Nets of Vekselberg’s T Plus company entangle Udmurtia
Upon establishing close relations with the regional authorities, T Plus has monopolized heat distribution networks in major Udmurt cities.
Evgeny Olkhovik and Boris Vainzikher, top managers of Renova Group, have been arrested on September 5, 2016 and then detained in the framework of a case related to bribery of the Komi republican authorities on an especially large scale. Later another suspect – Mikhail Slobodin – was put on the international wanted list and arrested in absentia.
Photo: Evgeny Olkhovik and Boris Vainzikher have been detained
According to the investigation, Olkhovik, Vainzikher, and Slobodin – who used to manage the Complex Energy Systems (after reorganization renamed into T Plus) company in different periods – had been giving multimillion bribes to high-ranked Komi officials for provision of ‘operational comfort’. This included uncontrolled utility tariff policies and monopolization of power supply in the region. Viktor Vekselberg, Chairman of the Board of Directors of Renova Group, in his comment on the situation, called the arrest of Renova top managers “momentary difficulties” and emphasized that the Complex Energy Systems (CES) successfully operates in 16 regions of Russia.
Photo: Viktor Vekselberg, Chairman of the Board of Directors of Renova Group, is not afraid of “momentary difficulties”
A review of T Plus operations performed by the CrimeRussia has revealed a certain regularity in company strategies used in various regions. For instance, the situation in the Udmurt Republic is similar with that in the Komi Republic. Structures controlled by Vekselberg have monopolized the heat supply market in the two largest Udmurt cities through close connections with the regional authorities – which resulted in a major catastrophe in the public utilities sector of Izhevsk.
In February 2014, the Udmurt authorities have been changed – the team of Aleksander Volkov, that used to manage the region since 2000, resigned. However, as the CrimeRussia wrote earlier, the previous team hasn’t left completely, and the same people still are in control of key industries through their sons–businessmen.
The new authorities of the Udmurt Republic have inherited a number of unresolved issues, including the most severe one – public utilities. The true magnitude of the problem became clear only in fall 2015, when a collapse occurred in Izhevsk due to numerous bursts in municipal heat distribution networks. In the period between September 15, 2015 and February 10, 2016, there were some 1,600 failures in heat distribution networks and hot water supply systems of the Udmurt capital. In January 2016, the authorities have imposed a state of emergency and summoned repair crews from nearby cities for help.
It is necessary to note that the company solely responsible for the municipal heat supply in the city of Izhevsk is the Udmurt Communal Systems (UKS) Limited Liability Company belonging to T Plus Group owned by Viktor Vekselberg. Below are some more details about the monopolist. According to the official web site, UKS Limited Liability Company was established in 2005; in 2007 this unknown firm, having neither required infrastructure not equipment, has leased heat distribution networks of the two largest Udmurt cities – Izhevsk and Sarapul. Only in Izhevsk, the company has got 372 heat supply facilities and over 530 km of heat and hot water supply pipelines. The total value of the assets is almost 4 billion rubles.
Three companies had participated in the tender to lease Izhevsk heat distribution networks: the Udmurt Communal Systems (UKS) Limited Liability Company, CES-Prikamie Limited Liability Company, and Izhteploenergoservice Limited Liability Company. It turned out that all the three competitors were affiliated with Viktor Vekselberg via the CES Holding: the UKS and CES-Prikamie had common founders, while Izhteploenergoservice had same legal address with the UKS. It is necessary to note that in April 2008, CES-Prikamie was renamed into CS-Prikamie – perhaps, to make the links between structures controlled by Vekselberg not so glaring.
Photo: CES-Prikamie was renamed into CS-Prikamie
Izhteploenergoservice Limited Liability Company has also ‘covered up traces’ to conceal its links with the UKS by changing the legal address from 11 Bummashevskaya st., Izhevsk to 12a, unit 2, Berezhkovskaya quay, Moscow. The company has stopped its operations on August 31, 2015.
