Igor Sechin, the man behind the massive Russian oil company Rosneft, has triumphed over Vladimir Yevtushenkov and his company Sistema in an on-going court battle that ended in December 2018 when the court upheld a ruling that was made in August in favour of Sechin. The oil conglomerate had sued the private equity firm for a substantial sum through two claims. The dispute reached the upper echelons of Russia and the Kremlin’s involvement in such matters was questioned after President Vladimir Putin called on the companies to settle out of court.
The disagreement centred on Bashneft, a mid-sized oil company. The first claim was made after the Russian government seized Sistema’s stake in the company in 2014, contending that its privatization had been illegal. Rosneft filed a lawsuit accusing Sistema of removing assets from Bashneft – which was emphatically denied by the company. In the second claim, Rosneft demanded that all Bashneft dividends paid out from 2009 until 2014 be returned. This was the time in which Sistema was the company’s controlling stakeholder. In total Rosneft sued Sistema for US$4.5 billion and Sistema retaliated with a lawsuit totalling US$5.6 billion.
A Russian Capitalism Success Story
Sistema is one of Russia’s success stories after the fall. It was one of the pioneers in domestic private equity that started taking care of local consumer markets. The company has achieved phenomenal success through the years including IPOing Detsky Mir in 2017 and raising more than US$350 million on the Moscow Stock Exchange in shares that are now frozen due to the legal battle with Rosneft.
A Respected Founder and Chairman
Vladimir Yevtushenkov, the founder and chairman of Sistema, is not a typical businessman who has gotten into the bad books of the Kremlin. He is a highly respected Forbes-listed billionaire with no known political aspirations. Yevtushenkov also does not openly fund any candidates that stand in opposition to the ruling United Russia party, and prior to launching Sistema he worked for the Moscow city government as a head of the Department of Science and Technology.
Sistema Stands to Lose it All
With only around US$300 million in cash, Sistema has no means of paying the lawsuit without seriously compromising its shares. This means dumping some of its shares including those in the US$8 billion Mobile TeleSystems (MBT). The defeat is also likely to make Yevtushenkov lose his status as the 30th richest person in Russia and will probably take him off the global billionaire list. This even with the so-called amicable agreement made in the pact between the two companies to make the payment in three instalments; in December 2017, February 2018 and March 2018.
Vladimir Yevtushenkov Claims it’s Unfair
According to Yevtushenkov and Sistema, the system was rigged against them. It is speculated that trying to take on Rosneft and Sechin is even more challenging than taking on the government and Vladimir Putin. After all, it is companies like Rosneft that pad the government’s bank balance. It was a battle that was tipped from the start.