The Russians are returning
Just a year after the Skripal poisoning, transport giant linked to Putin’s top tank maker is rolling in to London for £1bn market float
A RUSSIAN company is poised to raise money on the London Stock Exchange for the first time since the notorious nerve agent poisoning in Salisbury a year ago.
Despite soured relations between the Kremlin and the West, Russian freight giant Rustranscom (RTC) has laid out plans to raise about $300 million (£228 million).
The s hare s al e could value Rustranscom, which transports grain across the Russian Federation, at more than £1 billion and give its controlling shareholders a multi-million pound windfall.
Chairman Konstantin Sintsov and chief executive Konstantin Zasov together own nearly 96 per cent of the company.
It would be the first Russian float in London since Oleg Deripaska’s energy giant En+ controversially listed in November 2017. En+ raised £1 billion to pay back VTB, a Russian state-owned bank that sanctions have prevented from raising money in the EU and the United States. Deripaska was among the oligarchs close to Putin to be hit by sanctions.
VTB is among the banks working for Rustranscom which will cash in on the London listing, as well as Sberbank, another Russian state bank hamstrung by sanctions. Others involved are JP Morgan, Credit Suisse and Societe Generale.
Several other firms are thought to have been delaying share offers until the political uncertainty of Brexit is resolved.
Potential investors in Rustranscom have been warned that the c o mpany’s subsidiaries have bought railcars directly from UralVagonZavod – a state-owned company best known for making tanks used by the Russian army.
Rustranscom explicitly denies its founders have any links to the Russian state. However, Dr Andrew Foxall, director of the Russia and Eurasia Studies Centre at the Henry Jackson Society, highlighted the Kremlin’s tight grip on the railways in Russia. He said that ‘given the nature of power in Russia’, the Kremlin would likely have been made aware of the float.
Documents for potential investors reveal Rustranscom is ‘heavily dependent’ on its ‘ longstanding’ relationship with Russian Railways, the state-owned firm that controls the railways in Russia.
The company said: ‘There can be no assurance that…the group will not become subject to competitive pressures exerted by Russian Railways that may have a material adverse effect on the group’s business.’
Little is known about the pair of wealthy Russians who set up Rustranscom in 2008. It appears Sintsov is a shareholder in a Malta-based yacht-building business called Oceanic, which is currently building a 140ft superyacht.
After the Salisbury outrage, the Government tightened up rules on visas for wealthy Russian investors and has incorporated new ‘unexplained wealth orders’.
But Dr Foxall said it was ‘striking’ that the Government was hesitant to introduce stricter requirements for the LSE. Rustranscom has nearly 68,000 railcars in its fleet, of which around 54,000 are owned by the company. Its clients include Evraz, the FTSE 100 steel company controlled by Roman Abramovich.
Last year, Rustranscom generated £755 million in revenues and £179 million in pre-tax profits.
Zasov said his company has grown ‘ rapidly both organically and through acquisitions to become a national champion in specialised rail freight transportation’.
He added: ‘Robust sector growth, coupled with RTC’ s strong operational and financial results, support the company’s strategy aimed at capturing exciting opportunities offered by the underlying industries.’
However, the float documents reveal concerns that the company – which transports goods including fertiliser and timber – may not be able to raise funds with international investors due to Russia’s international conflicts.
They refer to the state’s alleged involvement in the poisoning of Sergei and Yulia Skripal in Wiltshire last year. The documents also warned of the company’s links to UralVagonZavod, which builds tanks including the new generation T-14 Armata and the BMPT-72 tank support combat vehicle dubbed Terminator 2. UVZ remains on the US sanctions list for being associated with the defence and intelligence sectors of the government of the Russian Federation.
Under US law, those who enter into ‘significant transactions’ with such organisations risk being hit by sanctions themselves.
UVZ is the largest battle tank manufacturer in the world and was sanctioned in 2014 by the US in retaliation to the annexation of Crimea by t he Kremlin. RTC warned: ‘While the company does not believe its transactions with UVZ are significant for this purpose, there can be no assurance that OFAC [the Office of Foreign Assets Control] will be of the same view.’
A spokesman for the Financial Conduct Authority said: ‘We consulted with the relevant authorities according to the usual protocols. Having done so, there were no grounds for the application to be refused.’
Last year, a Foreign Affairs Committee report into Russian money in the UK criticised the Government’s lack of action despite its strong rhetoric in the wake of the attack on the Skripals.
The report also highlighted the ‘mixed messages’ sent out by allowing En+ to float despite concerns voiced by MI6 and US security officials.
On the En+ flotation and the sale of Russian debt l ast year, the report said: ‘The ease with which such large scale transactions occur also sends political messages that undermine the Government’s condemnation of what the Prime Minister has called the “well-established pattern of Russian state aggression”, encouraging President Putin and his associates to conclude that the money supporting that aggression is safe and welcome in London.’
America has now lifted sanctions on companies controlled by Deripaska, an ally of Putin, after he loosened his grip on firms including aluminium giant Rusal and En+, which is chaired by Tory peer Lord Barker. Deripaska reduced his stake in En+ and overhauled the board in an effort to appease the US authorities.
On Thursday, Russia’s largest gold firm Polyus Gold revealed that its major shareholder Said Kerimov sold £300 million of shares in the company with the help of VTB and Sberbank. London-listed Polyus has not been affected by sanctions, but Kerimov’s father, Suleyman Kerimov, former owner of the shares, is on the sanctions list.
Given the nature of power in Russia, the Kremlin would likely have been made aware of the float