned to letting Alfa run their partnership as well -- the oil company TNP-BP. Over at aptly named Seeking Alpha, Craig Pirrong calls this a "marriage made in hell," but corporate honeymoons are usually quite short in Russia.

One thing is for sure -- Moscow is certain that foreign investors will keep returning. On Sunday, Prime Minister Vladimir Putin signaled that Russia would embark on yet another bout of privatization next year. Get out the champagne.

The indicators are that Putin's confidence is well-placed. In Business Week, Carol Matlack writes that western companies continue to flock to Russia despite the perils. Their rationale is similar to what drives gamblers to Vegas: the excitement (never underestimate the appetite of brio-seeking westerners to seek street cred by working in Russia; as a corollary, do not underestimate the Russians' capacity to notice) , and the long-shot prospect of big, big wealth.

Take a look at Business Week's "How to Play It" feature in the same issue as the Matlack story. I hadn't noticed this myself, but after last year's breathtaking nosedive, Russian markets are -- at least of now -- doing extremely well in 2009.

Craps anyone?


Credit: BusinessWeek

Bill Browder, Russia, and More in the Annals of Personal and Corporate Safety

We've discussed the failure to identify and prosecute those who ordered and paid for the murders of Russian journalist Anna Politkovskaya, Forbes' Paul Klebnikov and others. But what about that of Valery Kazakov, a Russian man slain on the way to testify against the former mayor of the town of Pushkino?

It's the subtext of a piece by Megan Stack of the L.A. Times, whose reporting suggests a couple of principal reasons why such cases don't get solved. One of course is official corruption. But another is that, even when cases have moved through the system in reasonably good order, Russians are hesitant to testify for reasons of personal safety. There's effective impunity not just for killers, but for those who murder witnesses intending to testify against the low-ranking triggermen who typically take the hit for everyone up the food chain.

That's one stubborn reality about Russia. Of a different order are the foreign firms and companies -- lawyers, bankers, investors -- who get fleeced, their local employees jailed, then indignantly scream for justice as though not pre-warned.

Over the last several days, this victim's slot has been filled by American Bill Browder, the once high-flying defender of investment in Russia as head of a $4 billion Russian fund called Hermitage Capital Management. In 2005, Russia effectively expelled the 45-year-old Browder, whose grandfather Earl headed the U.S. Communist Party in the 1930s and early 1940s, and since then he has had to run his fund from a distance in London.

As my colleagues at Business Week and others are writing, Browder now has hired former U.S. Attorney General John Ashcroft to run an unusual case stemming from a subsequent assault on Hermitage in which a couple of subsidiaries were seized. It's a tax fraud and money-laundering case against a group of officials who he says conspired to defraud the Russian government of $230 million.

(Yawn)

We've seen this movie before. For instance, BP keeps returning for more despite its own experience with the rough-and-tumble Russian system.

To his credit, Browder's stratagem at least in part is meant to free one of his Moscow lawyers, Sergei Magnitsky, who was jailed after filing a court statement alleging official corruption in the seizure of the subsidiaries.

Yet BP and Browder stuck around because of the money -- in BP's case, despite it all Russia remains one of its main profit centers. As for outsiders, there's the entertainment value of gaping at the road wreck.