Once an inseparable pair of Russian oligarchs, Boris Berezovsky and Roman Abramovich are back together again, only this time in the courtroom of the London High Court, where the former’s lawsuit against the latter is being played out. Neither the amount of money in the lawsuit (3 billion pounds sterling), nor who wins is what is most important. What is most important is what they are litigating about, which is the history itself. The story of how big business was done, fortunes were made and big-time politics was conducted at the turn of the century; the very same period of time that created the condition Russia is in today. Most of all, not observers or commentators but those most directly involved are playing storyteller.

Boris Berezovsky’s lawsuit against Roman Abramovich reads more like a non-fiction, full-fledge thriller than a mystery novel.

Moreover, the lawsuit fits on just 24 pages. The description of the events that make up the lawsuit’s foundation once took up much more space in the Russian media. The lawsuit, however, is not your everyday genre, is not historical research and not a journalist investigation. It is a legal invitation to search, in this case, for a clear answer to the following question: at what time did the ends stop justifying the means? It is up to the Commercial Court of the Queen’s Bench of the High Court of Justice – that’s how the entire names of the court where the lawsuit is being argued – to find what is in essence a political answer to this question.

Episode one.
Light as aluminium

The lawsuit, naturally, is compiled together in episodes; however, I will address them in a different order than how Berezovsky’s attorney’s set them forth. My approach will go from the simple to the complex.

The simplest story: Aluminium. Act 1: By 2000, Boris Berezovsky, Roman Abramovich and Badri Patarkatsishvili became the large proprietors of assets in the aluminium sector.

Act 2: At Abramovich’s initiative, he, Berezovsky and Patarkatsishvili agree with Oleg Deripaska, head of another group of aluminium barons, to create a virtual monopoly of a company. The agreement was completed on 14 March 2000 at London’s Dorchester hotel. The essence of the deal saw 50% shareholding go to Deripaska and his partners, and the other 50% go to Abramovich, Berezovsky and Patarkatsishvili. Furthermore, latter group would divvy 25% to Abramovich, while the other two were left with 12.5% a piece; Abramovich was the trustee for the three’s assets. An important part of the agreement was that none of them were to sell their shareholding without the others’ consent.

Act 3: In the autumn of 2003, Abramovich sold his shareholding to Deripaska without first receiving either Berezovsky or Patarkatsishvili’s consent.

In what would seem to be a purely business-related story, politics peer into the picture, an element that is not addressed in the lawsuit. In March 2000, Berezovsky was an active, if not chief, supporter of Vladimir Putin and virtually controlled ORT (now Channel One). In the autumn of 2003, Berezovsky had become a political refugee in England. This 180-degree turn of events, in part brought along by Abramovich (we will return to this later), most likely propelled Chelsea football club owner to stab his partners in the back.

The business advantage was obvious: Abramovich received $1.75 billion for selling his 25% stake to Deripaska, who in turned gained majority control in the aluminium giant. Meanwhile, Berezovsky and Patarkatsishvili’s shareholdings saw their value drop drastically. In July of 2004, they both sold their stakes, together compiling the very same 25% to Deripaska for just $450 million.

Episode 2
Black as oil

The conflict over Sibneft, the erstwhile state-oil company, goes much deeper. The plaintiff’s statement of claims directly indicates that Sibneft, a state company, was founded “as part of the privatisation programme”. Berezovsky, undoubtedly, is responsible for this illusion’s key component: founding a state company only to then immediately privatise it.

Abramovich’s attorney, Jonathan Sumption, made some rather curious remarks during the court hearings. He spoke of how Berezovsky convinced President Yeltsin in 1995 to found Sibneft and then immediately privatise it in order to use it as a source of financing for Berezovsky-owned ORT, which was to become the chief tool for supporting Yeltsin during the 1996 presidential elections.

The statement of claims, however, makes no mention of this. On the other hand, all three, Abramovich, Berezovsky and Patarkatsishvili – having agreed before Sibneft was even founded to snatch up the majority shareholding in the company during its privatisation – are named in it. Each party’s stake – 50% for Abramovich, the traditional trustee, and 25% each for the other two – was determined ahead of time as well.

Sibneft, only just barely having been founded, began to switch owners right away. The company was created in August 1995, with 51% belonging to the state and 49% subject to being sold; however, in October 1995, Sibneft came under a system of loans-for-shares auctions, when a creditor lends money to the government against a company’s shares. If the government did not buy out the shares within the deadline (usually three years), then the creditor would be left with the shares.

