Former Russian MP and businessman Sergey Petrov in Modling, Austria, on April 22. Photographer: Michaela Nagyidaiova/Bloomberg
By Marton Eder
Sergei Petrov was unable to do anything from his home in the outskirts of Vienna when Russian President Vladimir Putin wanted to take over the car dealership he founded and built.
Putin signed the decree in December transferring ownership of Rolf, Russia’s largest car dealer, from a Cyprus-registered entity controlled by Petrov’s family to the state-owned company Rosimushchestvo for temporary management. Shortly afterwards, armed officers raided the company’s headquarters to ensure the appointment of a new board went smoothly, Petrov said.
“It’s a kleptocracy,” Petrov said in an interview at his home in Austria, where he has resided permanently since 2016. “There are no laws, only the selective application of justice.”
During Putin’s two-decade-plus rule, Russia has sought to build state champions and sometimes used the criminal justice system to hand assets to Kremlin allies. That accelerated after Russia invaded Ukraine, causing a rift in relations with the West and increasing pressure on private companies to publicly support the war.
Petrov’s family held Rolf through Delance Ltd., which was vulnerable to laws that allow Putin to seize the assets of some foreign companies because Cyprus is categorized by Russia as a so-called unfriendly country. Russian lawmakers have yet to ratify a treaty on mutual investment guarantees with Cyprus, hampering efforts for a legal remedy. Russia nationalized Rolf in February.
Petrov, a dual Russian-Austrian citizen, said his situation reflects a new normal in Russia, where Putin has become increasingly comfortable using the legal system to meddle in cases and reward loyalists. He said the harassment by prosecutors is politically motivated and stems from his criticism of the Russian leader’s actions, such as when, while serving as a lawmaker in the Russian parliament, he did not participate in the 2014 vote to annex Crimea. In 2011-2012 he also openly supported the largest anti-government protests against Putin’s rule.
Russian authorities opened a criminal investigation into him in 2019, accusing him of illegally transferring money abroad. Petrov says the charges are based on obscure regulations, and that courts ignored substantial procedural shortcomings when they imposed a prison sentence of more than eight years on one of his managers, a co-defendant in the case.
The Kremlin did not respond to a Bloomberg request for comment. Rolf representatives also did not respond when asked for comment.
The Austrian government rejected an extradition request against Petrov, but a 2022 Russian civil judgment citing the criminal case forced Rolf to transfer 20 billion rubles ($214 million) to the Russian government.
While the decision was being appealed in Russia, Petrov said it was unlikely to succeed, and he hopes for compensation by following the blueprint of the now-defunct Yukos Oil Co., once Russia’s largest oil and gas company. Two decades of legal battles netted former shareholders a $50 billion reward over claims that Russia was politically motivated when it imposed several tax demands on Yukos Oil that ultimately led to bankruptcy. Russia has said it will not pay.
His lawyers have filed a claim with the United Nations Human Rights Committee under the International Covenant on Civil and Political Rights – a treaty that Russia has yet to withdraw from. They are also investigating the possibilities for arbitration.
An agreement with prosecutors, such as in the case of sanctioned billionaire Andrei Melnichenko, who was allowed to keep certain energy assets after his company agreed to contribute money to charity projects, is unlikely, Petrov said.
For now, the company is cooperating with state regulators who are pressuring managers to stay on board, Petrov said. Already reeling from the sanctions-induced shift from selling Western cars like Porsche and Mercedes Benz to offering Chinese brands and used cars, he worries things could turn out worse for Rolf.
Umar Kremlev, the head of the International Boxing Association and its Russian national organization, has been introduced to the company as its future owner, Petrov said. Under Kremlev, the international boxing body was stripped of the right to organize Olympic boxing tournaments in Tokyo in 2021 and Paris in 2024 over concerns about the group’s governance and allegations that the Russian head had used violent and threatening language about Olympic Committee staff, the organization said. Associated press.
Russia has become increasingly aggressive in seizing assets from local tycoons since the start of the war in Ukraine. Prosecutors have filed at least 55 cases seeking to nationalize assets since Moscow’s invasion of Ukraine began two years ago, according to research published in December by Moscow’s RBC newspaper. Sometimes these transfers took place in violation of laws requiring an auction to divest state-owned companies, Petrov said.
The Russian unit of food conglomerate Danone was under a similar temporary management regime. A dairy company owned by a member of a management team linked to Putin loyalist and Chechen leader Ramzan Kadyrov plans to buy that asset, the Financial Times reported in February.
Other production plants have come under government control, including units of Carlsberg A/S and US-based AgroTerra. In the auto industry, a Rolf rival Avilon bought up factories abandoned by Volkswagen AG and Hyundai Motor Co.
“They tried to buy in the cheapest way, hoping that they would find a way to make money from it,” Petrov said of the factories’ purchases. “It’s speculation.”
First print: May 4, 2024 | 11:18 am IST