During our recent meetings in London and Geneva, T&B encountered widespread agreement among veteran Russia investors that, at least from the investment standpoint, the Western press was substantially worse than useless – thus rendering alternative information sources (such as Ben Aris’ BNE) vitally necessary.
Our long-time assertion that subscriptions to the FT and The Economist were costing certain funds literally millions of dollars a year (due to the missed investment opportunities) was not seen as particularly contentious, and not surprisingly, there was a tendency to lump together The Economist with the Financial Times.
In fact, we think this somewhat unfair; in our experience, while The Economist is very consistent in its tendentious incompetence – by no means limited to disinformation regarding Russia – the Financial Times (9) is generally an excellent source of information almost everywhere except for Russia!
This observation was confirmed by a several Russia investors also active in Africa and Latin American markets who noted that whenever they read a story about a country they knew something about in The Economist, the reporting was almost invariably biased, tendentious – and as often as not – simply inaccurate. The FT, on the other hand, seemed to get it right far more often than it got it wrong. Why then, is the FT so consistently bad as regards Russia?
A couple of papers in the Financial Times – regarding the PWC audits of Yukos, as well as the Yevroset prosecution, seemed particularly typical of their shoddy journalistic standards in our neck of the woods:
9 hands down, T&B’s favourite newspaper, with excellent macroeconomic coverage, incisive columnists, and a good international network
PWC – No Joy in Heaven Like for a Sinner Repentant
A recent article regarding the withdrawal of the Yukos audits by PWC, while managing a superficial balance, as usual left the final word to the Yukos defence team. The FT thus intentionally creates the impression that the PWC audits of Yukos were withdrawn due not to the discovery that Yukos had egregiously lied to its auditors, but rather, because of pressure from the Russian Prosecutor General.
Although we have no basis to judge whether or not this was the case, the reasons for the withdrawal are essentially irrelevant to the case at hand. The Yukos audits should very clearly never have been issued, given that they served to cover up massive cashflow theft by Menatep. Whether, as PWC alleges, they chose to withdraw them when further information became available showing that Menatep had fully controlled the supposedly arms-length trading entities, and was thus engaged in outright theft, or whether PWC did so under pressure from the Russian authorities is of academic interest only – no sane person considering the currently available data could assert that the audits were justified to begin with.
The Russian business climate was quite different at the time, and PWC may have considered itself to be under no obligation to engage in forensic analysis of the information supplied it by its client. What is clear is that, whether by accident or design, it neglected the fact that Yukos was engaged in the sale of most of its output at prices far below the market, the offtakers being captive oil traders controlled by Yukos management. The party to have suffered damage was certainly not Menatep – rather, it was the shareholders of the E&P subs egregiously stripped by Menatep under cover of an international audit – as well as the Russian government, which lost billions of tax revenues to the schemes (10).
10 Indeed, rather than the relatively brief collapse in oil prices generally cited as the reason for the catastrophic 1998 meltdown, the crisis was in large part attributable to the widespread tax evasion, practiced not just by Yukos but by the majority of Russian oil companies during the Yeltsin years.
Justice…Even if not particularly Poetic
The second Khodorkovsky-Lebedev trial is nearing its end – we expect both men to receive substantial further prison terms. Since the beginning, their defence strategy has been to cause as much political and economic damage as possible to the Russian State, in the misguided belief that they could cause harm sufficient to force the Kremlin to capitulate – an approach not dissimilar from that attempted by the German armies during the Siege of Leningrad – and which shall ultimately prove about as successful.
A Russian by birth, Khodorkovsky should have known that his country has a long history of absorbing far more pain than even Menatep and its hordes of PR shills could inflict, without ever contemplating the possibility of surrender. The current matter will certainly not prove the exception – and there is some consolation in the fact that the very real damage done to the Russian economy shall in no way benefit the perpetrators.
The FT on Yevroset – Another Wrong Number
An article by one Courtney Weaver regarding Russia’s demand for the extradition of Chichvarkin, the former owner of mobile phone distributor Yevroset, represents the absolute worst in English journalism, apparently reprinting the press releases of the defendants’ PR firms almost verbatim – presented not as PR but rather, as investigative journalism.
As regards the fundamentals of the Chichvarkin case, T&B knows only what is in the public record; Mr. Chichvarkin has not been convicted in any court, and benefits from the presumption of innocence and we have no information as regards the validity of the charges: aggravated kidnapping and extortion. The point is that, in this regard, we are as much in the dark as is the FT; where we take issue is with the typically biased and spun “reporting” on Russian judicial affairs.
