Stay Hungry, Stay Foolish

Abramovich v Berezovsky

In Uncategorized on November 3, 2011 at 12:03 pm

The clash between the Russian oligarches Boris Berezovsky and Roman Abramovich occurs here in London, at the High Court of Justice. Biggest personal lawsuit in history with $6.5billion involved, this oil share legal battle is interesting not only in terms of contract law but it also forces both the plaintiff (B) and the defendant (A) to explain their rise to power in the 1990s in Russia, their responsibilities as Russian Elite (A was governor of Chukotka, a whole region) and their close relations with Yeltsin’s and Putin’s governments. Here some extracts of Abramowich’s witness statement. The full text is readable here.

Describing his relationships with Berezovsky:

“Mr. Berezovsky has said that there was a time when I was his trusted and close business colleague. With the benefit of hindsight, I hesitate to call him a former close “friend” although I felt a strong emotional bond to him and I had previously always respected him. […] For the reasons I explain below, our relationship may not qualify as friendship or regular business association. He did not regard me as an equal. Our relationship was a peculiarly Russian relationship typical for a Russia’s post-communist history. The Russian word to describe the nature of his relationship with me is “krysha [roof]” A person providing krysha to another man was a person who acted as his protector. Kryshna could take the form ofpolitical or physical protection. […] It was not possible to achieve [my business interests] in Russia at that time without the help of a person who had the appropriate political connections.

Compared to Mr Berezovsky, I was a nobody. 

On the business environment in Russia in the 90s :

Additionally, it was also necessary at that time to have “physical” protection as anyone having access to businesses capable of generating strong cash-flows was vulnerable to criminal interference, including potential violence. […] A number of major industries, particularly aluminium, were under the influence of criminal gangs who often used intimidation and murder as tools to extract money from the enterprises. Where foreign investors were allowed the opportunity to invest in Russian businesses, they generally would not do so because of the risks. The civil law had not kept pace with economic developments. The court system was unreliable and inadequate to enforce any rights under civil law. These were exciting times to be an entrepreneur but were also dangerous and risky times. However, on the other hand opportunities abounded for people like myself.

Over time Mr Berezovsky also asked me to assist him with other expense he incurred. For example, I recall paying occasional credit card bills of his girlfriend at the time […] If Mr Berezovsky needed to charter a plane in order to fly somewhere, or wanted a yacht to be chartered, he would ask me to pay for it. It was always Mr Berezocksy who decided what expenses were necessary for him to maintain his image and influential position. I suspect that there were times when almost all of Mr Berezovsky’s personal expenses were subsidized by me. […]

On the ties with Putin:

At the end of 1999, Mr Yeltsin retired and Mr Putin became acting President. At first, Mr Berezovsky was please about this and regarded the appointment as one of the many things for which he deserved credit. However, Mr Berezovsky was soon to become dissatisfied when he discovered that Mr Putin was not a person whom one could readily influence.The relationship with President Putin deteriorated over a fairly short period of time. To satisfy his political ambitions, Mr Berezovsky took every opportunity to criticize the country’s leadership, including tragic events.[…]

Although Mr Berezovsky never directly threatened me, his bragging about the methods he resorted to when dealing with his enemies and his close connections with powerful Chechens had a strong influence on my thinking.[…] By late 1999 I knew most, if not all, the major players in the aluminum industry, and that a number of them wanted to get out. […] I still was not keen to get involved in the industry, given its violent and unstable history. Criminal groups were fighting fierce battles for control of the profits generated by the aluminum industry and dozens of businessmen had been killed in this struggle for control […] I welcomed the changes that President Putin set about to make in the country. In business, it is very important to have clear rules and predictability. I am sure that it sis a better way than to risk capital and resources with only krysha to preserve it.”

Better than the Godfather right … ?


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