Russia’s Prosecutor General has made a sensational statement about the reasons behind the imprisonment of Summa Group’s owners and his close associates
In August the Moscow city court extended the incarceration of Summa Group’s owner Ziyavudin Magomedov and his business partners, older brother Magomed and Artur Maksidov, for the second time, at least until 5 November.
The court stated that the seizure of assets of Summa group’s 36 companies was legal and entered cases against new “members of a criminal group,” including top managers at Summa subsidiaries.
Earlier this month the court ordered the detention of Sergey Polyakov, the deputy director general of Summa-controlled United Grain Company (OZK), and Roman Gribanov, the former head of OZK’s economic security department.
Furthermore, the court declared the receipt of an unsigned letter from anonymous shareholders of the FESCO group (also controlled by Magomedov), which accuses Summa’s owners of embezzlement. FESCO has stated that no shareholders have ever addressed it on this matter.
Now, however, Russia’s Prosecutor General Yuriy Chayka has caused a sensation. Speaking at a meeting during the recent Eastern Economic Forum in Vladivostok, he said that the main reason behind Ziyavudin Magomedov’s arrest was his conflict with a Russian-born French businessman, Michel Litvak.
According to Chayka, Michel Litvak was ready to invest billions of dollars in the development of Russia’s Black Sea port of Taman, but the Magomedov brothers interfered and intrigued against the Frenchman, as they wanted the project for themselves. Litvak complained to the prosecutor general’s office. "We listened and decided to act," said Chayka.
Magomedov’s Summa and state-owned oil pipeline monopoly Transneft control Novorossiysk Commercial Seaport (NMTP), Russia’s largest port operating group. NMTP was acquired for around US$2.5B in 2011 from businessman Aleksandr Ponomorenko, Duma member Aleksandr Skorobogatko and companies affiliated with President Putin’s friend Arkadiy Rotenberg.
67-year old Litvak made his fortune in the Russian import and export business after the fall of the Soviet Union in 1991. He then invested in the privatisations of former state-run assets and acquired extensive oil interests.
His United Transport and Forwarding Company (OTEKO group) is thought to be one of the largest private investors in Russia’s Black Sea port infrastructure. Thus, in 2012, OTEKO’s subsidiary TamanNefteGaz launched Russia’s first 20 Mtpa oil and LPG terminal in Taman. Total investment in the project and the construction of approach rail lines is estimated at US$3.5B.
In addition, OTEKO has been planning to put into operation a 35 Mtpa Taman bulk cargo (coal, iron ore, fertilisers and sulphur) terminal by the end of the current year.
In 2016, OTEKO committed to invest around US$8B in all its Taman-based projects (including a would-be port industrial park) by 2021. The same year, Russian president Vladimir Putin personally ordered the country’s transport ministry to grant permission for OTEKO to build the approach rail tracks.
In 2015, Moscow was forced to cut budget spending and the federal costs initially earmarked for the construction of the Taman harbour were assigned for building the Kerch Bridge to link Russian-annexed Crimea with the mainland.
Under the circumstances, the government mapped out Taman port development scheme and was considering the sale of a 49% stake in RMP Taman, the state-run developer of the port, to private investors.
The Kremlin then signed a Letter of Intent with NMTP group for the construction of Taman’s dry cargo handling area with its peak aggregate capacity of 90 Mtpa. The document enabled NMTP to become a strategic partner in RMP Taman.
Last year, when Moscow withdrew its public concession grant (one third of the total construction costs) from the Taman projects, Ziyavudin Magomedov declared NMTP group’s preparedness to develop the Taman port on its own.
According to Magomedov, Novorossiysk and Taman would not compete with each other as they would handle different cargoes. Thus, it was planned to handle "dirty cargoes" such as coal, fertilisers and sulphur at Taman, while leaving metals, grain, general and container cargoes for the city-based Novorossiysk harbour.
This year, however, the situation changed dramatically, as Summa’s long-running conflict with Transneft over control over NMTP reached its pinnacle and Summa announced the sale of its stake in NMTP to its enemy, but the deal fell through due to the arrest of Magomedov.
Add in Yuriy Chayka’s statement, it looks like the Magomedovs and their supporters have made too many powerful enemies. Meanwhile, they remain in prison without trial, presumably while the state continues its efforts to build a watertight case againt them, although they continue to protest their innocence.