$50 Million Tax Free

In the middle of the unfolding Khodorkovsky drama, a story emerged that another Russian businessman was facing troubles with the government in Moscow. Nikolai Bogachyov had agreed to sell a stake in a project to develop the South Tambey field on the Yamal-Nenetsk peninsula to a consortium of three foreign companies: Spanish Repsol, Shell, and Petro Canada. Bogachyov held the production license for the field, which was estimated to contain reserves of 1.2 trillion cubic metres of gas.

The Russian state-owned natural gas company Gazprom sued, claiming that South Tambey had been theirs to begin with, and was given up in a shady deal by the company’s former leadership. The dispute was finally resolved in an out-of-court settlement in the middle of 2005.

Nikolai Bogachyov’s background is typical of the Soviet nomenklatura. Born in 1955, he lived in New York as a child while his father, Vladimir, worked at the UN as a journalist for TASS (a typical cover for the KGB at the time) from 1959 to 1964. Vladimir returned to the United States at least once after that assignment. He reportedly had an affair with the Communist artist, Alice Neel, in 1969.

The elder Bogachyov was later involved in the formation of Zhirinovsky’s Liberal Democrat Party of Russia (LDRP) in the early 1990s, but soon split off to form his own party, according to a 1994 article in the Washington Post.

Nikolai Bogachyov claimed he walked away with $20 million in exchange for his cooperation with Gazprom in 2005. He had allegedly previously demanded $50 million. Either of these amounts were mere pocket change when discussing the long-term potential of a field like South Tambey.

Whatever really happened behind the scenes is still unclear, but it most likely did not take place as reported. Filings with Companies House in the UK indicate that Bogachyov did walk away with nearly $50 million, tax-free.

Over a period of about 18 months, Bogachyov gave up his shares in exchange for a series “loans”. He first took a loan of $15 million from Switzerland-based commodities trader Glencore, using his shares in Yamal LNG as a guarantee.

Bogachyov then took $20 million from an arm of the Irish-registered emerging markets investment vehicle Ashmore. He again used the same shares as collateral. Using the second loan of $20 million from Ashmore, Bogachyov paid back the $15 million from Glencore. He was now ahead $5 million.

Over the next several months, Bogachyov continued to take loans from Ashmore using the same shares as collateral.

Tambey then transferred these loans to two shell corporations: one in Nassau, Bahamas, and the other in Moscow.  After an appropriate period of time, the two shell corporations were declared insolvent, meaning that the UK company could not pay back the original loan to Ashmore. The UK company then declared insolvency itself, effectively defaulting on the loan. The shares were then transferred to Ashmore, who presumably then transferred them to Gazprom.

But the scam was that both shell companies were associated with Bogachyov. The parent company of the UK-based Tambeygas was the Nassau company Prato Investments Limited. Prato was the recipient of $1,543,096 in loans from Tambeygas. The second company, Moscow-based Ruad Gas Limited received $46,142,618 in loans from Tambeygas. Ruad was also a subsidiary of Prato, and was registered at the same address where Bogachyov’s Yamal Energy Partners was registered.

In the end, Bogachyov walked away with a little under $50 million (less ~$2.3 million in fees), tax-free.

P.S. There is a second part to this story, but I am still trying to untangle it.

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One thought on “$50 Million Tax Free

  1. Pingback: The Emperor Has No Clothes – Nina Jobe

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