The state’s 51% shareholding was sold at auction in December 1995 to Neftyanaya Finansovaya Kompaniya, which, as the lawsuit asserts, belong to our now notorious trio (the document is mute on the stakes involved). The company, together with Stolychny Bank Sberezheny, bid $100.3 million for the shareholding. Keep this number in mind.

Soon after, in January 1996, another auction to sell the remaining 49% in Sibneft took place, with the very same people reaping the benefits. After the August 1998 default, the government was unable to buy out the loan.

There is, however, an intricate line drawn here. The statement of claims clearly points to how the magnificent three, before Sibneft had even been founded, agreed to divvy up the company’s shares; however, the payment for the shares is not at all in the focus. The statement of claims speaks only about how, in the end, “Mr Berezovsky, Mr Patarkatsishvili and Mr Abramovich acquired roughly 86% of the shares”.

Abramovich’s side of the story is that he bought Sibneft with his own money, and that Berezovsky “did not invest even a cent in it”. Abramovich asserts that his former business partner did not own Sibneft shares. Why Berezovsky denied owning any shares in Sibneft until 2001 was also raised during the court session. He explained that he had agreed with Abramovich to do so, but that things changed after Berezovsky fled Russia, when he thus believed that any obligations he had to his former partner were now no more.

However it may be, Berezovsky was satisfied with the management plan for Sibneft until the end of 2000: Abramovich made him and Patarkatsishvili the appropriate payments.

Everything, however, changed in 2001. Abramovich told his business partners that the Kremlin was ratcheting up the pressure on them and there were threats that their shares would be confiscated. This was an unequivocal offer to sell the shares. The statement of claims, as a weighty argument, mentions the fate of Nikolai Glushkov (whom were will get back to later), Berezovsky and Patarkatsishvili’s close partner who was arrested, and the charges brought against Patarkatsishvili in Russia

The transaction took place at the Munich Airport in the beginning of May 2001. Patarkatsishvili, with Berezovsky taking part in the negotiations over the telephone, wanted to get $2.5 billion, but was forced to agree to the $1.3 billion that Abramovich had offered.

Do not forget that the amount paid out is not congruous with Abramovich’s claims that Berezovsky did not own shares in Sibneft. His attorney’s explanations that the payment took place “to close the books on the past” obviously stray from how relationships actually play out among oligarchs.

Berezovsky claims, in essence, that Abramovich used threats to aid in the former’s losing his property “for political purposes”. Glushkov’s imprisonment was used as “the element of a commercial transaction”, not to mention that Abramovich in no way acted in the interests of his grantors, as he should of done according to the trust agreement.

The numbers are even more impressive. The lawsuit estimates that the price Gazprom paid to Abramovich for 70% of shares in Sibneft in autumn 2005 was $13 billion. Berezovsky’s lost benefit resulting from pressure, threats and the trust agreement’s being broken are ciphered out of this estimation.

Now recall the three following numbers: 1 – $100.3 million paid to the government in 1995 for 51% of shares in Sibneft.

2 – $1.3 million paid by Abramovich to Berezovsky and Patarkatsishvili in May 2001, presumptively for half of the trio’s 86% shareholding. Furthermore, the lawsuit admits that Berezovsky and Patarkatsishvili did not take it upon themselves to having to do with management and relegated everything to Abramovich, while at the same time receiving the dividends they were owed until the end of 2000.

3 – $13 billion, which, Berezovsky estimates, Gazprom paid to Abramovich in the autumn of 2005 for 70% of shares in Sibneft.

Doubling the country’s GDP is nothing comparable to these brain-wracking numbers that are worthy of being part of the Intriguing Arithmetic textbook. Incidentally, as far as GDP goes (a topic very close to Putin), I do not think that Gazprom’s payment would have been made without approval from above, without the company’s western creditors and without the appropriate government guarantees. Therefore, the highest-ranking Russian authorities are, to put it lightly, an arms length away from showdowns among the oligarchy.

Episode 3
Advantage, television

As we know, Berezovsky controlled ORT (now Channel One) in the second half of the 1990s. ORT had 49% of its shares privatised, while the remaining 51% remained with the state to slash its losses in 1994. Come 1998, Berezovsky and Patarkatsishvili controlled the 49% privatised shares.

President Yeltsin resigned on 31 December 1999 and Vladimir Putin was elected president on 7 March 2000; his term officially began on 7 May.