Photo: Izhteploenergoservice has changed its legal address
Many experts had predicted the victory of the UKS in the contest for Izhevsk heat distribution networks from the very beginning. Some municipal parliamentarians had envisaged the further events and openly warned about the risk of monopolization of the heat supply market by Vekselberg’s structures. For example, Deputy Vasily Shatalov, speaking of consequences of transferring all the heat distribution networks to the UKS, had stated: “There is a risk that the city might freeze in winter”. Now, after the Izhevsk communal catastrophe in 2015, these words seem prescient.
According to the lease contract signed by the Izhevsk Municipal Administration and the UKS, the heat supplier had to invest 470.2 million rubles into the development of the heat distribution network, which equals some 18 million rubles per year. Because the UKS was responsible for maintenance of the pipelines, in 2007 the public utility provider included the cost of capital renovations of the networks into the residential heating fees – which has brought the UKS some 150 million rubles per year.
In 2009, serious conflicts between the monopolist and local authorities have started. The UKS Limited Liability Company has filed a lawsuit to the Arbitration Court of the Udmurt Republic to collect multimillion arrears for the supplied heat from the Housing and Communal Service of Izhevsk – and the amount of the arrears was later changed several times. Initially, the lawsuit indicated the amount of 600 million rubles. However, in 2009, the Investigations Department of the Administration for Investigation of Organized Criminal Activities of the Ministry of Internal Affairs (MIA) for the Udmurt Republic has initiated a criminal case against a group of persons under Article 159 of the Criminal Code of the Russian Federation (swindling) due to overcharged heating tariffs. Searches had been performed in the UKS office – which has probably affected the litigation with the Housing and Communal Service of Izhevsk: the amount of the lawsuit was initially reduced by one-third and a year later – reduced again to 200 million rubles. The legal battle between the UKS and the management company of the Udmurt capital has ultimately resulted in liquidation of the Housing and Communal Service of Izhevsk. It is necessary to note that Aleksander Volkov, then-President of the Udmurt Republic, had been openly supporting the UKS during the conflict. In August 2009, during negotiations with Mikhail Slobodin, Head of the Complex Energy Systems (CES) Closed Joint Stock Company (currently he is on the international wanted list and arrested in absentia), the President of Udmurtia has admitted the debt of Izhevsk in the amount of 398.3 million rubles as of January 1, 2009 and promised to pay out the arrears from the regional and municipal budgets. Interestingly, Volkov has made this promise prior to the court verdict that was supposed to identify the exact amount of the debt. In other words, the President of Udmurtia was ready to pay 400 million of taxpayers’ rubles solely on the basis of calculations provided by the heat supplier controlled by Vekselberg.
The local press had continuously stated that the prices on the supplied heat were artificially high. Over time, the monopolist company, feeling its impunity, started practicing blatant blackmail. Contrary to the legislation, UKS representatives promised to shut off the heat supply for taxpayers in the middle of the heating season (i.e. in winter). In addition, the Vekselberg’s structure was threatening residents to charge double fees for the supplied heat, should the management companies remit insufficient amounts to it.
The conflict between the UKS and management companies resulted in numerous lawsuits: according to Kartoteka (Card Index), since its creation, the monopolist acted in court 917 times as a defendant and 3,124 times as a plaintiff. In order to eliminate the unwanted intermediaries – the management companies, – T Plus has engaged another company subordinate to the former CES Holding – Udmurt Power Supply Company (currently reorganized into the Udmurt Branch of Energosbyt Plus) – to collect money from the population.
Who is the owner?
Initially, 51% of UKS shares belonged to Vekselberg’s structures and 49% – to the Udmurt Republic. According to Kartoteka, at the time of its creation, the UKS was jointly controlled by Russian Communal System Open Joint Stock Company (a successor to the Untied Energy Systems Russian Open Joint Stock Company founded by Anatoly Chubais) and Udmurtia-based Uralenergo Limited Liability Company. Then transfers of UKS shares have started, including transfers to Cyprus-based companies. A glaring example is Turlin Management Limited, which apparently is an offshore ‘laundering’ structure of Vekselberg – because this company is closely affiliated with various organizations subordinate to T Plus.
In various years Turlin Management Limited used to own shares of various heat and energy suppliers linked with T Plus, including the UKS, Sverdlovsk Heat Supply Company, KESK-Multienergetika management structure, Sverdlovsk Communal Networks Limited Liability Company, Kirov Heat Supply Company, and Permenergosbyt Open Joint Stock Company.
