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Analysis & Opinion
07.10.11 Friends No More
By Dan Peleschuk

Russian oligarchs Boris Berezovsky and Roman Abramovich are facing off in a UK court, where the former is accusing the latter of cheating on the sale of shares in an energy company over a decade ago. As the lawsuit heats up and both sides trade accusations, the affair again draws attention to the very public break-up of a once close and powerful partnership.

In a case that began on October 3 in London’s High Court, Berezovsky claims that Abramovich – fellow tycoon and former friend and business partner – intimidated him into selling his 21.5 percent share in oil company Sibneft in 2000 for about $1.3 billion, a fraction of its true value. Alleging breach of trust and breach of contract, Berezovsky is suing Abramovich for more than $6 billion – a substantial chunk of the businessman’s net worth. In response, Abramovich claims that Berezovsky never bought into the company, but instead gladly received $2 billion from Abramovich between 1995 and 2002 in exchange for political influence to support his business ventures.

At that time, in the 1990s, Berezovsky enjoyed an extraordinary amount of political influence as a media mogul and key member of former President Boris Yeltsin’s “family.” He even assumed the role of a mentor to Abramovich and introduced him to many of the high-level contacts that helped build the future billionaire’s fortune. In 1995, the two bought a controlling share in Sibneft for a bargain price and were on their way to merging it with Yukos, imprisoned oligarch Mikhail Khodorkovsky’s former interest, to form Russia’s largest oil company. Yet shortly after Vladimir Putin’s election as president, Berezovsky fell out with the authorities and fled to the UK in 2000 to avoid imminent prosecution by Putin’s new government.

Abramovich, meanwhile, stayed behind – perhaps a defining moment in the partnership between the two. In contrast to Berezovsky’s vehement, long-distance criticism of Putin, Abramovich chose to play ball with the new administration. Berezovsky alleges that his former partner forced him to sell off his shares in Sibneft, which he claims were in fact worth up to $3 billion, in what he called Abramovich’s “betrayal” in favor of making money under Putin. Indeed, shortly after Abramovich gained a controlling stake in the company, he sold it to Gazprom in 2005 for $13 billion, the largest sale of the sort in the former Soviet Union at that point.

Curiously enough, Berezovsky’s legal team has tilted the lens over the two men’s onetime friendship, apparently using it as the cornerstone of their case. “[Berezovsky] fell out with those in power in the Kremlin and was forced to leave his home and create a new life abroad, leaving Abramovich in a position where he was in effect required to make a choice: to remain loyal to Berezovsky, his friend and mentor and the person to whom he owed his newly acquired great fortune, or instead, as we submit, to betray Berezovsky and to seek to profit from his difficulties,” Berezovsky’s lawyer, Laurence Rabinowitz, told the court.

Experts, however, said the rhetoric is more of a legal ploy than an honest approximation of the true nature of the oligarchs’ relationship. Yury Korgunyuk, an analyst at the Moscow-based INDEM Foundation, argued that such a characterization is misleading considering the context in which the crony capitalism of the 1990s took place. “In these sorts of circles, ‘friendship’ isn’t exactly the most appropriate word,” he said. “Where their money goes is a far more important detail.”

The public falling out, which has been years in the making (Berezovksy once famously served Abramovich a writ at an upscale London boutique), also offers an intriguing glimpse into the shift in personal politics between the Yeltsin and Putin eras. Under Yeltsin, oligarchs such as Berezovsky were largely allowed to roam free and build their wealth with the tacit approval of the Yeltsin administration – so long as they would lend part of their funds to Yeltsin’s political cause. Today, however, most remaining Russian oligarchs occupy an altogether different role: those like Abramovich, who himself never quite aspired to political power, are forced to adhere to the regime line and remain outside the realm of political criticism or competition. If they are offered a post – as was Abramovich with the governorship of the remote Chukotka province – they quietly accept.

Abramovich’s lawyer, Jonathan Sumption, used the chaotic environment of the Yeltsin years, in which he said Berezovsky acted as a “political godfather” toward Abramovich, to illustrate the uncertainty of Berezovsky’s claims. Instead, Sumption told the court, Berezovsky is playing up his importance in order to claim money which was never his. “It may well be that Berezovsky genuinely believes that having put Abramovich on the road to one of the world’s largest personal fortunes in 1995, Abramovich owes him in some loose sense part of the benefits,” the Independent reported him as saying. “Like many of his statements to members of his inner circle, it is grandstanding by a man with a lively sense of his own importance.”

Ultimately, however, it may not be a matter of who wins the case or what political consequences will follow, according to Korgunyuk. He sees the affair as just business as usual between two elites with bones to pick. “There’s an appropriate Russian saying here: one swindler has outwitted the other. That’s basically what is happening,” he said. “It’s impossible to sympathize with one side or another.”
The source
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