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Analysis & Opinion
06.04.11 Banished From The Bank
By Andrew Roth

The head of the Bank of Moscow, who has strong ties to Moscow’s former Mayor Yuri Luzhkov, is said to be seeking political asylum in London after skipping town last week. Andrei Borodin appears to have conclusively lost control over the Bank of Moscow and may not be able to return to Russia in the future without facing criminal prosecution. Is this a case of political repression, of criminal flight, or both?

Declarations that Borodin is the latest victim of selective political oppression in Moscow came out of London quickly. Boris Berezovsky, the oligarch who fell out of favor with Vladimir Putin and fled to London in 2001, was the first to state that Borodin would be seeking political asylum in London. “As far as I know he will ask for political asylum in London,” the Daily Mail reported him as saying. “In England, there will soon be a union of businessmen who have fled, where we will unite all those who have been subjected to harassment by the Russian government.”

Despite Berezovsky’s sympathetic words, however, Borodin and the Bank of Moscow have an extremely checkered reputation because of their connection to a loan made for half of a billion dollars to a company owned by Luzhkov’s billionaire wife, Yelena Baturina. Investigators maintain that money from the loan was found in a personal bank account of Baturina’s.

After Luzhkov’s fall from grace that led to his ouster as Moscow’s governor late last year, police raided Baturina’s Inteko, as well as the Bank of Moscow. Borodin, as well as the bank’s Vice President Dmitry Akulinin, were supposed to have been questioned this week about the deal, but did not show up for their meetings with prosecutors. It was later revealed that they were abroad in London.

While the Bank of Moscow has made an official statement saying that Borodin is simply on sick leave, and Borodin himself has said he has plans to return to Moscow, many believe that he has good reasons to stay in London. The case reads like the next step in a politically motivated shake-down of Luzhkov’s political allies.

A look at VTB’s take-over of the Bank of Moscow may give some insight into Borodin’s position. The war of words that has broken out between Borodin and Andrey Kostin, the head of VTB bank who tore into the Bank of Moscow this week, calling the situation there “an outrage,” is indicative of the larger fight for control over the company. Borodin has been holding out on selling his shares in the bank for some time, suggesting that he put a high price on retaining control of the company.

“What exactly he was fighting for is an interesting question,” said Jason Hurwitz, the chief analyst for the financial sector at Alfa Bank. “Was he simply trying to get a higher price for his shares? Certainly a possibility. Some cynics might suggest that another plausible explanation could be that he had something to hide, and the only way to continue hiding it was to stay in control of the bank.”

The possibility of fraud being uncovered will make it extremely difficult for Borodin to consider coming back to Moscow. Yet Borodin will also lose control of the Bank of Moscow if he stays in London. “I think that for Borodin, if he asks for asylum, it will become extremely difficult to have any impact on the future situation of the bank,” said Dmitry Abzalov, an analyst at the Center for Political Assessments. Nonetheless, Abzalov argues that the pressure from the government was not the final straw for the embattled president, as he was already on the way out. “Then again, to say that the pressure to push him out of Russia was part of a plan to push him out of the bank seems undercut by the fact that he had already lost control of the bank.”

Nonetheless, Borodin’s self-imposed exile seems to be very much to VTB’s advantage, and should remove the last major obstacle for VTB to have a free reign in managing the company. “VTB has been trying to gain management control and Borodin has been standing in the way, and pretty effectively at that, for a short period of time,” said Hurwitz. “With him gone, who else would the employees of the bank look to for their new leadership besides their new bosses in VTB? So it’s a matter of time until VTB gets total control, and Borodin’s fight seemed to be in vain anyway.”
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