Currently the sole proprietor of the UKS is T Plus Public Joint Stock Company managed by Boris Feliksovich Vainzikher.
It is necessary to note the amazingly quick success of the UKS and overconfidence of its representatives – normally those are indicators of patronage in the highest power circles. The Udmurt media suspected Aleksander Volkov, the President of the Udmurt Republic, and Yuri Pitkevich, its Chairman of the Government, of personal interest in the success of the monopolist. However, a few more high-ranked Udmurt officials and businessmen have contributed to the promotion of T Plus interests as well.
Although the local media are closely monitoring the situation in the region, one of the main lobbyists for structures controlled by Vekselberg – Sergey Chikurov – is virtually never mentioned.
Photo: Sergey Chikurov. Photo: Komsomolskaya Pravda
Chikurov has had a long career path maneuvering between the business and authorities. A former policeman, he obtained essential skills allowing him to achieve success during the service. According to some sources, Chikurov managed to establish a close friendship with the President of Udmurtia through simple manipulations: being a regional monopolist on the bread market, he was overcharging retails prices by 100% and spending the profits on election campaigns of Volkov. After managing several commercial structures, in 1999, the ex-policeman has become Deputy Chairman of the Government of the Udmurt Republic. Shortly after this, Sergey Kirienko, the Presidential Envoy in the Volga Federal District, appointed him a Federal Inspector for Udmurtia (i.e. representative of the federal authority in the region). According to Kommersant, the appointment of Chikurov was lobbied by Aleksander Volkov who did not want an ‘outsider’ in his team.
Soon, political ambitions of Chikurov have surfaced – the official has entered the race for the Izhevsk Mayor. Despite good chances to win the elections, the politician had to withdraw his candidacy after a reprimand from his direct boss Sergey Kirienko. The Presidential Envoy in the Volga Federal District noted that the current position of Chikurov is about control of compliance with the federal legislation in the region, not about regional politics. According to unofficial sources, the withdrawal of the former policeman from the election campaign was a result of consensus between Volkov, the President of the Udmurt Republic, who was unhappy with political ambitions of his former associate, and Kirienko, who has heard about the shady past of his protege.
Photo: Sergey Kirienko used to be the Presidential Envoy in the Volga Federal District
However, ultimately Chikurov hasn’t sustained any losses and continued his career in a different field. After his resignation from the Federal Inspector post, the businessman has become the Head of the Inter-Regional Power Supply Company – a founder of the Perm Power Supply Company. Shortly after this, Renova Group has acquired the Inter-Regional Power Supply Company, and Chikurov started working in structures controlled by Vekselberg – he became the head of the Perm-based CES-Multienergia (a subsidiary of the CES Holding). The main assets of the new manager were not his experience or personal traits, but his close relations with the ruling elite of the Udmurt Republic. Using connections of the former Federal Inspector, the energy company of the oligarch has attempted to ‘enter’ the republican market. In 2005, the CES Holding purchased shares of the regional Udmurtenergo company, which allowed Vekselberg to acquire shares of the Territorial Power Generation Company №5 – one of the largest energy producers in the Volga Federal District.
After the acquisition of Udmurtenergo shares, subsidiary structures of the CES Holding, with support of Sergey Chikurov, started a steady takeover of the regional heat supply market. Participation of the ex-policeman in this process has been proven by the fact that CES-Prikamie Limited Liability Company – a bidder in the tender to lease heat distribution networks of Izhevsk – was a subsidiary company of CES-Multienergia whose General Director was Chikurov. In other words, a high-ranked regional functionary close to the republican leaders has transferred to a commercial structure, which immediately started an active expansion in that region.
Businessman of all trades
Andrei Oskolkov, one of the most influential businessman in the region, is also named among T Plus lobbyists. Kommersant reported that he used to control the above-mentioned 49% of UCS shares via a number of offshore companies.
Photo: Andrei Oskolkov
A native of Kambarka settlement in Udmurtia, he has risen to power with support of his close friend and business partner Sergey Chikurov. In the past, Oskolkov used to collaborate with a local organized crime group ‘Bogdanovskie’, run a business, manage governmental structures – and has ultimately chosen commerce as the optimal field for him.
