Emerging Markets : Accusations Mount Against Kremlin



Litvinenko: Death

triggered accusations

Just weeks after the assassinations of the number-two official at Russias central bank and of a prominent crusading journalist, the Kremlin has found itself accused of orchestrating yet another killing.

As the affair took on shades of a John le Carr spy novel, Alexander Litvinenko, a former KGB officer who became an outspoken critic of the Kremlin, died of radioactive poisoning under highly suspicious circumstances. With the Kremlin accused of fomenting Litvinenkos death, Russias image took another beating in the international media. Days later, Yegor Gaidar, a former Russian prime minister who is also critical of Vladimir Putins Russia, was mysteriously poisoned but survived.

The Kremlins apparent attack on foreign-owned businesses continued, too. Peter Hambro Mining, one of a small number of AIM-listed mining companies to have met with success in Russia, in late November saw its shares plummet after a government official said the company had breached environmental regulations and said the company might lose some of its licenses. The accusations echo problems facing Shell in its $20 billion Sakhalin-2 project earlier this year.

In a widely publicized report, the Organisation for Economic Co-operation and Development (OECD) criticized the Russian government for expanding into the private sector and fingered Gazprom in particular as having a seemingly insatiable appetite for assets. Meanwhile, the head of Russias largest oil company, state-controlled Rosneft, said the company would grow to be as large as BP by the end of the decade.

The ongoing international expansion of Russian corporates continued, as Russian steel company Evraz Group offered $2.3 billion for Oregon Steel Mills, a manufacturer of railroad tracks and large-diameter pipes located in the state of Oregon in the United States. The deal would be the largest Russian investment to date in the US. On the same day in late November, Norilsk Nickel offered $408 million for the nickel-producing assets of OM Group, based in Cleveland, Ohio.

Kim Iskyan