Berezovsky’s business was in safe waters as long as he supported Putin, but the former over-rated his own abilities as a kingmaker and underestimated Putin. After the Kursk submarine disaster, killing all its crew in August 2000, ORT brutally criticised the authorities, which caused Putin to make immediate conclusions.

The lawsuit, whose most dramatic section is entitled Kursk points out that at the end of August 2000, the head of the presidential administration Aleksandr Voloshin, and then Putin himself, made Berezovsky an ultimatum: either voluntarily give up your shares in ORT to the government, or you’ll go down just like Gusinsky.

Vladimir Gusinsky, the former owner of NTV, was charged with fraud and detained. Three days later he agreed to give up his shares in NTV in exchange for the authorities not initiating a criminal case against him. Later the European Court for Human Rights found signs in the case of Gusinsky’s rights to freedom and security having been violated. The court interpreted Gusinsky’s criminal prosecution and imprisonment as “the strategy of a commercial transaction”. This definition is actively used in Berezovsky’s lawsuit.

Patarkatsishvili negotiated the sale price for the ORT shares with Minister of Information Mikhail Lesin, who made an offer of $300 million. Berezovsky turned the offer down and fled the country.

Nikolai Glushkov, Berezovsky and Patarkatsishvili’s close friend and business partner, was arrested on 7 December 2000. At the same time, Abramovich, who Berezovsky portrayed in court as “a genius. He really had me convinced for a long time that he was like a son to me…”, was the Kremlin’s negotiator with the disgraced oligarchs.

The meeting took place at Côte d’Azur in France. The lawsuit states that Abramovich came with new terms: if you sell your ORT shares, Glushkov is a free man. Otherwise, he will spend a long time behind bars. The new offer for the shares was set at $175 million.

Berezovsky and Patarkatsishvili reluctantly accepted the offer, but Glushkov remained behind bars. Freeing him was part of the deal for selling the shares in Sibneft, which was discussed at the Munich Airport in May 2001, but Glushkov was freed only in 2004.

Time to make one clarification: the lawsuit, as we have already seen, has Berezovsky accusing Abramovich over and over of pressuring and threatening him. Abramovich, however, was simply the messenger for the Kremlin, he did not arrest Glushkov and neither could he spring him from jail. Abramovich was just the negotiator. And the use of imprisonment as a strategy for a commercial transaction, condemned by the European Court for Human Rights was unlikely Abramovich’s personal initiative. So in essence Berezovsky is levelling his accusation against Putin.  

Final act
Placing hope on the negotiator

After having read Berezovsky’s lawsuit, one can hearken back to how the Sibneft story played on after Berezovsky, but before Gazprom. This is yet one more breaking point in Russian politics and the country’s economic history – a prelude to the YUKOS case.

Sibneft intended to merge with YUKOS, attempts were made to do so in January 1997 and April 2003. The merger memorandum that Khodorkovsky and Abramovich signed was only the first step in their ambitious deal. After Khodorkovsky had already been put in prison, Abramovich said this about the deal: YUKOS’s merging with Sibneft, accounting for the discrepancy in size between the two companies, would cause the administration of the united company to transfer right into Khodorkovsky’s pocket. Next, shares were supposed two be traded between the YUKOS-Sibneft conglomerate and one of America’s largest oil companies, with negotiations with Chevron had gotten the furthest. What was unique about the second step, as Abramovich put it, is that YUKOS-Sibneft were to have not a 51% shareholding in the Russian-American oil company, but rather the largest, which would have given Khodorkovsky the chance to become the company’s key player.

I will not even bother judging on how realistic this plan was and how seriously it impacted Khodorkovsky’s future; however, here is what definitely has to do with Berezovsky and Abramovich fighting it out in court: at one of Khodorkovsky’s last meetings with journalists, which took place when Platon Lebedev had already been detained, before he was arrested, I asked what Khodorkovsky was hoping for and to whom he would turn as a last resort, since he was obviously in danger of being the next to go down. Honestly, I figured he would say Voloshin. But after a pause, Khodorkovsky quietly said, “Abramovich, probably”.

Now for a few dry numbers: the YUKOS-Sibneft merger was to see the former receive a 92% stake in Sibneft, while Sibneft was to receive a 26% share in the merged company and $3 billion. After Khodorkovsky was arrested, the deal was reversed, but Sibneft held onto the $3 billion.

So there you have: the art of the negotiator wielded by a genius in establishing trusting relationships.