According to the media, in 1999, Oskolkov, then-Head of ASSO, a large multi-industry holding company, was introduced by Chikurov to Aleksander Volkov, the President of the Udmurt Republic. Following a request from the head of the region, the businessman agreed to finance an election campaign, after which his career has virtually skyrocketed. In the same year, he became a member of the Board of Directors of the Eurasian Bank for Economic Cooperation Open Joint Stock Company (Eurasia Bank), was elected a Deputy of the Second Convocation of the State Council of the Udmurt Republic, then appointed a Vice Premier of Udmurtia, and then returned to business and created an even larger Kosmos (Space) Holding. But the most important achievement of Oskolkov was that in 2003 he became the Head of the Udmurt Fuel and Power Company – an association of major regional oil companies (Udmuttorf (Udmurt Peat) Open Joint Stock Company, Udmurtgeologia (Udmurt Geology) Open Joint Stock Company, Udmurt National Oil Company Open Joint Stock Company, and Udmurtnefteprodukt (Udmurt Oil Products) Open Joint Stock Company). In 2012 Forbes named Andrei Oskolkov the fourth richest functionary in Russia.
Senior lobbyist of Vekselberg
Another high-ranked associate of oligarch Vekselberg is Viktor Alekseevich Saveliev, Chairman of the Government of the Udmurt Republic.
Photo: Viktor Saveliev, Chairman of the Government of the Udmurt Republic
During his career, Viktor Saveliev used to work in several oil companies, including TatNIPIneft, Tatneftgasrazvedka, and UdmurtNIPIneft. In 1999, he was appointed the Minister of Fuel, Energy, and Communication of the Udmurt Republic, in 2000 – Deputy Chairman of the Government of the Udmurt Republic. In 2006, Saveliev has left the governmental service and returned to the oil business; during the next 10 years, he worked in RussNeft, Gazprom, and Slavneft. In 2013, the businessman has become the Head of Geoservice Group of Companies, and in 2014 was appointed the Chairman of the Government of the Udmurt Republic.
Today the media openly call Saveliev the senior lobbyist for oligarch Vekselberg in Udmurtia. There are grounds for such accusations: in the end of 2015, during the catastrophe in Izhevsk, the Prime Minister of Udmurtia attempted to pass a bill increasing the maximal allowed indexing of residential utility fees by 25%. The initiative was not supported by the Deputies, and the bill has been defeated.
During the communal collapse, the Udmurt authorities conducted continuous negotiations with Boris Vainzikher, General Director of T Plus (currently he is in detention). The subject of the negotiations was a simple requirement set by the regional authorities: the energy company must repair all deficiencies in the heat distribution networks at its own expense. However, the General Director of T Plus hasn’t expressed any interest in this scenario and only mentioned the need to “identify new sources of financing”. In addition, according to some sources, Vainzikher gently hinted that the company is not interested in investments into the leased assets. Therefore, it became clear that the goal of T Plus was to obtain a concession on all Izhevsk heat distribution networks.
Photo: Negotiations between the Udmurt authorities and representatives of T Plus
According to Day.org.ru, this idea hasn’t come out of thin air: a few months earlier, Prime Minister Saveliev allegedly had a joint fishing trip with Boris Vainzikher to a hinting and fishing lodge in Ust-Belsk, where they had discussed the transition of all heat distribution networks under absolute control of Vekselberg’s structures.
Winter is coming
The scheme used by T Plus in Udmurtia is very similar to the one used in the Komi Republic: the company ‘enters’ the regional market, steadily monopolizes it through close connections with the regional authorities, establishes residential utility tariffs at its sole discretion, and then siphons huge money from the consumers.
The next heating season is approaching, but there are no indications that the situation with public utilities is about to improve. The struggle between the new regional authorities and commercial interests of oligarch Vekselberg is ongoing. The situation is further worsened by the presence of powerful lobbyists in decision-making structures, who are not interested in a weakening of the monopoly’s rule. One thing is clear: whoever wins in this conflict, the residents of Izhevsk are to be the losing party.