 |
Canadian firms considering operating in Russia should first take a long look at the sad story of Calgary-based Norex Petroleum and its majority investment in Russian oil company Yugraneft.
On June 29, Yugraneft's minority Russian shareholder, Tyumen Oil Co., sent heavily armed men to seize Yugraneft's headquarters in Siberia and its nearby oil field. All employees were ordered off the property at gunpoint. This week, Tyumen took control of Yugraneft's bank accounts, raising reasonable fears they would be drained of their $30-million in cash.
Tyumen is run by Sergei Sobyanin, the powerful governor of the region, who is said to exert enormous influence over police and courts in the area. Tyumen is part of the giant Russian conglomerate Alfa Group, whose owners have close ties to the Kremlin and are among the new oligarchs who control Russian industry.
Norex president Alex Rotzang has protested against the raids and sought recourse in Russian courts. He obtained a court order last week to remove the armed men, but it has so far proved ineffective, as has a letter of support he received from a Russian prosecutor. The letter says Tyumen called an illegal, secret shareholder meeting for Yugraneft - one Norex knew nothing about, despite owning 60 per cent of the company - at which it declared itself in control.
Mr.Rotzang's next hope is to persuade Prime Minister Jean Chrétien to take up the issue with Russian President Vladimir Putin. Mr. Chrétien is travelling to Moscow today and is scheduled to meet with the Russian leader. He should take every opportunity to press the case hard, not just for Norex's sake but for the sake of all foreign companies in Russia.
Consider the experiences of a few Canadian companies, whose situations are mirrored by scores of other foreign investors.
Ivanhoe Energy of Vancouver crossed paths with Tyumen in 1996, when Tyumen won control of Ivanhoe's oil-field licences in Russia. Ivanhoe denounced it as an illegal takeover, and eventually accepted $29-million in compensation, although analysts said it had invested far more.
Canada's Archangel Diamond Corp. and a Russian partner discovered a major diamond deposit in 1996, but Archangel says its partner has reneged on an agreement to give it a 40-per-cent stake in the joint venture.
Pan American Silver Corp. of Vancouver owned 70 per cent of a company with mining rights to a silver deposit in Siberia, but was muscled out of the project and eventually wrote off its entire $38-million investment.
Russians apparently want foreign investment desperately, but on their own terms with no concern for the legalities of ownership. As The Globe's Moscow correspondent Geoffrey York wrote recently, Russia is potentially one of the world's richest countries, but remains poor. One of the main reasons is a web of corrupt bureaucrats and politicians who, among other things, allow Russian corporate raiders to seize the assets of foreign investors.
The Chrétien government has been mulling over whether to lead a Team Canada trade expedition to Russia. This would be sheer folly, both an undeserved reward for Russia and a disservice to Canadian companies. Until Russia dramatically improves its protections for foreign investors, it cannot expect to be treated as a partner in capitalism.
Copyright © 2001 Globe Interactive, a division of Bell Globemedia Publishing Inc.
|
|
 |
