The ecology of sanctions

Sanctions against Russian natural resources tycoons will be good for the environment.

There is an old Russian joke about a woodsman, in 1942, in the Belovezhskaya forest in Belarus. He walks through the forest and sees that the squirrels are dying of hunger. He turns to the partisans and asks them to feed the squirrels. They swear at him, saying that people are dying here; and they tell him to get lost. He goes to the Germans with the same request. They ask him to first show them where the partisans are hiding. He obliges, the Germans capture them; and afterwards they also tell the woodsman to get lost. The woodsman goes away thinking, ‘the squirrels are hungry and things aren’t going so well for us either.’ 

Russia’s main export

It seems ecologists feel the same way in Russia. Some say that if you want to decide something concerning a project that is polluting the environment, you should appeal through China – there, of course, they have a massive influence on Putin. Others say that you need to figure out which of the oligarchs is behind a project, and turn to the competing Kremlin clan. In a word, do whatever you can because the legal system isn’t going to help. A company will flagrantly pollute the environment, and muddy the question about what it is up to, but the burning issue of what the responsible monitoring body will do about it, will still be decided via the ‘the usual channels.’

Corruption has really stopped Russia developing; and the current crimes being hidden behind bribes will continue to stop Russian citizens from building their country for a long time. Especially crimes in the natural environment, which are turning entire regions into places unsuitable for human life.

Corruption is practically the main export of Russia. Our dirty money puts a black stain on the reputations of politicians and civil servants the world over. Because of this, the introduction of sanctions against several Russian companies and businessmen could actually improve both the natural environment in Russia, and the financial situation in the wider world; and even in Russia itself. Only, while making this list, it is necessary to keep in mind the need for financial monitoring – stop the flow of dirty money, sanitised with the help of European companies and banks. Try to make it so that sanctions affect the population as little as possible, hitting only the financial traffic spirited out of Russia by powerful businessmen, suspiciously wealthy civil servants, and their partners.

The Ukrainian conflict is a consequence of this total corruption. Because of this, it is better to treat the disease than the symptoms. Cut off Russia’s business tsars, who are profiting from the natural resources of the country, from the global financial network. We have long since lost the ability to control them within our own country. They don’t give a damn about human rights, take no account of civil society; and if any social activists start to annoy them, they order a media campaign against them. If this doesn’t work, they can arrange to have these people put in prison. They simply need to order a criminal case from a corrupt police force.

Nickel mining in Khoper

Take, for example, our situation with the protests against the mining of nickel in Khoper. Experts are convinced that the cobalt/nickel extraction facility being worked on in the agrarian Voronezh region, close to Khoper National Park, can only bring harm to the local inhabitants and to the country. The metals will be taken out of Russia; and within 40 years of extraction, the region will turn from an agrarian one to a mining wasteland; and its main resources, in the sense of its rich bountiful soil and clean water, will be spent. Looked after, these natural resources could support the development of the local community for hundreds of years. 

Despite mass protests, the mining company continues to work on geological exploration of the area. Are they trying to guarantee its preservation? Let us have a look at those who own this business and how they hide their money. 

The Ural Mining and Metallurgical Company (UGMK), which operates under a licence for the exploration and extraction of metals in Khoper, is owned by three offshore companies based in Cyprus. The main beneficiaries of UGMK are the oligarch Iskander Makhmudov, whose net worth is about $9 billion; and his partner Andrei Bokarev. 

All for one and one for all

Iskander Makhmudov owns a large number of companies, operating in transport, mining, and metallurgy. One well-known interest, belonging to Makhmudov and Bokarev is the Transmashholding group, which manufactures railway parts for Russian railways and metro systems. According to the anti-corruption activist, Aleksei Navalny, Transmashholding, may, in fact, be affiliated with the Moscow Transport Department, the very organisation that places orders for these parts. The head of this organisation, Maksim Liksutov, announced in May 2012, that he had sold his shares in Transmashholding to Iskander Makhmudov and Andrei Bokarev. According to Navalny’s research, these assets, which had belonged to Maksim Liksutov, are now managed through a Cypriot offshore company, by Aleksei Kirovoruchko, the general director of Aeroexpress, and an old friend of Liksutov.

The beneficial owner of this web of offshore holdings is the leading Dutch company, The Breakers Investments B.V., registered in the British Virgin Islands. Thanks to a leak in April 2013, we can now be certain that Liksutov is one of the owners of Sermolent Equities, which control shares in three Cypriot offshore firms belonging to The Breakers Investments BV.

And 25% of Transmashholding belongs to the French group Alstom, which, together with Iskander Makhmudov, conducts this opaque business. As an aside, perhaps it is worth mentioning that one of the figures on the sanctions list, Vladimir Yakunin, who heads Russian Railways (RZD), and is a member of Vladimir Putin’s inner circle, has longstanding links with France. He is co-chair of the Council of Russian-French Business Cooperation; and a member of the Compagnie des mousquetaires d'Armagnac. The introduction of sanctions, however, has done nothing to change his status with either organisation.Experts consider Vladimir Yakunin’s clan to be the most powerful in Kremlin circles. He is connected to both the Kovalchuk brothers, to Gennady Timchenko, as well as having business interests with Iskander Makhmudov, throughTransoil. Both Transoil and Timchenko are on the US sanctions list.

It is also known that companies, formally shareholders in UGMK, at the start of the 2000s, were affiliated with international structures which laundered money, the directors of which were known by fake names – Erik Vanagels, Stan Gorin, Voldemar Spatz, and Danny Banger. These firms were connected with dozens of international criminal scandals, weapons trading, deals in Ukraine with the Yanukovych family; and the tax fraud scheme, which Sergei Magnitsky died trying to uncover. 

Business as usual

How is it, then, that many of Russia’s civil servants and businessmen have not been affected by sanctions? Meaning that their Western partners have yet to be forced to cease doing business with them. Aeroexpress, mentioned above, and partially belonging to Makhmudov and Bokarev, is preparing to purchase double-decker trains from the Swedish Stadler Rail Group for about €500m; and what is more, with funds taken from the Russian National Stability Fund. 

Exxon Mobil continues to drill into the arctic shelf with Rosneft. At the same time, ecologists note that in the Kara Sea, where this work is taking place, the oil majors are not conforming to best international practices, respecting the environment, which they would need to observe if they were not working in Russia. Similarly, the European Commission’s antitrust bodies and the Bundestag have approved the purchase of the German gas company RWE Dea by companies linked to Mikhail Fridman. Neither is BP planning to divest itself of its shares in Rosneft. 

These Western companies continue to buy Russian natural resources, sell technology, and take advantage of capital of dubious origin, supporting in essence the destruction of my country, and the pressure put on its civil society. Other powerful Russian businessmen, directly connected not only with figures on the sanctions list, but with people finding themselves on international wanted lists, continue to squirrel money out of Russia; stay friendly with members of powerful European families; and own property around the world, spreading this infection of corruption with every handshake. Sooner or later, this needs to be stopped, and the sooner the illness is isolated, the quicker and easier it will be for the whole organism to be cured.

I will finish with the joke I began with at the start: it is all the same to us who puts a stop to the mining at Khoper. If it is going to be Putin, then we’ll say, ‘thank you very much.’ If external sanctions lead to those companies, which currently are robbing Russia blind, losing interest, then that is also to the good. We are talking about the avaricious interests of a small circle of businessmen, but the negative consequences will be borne by the people of Russia for hundreds of years to come. 

Originally published at OpenDemocracy