Thursday, February 10, 2011

Allegations of Transneft Corruption to Get Its Day in Court

Amid name-calling and countercharges, Transneft's minority stockholder Alexei Navalny is getting his day in court. Navalny, as readers of this blog know, has accused Transneft of stealing $4 billion from the construction of the East Siberia-Pacific Ocean (ESPO) pipeline.

Navalny, who writes a blog on official corruption, was dismissed by many in Russia as a gadfly. His charges were not taken seriously. The Russian Duma refused to forward a request to the Prosecutor General to investigate, claiming that Transneft's actions were approved by the government. But at the close of 2010, Russian Prime Minister Vladimir Putin called for treating the charges with respect: "It has to be checked. Let the prosecutors and other controlling bodies look into it ," he said.

Transneft immediately went on the offensive. Its president, Nikloai Tokarev, admitted that there had been problems and shortcomings with the ESPO project, "But they were discovered independently by Transneft itself. All of the information was dispatched to the appropriate agency," and the company was able to recover $333 million from contractors.

Tokarev also engaged in some name calling, comparing Navalny's charges to those of a village idiot who has been paid 3 kopeks to shout slanders through the town. He also charged that Navalny was acting as an agent of an (unnamed) foreign power who were opposed to ESPO's construction. He said several foreign governments had tried to stop ESPO's construction, and had even financed social and ecological groups opposed to the pipeline. Tokarev was joined in his charges by Transneft spokesman Igor Dyomin who called Navalny a Nazi. In reply, Navalny said satirically, "They call me a village idiot, and then they call me a Nazi. I wonder if they are going to comment on the Transneft report that I've published? OK, I'm Nazi, but where is the stolen money?"

Despite Transneft's protestations, however, on 7 February 2011 the Moscow Arbitration Court held preliminary hearings on Navalny's lawsuit, and requested Transneft transcripts of their board of director meetings for 2009 and 2010. Transneft's arm is long, however, and Russian federal prosecutors are launching a federal investigation into Navalny, to determine if charges should be filed against Navalny for allegedly threatening to have a state timber manager fired unless the manager awarded a contract to Navalny's preferred firm. The contract resulted in a loss to the state of over $34,000. The federal investigation came as a surprise, because the same charges had been investigated previously by the regional governor and dismissed.

Putin's decision to have Navalny's charges investigated appears to have caught the Russian energy moguls by surprise, but it appears they have not stopped trying to pressure him into dropping charges.

Dr. James J. Coyle is available to speak to your organization or at your event. Please contact him at