Russia is to face the ‘velvet re-privatization’, that is a voluntary-compulsory withdrawal of enterprises. This act will be executed by “600,000 people who just f*** about looking for where they can make some money” under the supervision of the Deputy Chief of Staff of the Presidential Executive Office Igor Sechin. Oleg Shvartsman, head of the Union of Social Justice of Russia, owner and president of little-known Finansgroup financial-industrial group gave in interview to "Kommersant business daily".
Recently Finans-Trast company, a daughter enterprise of Finansgroup became one of the three winners of the Russian Venture Company (RVC) competition, and will soon receive budget co-financing for venture investment. That was an occasion for the interview given by Mr. Shvartsman on Friday at the conference in Palo Alto (USA). But during the interview it found out that the FPG Finansgroup is occupied not only with venture projects. “Venture is fiddle-faddle for us”.
Where are you from?
Telling about his business, Shvartsman admitted that his business structure was closely concerned with some political figures and managed their assets. The company, according to him, is related to the presidential administration, its power blocs and manages assets which are estimated at about $3.2 billion.
“We have some very serious oil assets like Russian Oil Group (I am its co-owner and president), and other assets like Russian Diamond Group and Russian Instrumental Technologies. By the way, Russian Business Group is a very important holding”, said Shvartsman.
By his admission “the true ownerships are various off-shores, in Cyprus and other countries. These are not the presidential administration members; these are their relatives, high-placed people. There are individuals among them, all relatives, from FSB or SVR.”
How we learnt to bend and bow
Shvartsman’s structures concern the political organization Union of Social Justice of Russia which hitherto was also little known. According to the businessman the structure was created in 2004 after Vladimir Putin haв told that big business had to be socially responsible to the state. “So, our colleagues from FSB decided there should appear an organization which would bend, bow, torture, and impose social responsibility on all sorts of Khodorkovskys…”
At first the activity of this organization didn’t get going. “It has all power ministries among its trustees: the Defense Ministry, the Emergency Situations Ministry, and the Interior Ministry. However, executives and directors changed because there were conflicts and feud. For instance, someone would press down a major businessman. He would make a phone call or two, and everyone would say: “Stop, wait”. So, it became clear the instrument isn’t working, because every tycoon has relations with the same power agencies.”
As a result the conception was changed. The structure was given to Shvatrsman and he became the director of economy and finances of the Union of Social Justice of Russia. He began searching new forms of financing and claimed $80 million for implementing social projects in 2005. As a result “we developed a concept which implies establishing partnership with those companies which were earlier subject to bending and bowing.”
“We started visiting them and making various offers; joint business was the outcome. For instance, Russian Oil Group is the fruit of our alliances with Rosneft, TNK, and LUKOIL. First, in trading, and then we began buying small and medium oil-producing enterprises. In other words, these companies shared their sales with Russian Oil Group”, tells the businessman.
The earned money the Union spent on social purposes within the power ministries. “Seventy percent of our social activities falls on power ministries – support for widows and orphans”, said Shvartzman. “Because we are supported by power structures”
In the future the Union of Social Justice of Russia is going to create a structure, which later will be transformed into the state-run corporation “Social Investments”. It is based on the idea of “velvet re-privatization” developed by the Union jointly with the Russian State Service Academy and the National Economy Academy. The businessman stressed that the re-privatization would be carried out in Rosoboronexport’s interests as well.
“It is a market type of strategic assets acquisition in budget-supported regions”, explained Shvartzman. It concerns budget-forming or town-forming assets which use different regimes of tax optimization. The assets will be purchase at minimum prices and passed over to the state-run corporation. Then, Shvartsman says, they will be officially, through tenders handed over to managing companies, which will generate profits.
The gathering of assets is already in progress. The head of the Union of Social Justice of Russia argued that these weren’t raids. “We do not take enterprises away. We minimize their market value by means of various instruments. As a rule, these are voluntary-coercive methods. There is the market value, the mechanism to block its growth, and, certainly, various administrative levers. However, people usually figure out where we come from…Yet, these are mostly glowing conflicts in the limelight of existing financial-industrial groups. In cases like that, we have to agree with our older comrades and to find a consensus. As a rule, it is the market value’s lowest level. However, it does not concern the YUKOS takeover: people are getting quite good money for it.” Moreover: “Unless we do it, others will come, and they will be carrying out the function of consolidating assets in the state’s hands just like we are doing it now, because it is the current state policy.””
Sechin is our party
Shvartsman’s structure doesn’t feel a need for stuff. “First of all, the Moscow market of corporate raids reduced, and there is nothing to do there. Someone came from Rosbilding, another one from somewhere else... We motivate the people by salaries and bonuses, as other companies. We do not provide them with a share in the profits, because it is part of the trend: the tasks are not commercial, but are state tasks. However, everyone earns well”, he says.
Moreover, there are still idle sources: the Council of Interior Ministry Veterans, former officers of the Economic Crimes Department and regional departments against organized crime. According to Shvartsman “There are 600,000 of people who just f*** about looking for where they can make some money. It is a huge threat. A threat to security and social stability. And with our program, they’ll be busy working.
“They carry out watchful analytical work, finding out which companies in which regions go through which stages of corporate relations. They look for opportunities to oust owners disloyal to the authorities by means of greenmail or cooperation with minority shareholders.”
Shvartsman argues that he works in close interaction with a power bloc headed by Igor Sechin.
“And who set this task for you?” - “The party!” (Laughing.) “For us, the party is represented by the power bloc headed by Igor Ivanovich Sechin.”
At the same time tasks are often formulated by Shvartsman’s structure itself. “It isn’t that we get a task. Rather, I come and write a report that it would be advisable to secure our company’s participation in this or that project within the framework of implementing a national project or initiative.” The contact is realized through a State Duma deputy Valentin Varennikov. Shvartsman calls him “the spiritual leader of the Union of Social Justice” who completely supports the idea of ‘velvet re-privatization’.
This interview had immediate consequences. First some analysts considered that having told about the velvet re-privatization Shvartsman let out the secret of the so-called ‘Plan of Putin’.
The second consequence concerned the fact that the businessman was a member of the Federal Politician Council of the Civil Force party. After this interview the leader of the party Mikhail Barshchevsky immediately claimed that he had set a matter on the exclusion of Shvartsman from the party’s supreme council and regretted that it was already impossible to withdraw him from the elections. According to Barschevsky he even didn’t know in what inadmissible activity a member of his party was engaged.
Closer to the evening Shvartsman was excluded from the supreme council of the party. “ A person who is engaged in the state raids and considers this to be a normal phenomena can not be our confederate”, said the Head of the Federal Politician Council of the Civil Force party Alexander Ryavkin.
Oleg Shwarzman's biography
Born September 23, 1972. 1991-1996 Faculty of Biology of the Moscow State University. 1996-1999 PhD candidate of the Faculty of Philosophy, Moscow State University. Successfully upheld his thesis. Since 2006 a PhD candidate of the Russian Academy of State Service. Since 2006 a research assistant of the Shternberg Astronomy Institute of the Moscow State University
The Director of economy and finances of the all-Russian public organisation the Union of Social Justice of Russia. He president of the corporation ‘Social Investments’. Owner and president of the Finansgroup financial-industrial group.