On first sight, the article (reproduced below) would appear to be little more than the reformulation of a press release by the attorneys of the accused, failing to mention the name of the purported victim (Andrey Vlaskin), much less the crimes alleged: kidnapping and extortion with violence. The FT extensively quotes Chichvarkin’s lawyer, while typically (11) failing to offer the opportunity of a rebuttal to the purported victim, Mr. Vlaskin, or to his counsel.
Like numerous businessmen accused of criminal activity in Russia (including one prominent Western fund manager, very credibly accused of serious tax fraud, pre-dating by several years a separate matter where he now claims to have been victimized by corrupt law enforcement agencies) Mr. Chichvarkin claims to have be the innocent victim of corrupt functionaries.
Having previously evinced no known interest in politics, immediately after his run-in with the authorities, Mr. Chichvarkin suddenly declared himself a member of the political opposition. While no one in Russia takes such last-minute conversions very seriously, Western journalists are anxious to believe anything served up to them, provided that it is anti- Kremlin.
The article, as usual, quotes (unnamed) analysts as well as (also unnamed) peers in the industry. While protection of sources is vital, there is not a scrap of evidence from any named independent source – the author could easily enough be quoting her driver, or a Yevroset employee, or for that matter, Boris Nemtsov. The surprising claim that Chichvarkin – alone among his peers – was unwilling to pay bribes appears to be unwittingly contradicted by the author herself; the FT story reads:
“Up until 2006, some Russian retailers imported phones illegally without paying customs: paid officials turned a blind eye. Mr Chichvarkin was the first to turn away from this practice as he sought to ready Yevroset for a London flotation.”
Unless we misread it, by stating that Mr. Chichvarkin “turned away from this practice” for business reasons in 2006, the article implies that, in order for him to be able to “turn away from it,” until that date he had, in fact, been engaged in the smuggling of telephones (they wrote it – we certainly didn’t!)
11 not unlike their reporting on Yukos, with Khodorkovsky’s lawyers given ample space, while the families of Menatep victims were never granted a public forum
To Hell with the Facts – give me more Interpretation!
In order to refresh our memory and to check the facts, we ran a Google search. Quite extraordinarily, while most Western press stories provided ample details regarding Mr. Chichvarkin’s hairstyle (“mullet”) and fashion statements (“bright yellow and orange boots, jeans”) we had to search through almost 60 papers before finally finding any mention of what crimes he is accused!
In April 2009, The London Standard wrote:
“He (ed: Chichvarkin) is suspected of abduction and extortion of his firm’s former shipping agent Andrey Vlaskin who is believed to have stolen a shipment of mobile phones from Evroset. Chichvarkin allegedly ordered the company’s security service to force the man to return the goods.”
“…Other charges, aside from abduction, were extortion and smuggling. According to the investigators’ version, Levin and his subordinates abducted Vlaskin and held him captive in his family’s apartment, beating him and demanding 20 million rubles for stealing mobile phones.”
Another victim, Smurigin, was also beaten by the company’s security guards who demanded he discloses information on Vlaskin, according to the investigation. The guards allegedly stole belongings from both victims, one example being Vlaskin’s BMW X5.
His lawyer, Konchevskina, said “There was no evidence Andrey Vlaskin had any involvement in the disappearance of any phones – only the testimonies of some witnesses. It simply seems that they found a person to write off their past due taxes, and in the process “beat-out” some more money from him.” She added her client’s parents were forced to collect the money. They even had to sell their farm because they were afraid for their son’s life.
- You wouldn’t know any of this from reading the FT story, would you?
There is a curious cognitive dissonance here: the Western press misses no opportunity to show how corrupt and disorderly Russian business is – fustigating the authorities for failing to clamp down on supposedly-rampant illegal practices. Then, as soon as any Russian businessman is accused of criminal activity and manages to flee to London, he becomes a hero for a) Russian political liberalization, b) new, Western-style business practices, and c) resistance to corruption. If, in addition, he claims to be “fighting the Kremlin” the Westerners will be eating out of his hand – especially if he is wealthy enough to hire a top UK PR firm.
To continue with the FT’s logic, one must assume that Russian business is a clean, orderly affair – that no Russian businessman has ever used strong-arm tactics against persons they suspect of having abused their trust, and that the only crimes are those committed by the authorities. This view suggests either gross stupidity or intentional disinformation.
Were this story to take place anywhere but in Russia, the FT would presumably await the court ruling before exculpating the accused – but then, in Russia, the usual journalistic rules do not apply.