Should Putin host the G8?

8 July 2006

By allowing Russia to stage the summit we have accepted her as one of us, says Anne Applebaum. This G8 will give its tacit approval to the theft of private assets, the destruction of the rule of law and the violation of human rights

I am talking here about Rosneft, the very large Russian energy company whose shares go on sale in London next week. Don’t worry if you’ve never heard of Rosneft; it hasn’t been a very large Russian energy company for long. Much of its wealth was acquired recently — last year, in fact — when the Russian government forced another oil company, Yukos, into bankruptcy by demanding $30 billion in back taxes and sending its chairman to a labour camp. Only one bidder — a previously unknown company whose listed address turned out to belong to a mobile phone shop in an obscure town — showed up at the auction of Yukos assets. A few days later that mystery company sold its Yukos property to Rosneft for a pittance — which was not surprising, given that Rosneft’s major shareholder is the Russian government. Have I mentioned that the Rosneft CEO works as President Putin’s deputy chief of staff?

But the truly unusual, almost comic aspect of the Rosneft sale is the openness with which this extraordinary company has presented itself to the London Stock Exchange. When a prospectus was issued two weeks ago, it contained a few warnings, including some that are uncommon in the rarefied world of Morgan Stanley, Goldman Sachs and the other investment banks which are straight-facedly managing the sale. ‘Crime and corruption could create a difficult business climate in Russia,’ notes the prospectus, which also points out that the company is controlled by government officials ‘whose interests may not coincide with those of other shareholders ...and may cause Rosneft to engage in business practices that do not maximise shareholder value’. Translation: when the Russian government walks away with your money — as it walked away with Yukos investors’ money — don’t say no one warned you.

There is no pretence here. The Rosneft sale next week — scheduled for 14 July —will establish the principle that companies with illegally acquired assets can receive the imprimatur of the international financial establishment — as long as they are rich enough. But maybe that shouldn’t surprise anyone. After all, on the following day Prime Minister Tony Blair, President George Bush and the leaders of Italy, Germany, France, Canada and Japan will meet in St Petersburg to help President Putin preside over the annual meeting of the Group of Eight. By doing so, they will establish the principle that authoritarian governments can receive the imprimatur of the international political establishment — as long as they are rich enough.