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Published in Stream:
Russian Update: March 17, 2015
Press by
The Interpreter
@Interpreter_Mag
Russian-to-English translation journal, with original analysis and commentary on Russia's foreign & domestic policy.
Interpreter_Mag
Sergei Ivanov Nominated for Board of Rostelekom - and Further on Malofeyev
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Since rumors circulated during President Vladimir Putin's 11-day absence that he could be facing a challenge to his power by figures more hardline than he, or even a coup, now news of the other top Kremlin officials is being studied carefully.

Today, an announcement came that Sergei Ivanov, Kremlin chief of staff was nominated to the board of Rostelkom, Russia's leading long-distance telephone provider, Novaya Gazeta reported.

Ivanov was discussed as a possible "coup-plotting general" by Andrei Illarionov, former Kremlin advisor, according to some scenarios.

As Paul Goble wrote in a summary of the "generals' plot," Illarionov noticed that Ivanov had gone about "reinforcing his union with the Russian Orthodox Church or at a minimum, guaranteeing its neutrality" when he attended the ROC Encyclopedia board meeting March 11 -- while Putin was missing.

ROC-and-Ivanov.jpg

 Kremlin chief of staff Sergei Ivanov, far right, next to Patriarch Kirill of Moscow and all Rus' of the Russian Orthodox Church; next is Sergei Naryshkin, chairman of the State Duma, and Sergei Sobyanin, mayor of Moscow, at the board meeting of the Russian Orthodox Encyclopedia on March 11, 2015. Photo by patriarchia.ru

According to Novaya Gazeta (translation by The Interpreter):

Presidential press secretary Dmitry Peskov confirmed the news from TASS on the nomination of Sergei Ivanov, chief of the Kremlin administration, to the board of directors of Rosteklkom

Moreover, according to Peskov, Ivanov may chair the board of directors.

'Thus, the government is demonstrating the significance that it gives to the topic of the further development [of the telecommunications sector], said Peskov, speaking of the possible appointment of Ivanov to the company's executive body.

Earlier Vedomosti had cited a source that said Ivanov would be nominated for the board of directors.

The list of candidates is still being approved, other high-ranking officials may be put on it.

While the telecommunications industry is no doubt important -- Rostelekom owns "the last mile" of Internet connection for 35 million households" -- it may also be important to give Ivanov a big post  (not seen as a conflict of interest even while he is in office) -- unless this is his golden handshake.

It's more likely his possible takeover of the board is a sign of increased power over a key industry which brings not only personal wealth but influence. But it may be that he is being installed to turn around the business - Rostelekom's income fell by 16.6% last year; its net profits in 2014 were 29.5 billion rubles or $455.5 million.

Another interesting development, as we noted in a list of strange things in Moscow, is the settlement of a 4-year-long dispute with VTB bank by Konstantin Malofeyev, the Russian Orthodox philanthropist and CEO of Marshall Capital Partners who backs the "Novorossiya" cause.

According to a Kommersant source in an article titled "Loan Ceasefire," Malofeyev got an undisclosed discount on the repayment of $225 million to VTB. The funds were once loaned to him to buy some dairy companies

A source familiar with the situation said Malofeyev paid cash, and not shares he owned in other companies to cover the debt. In 2007, a court had frozen 10% of Malofeyev's shares in Rostelkom as collateral to force return of the debt. Malofeyev was able to convince a London court to rule in his favor and get the shares unfrozen, and then turned around and sued VTB for $600 million in lost income from the asset seizure.

Malofeyev had attempted to negotiate a deal in February of this year, whereby he would give VTB shares in his company S-TS Holding (formerly Infra Engineering) which has experience in building networks for Rostelekom. Since VTB became co-owner of Tele2, a cell operator which began a telecommunications construction project worth 125 billion rubles, the sides were able to see mutual advantage in an agreement, says Kommersant.

In April of last year, Eletrougli Lend received permission from the Federal Anti-Monopoly Service to purchase 100% of the shares of S-TS Holding and the main shares of its founding company Soyuz-Telefonstroi; subsequently a second approval was obtained to buy 49.9% of S-TS Holding, but then it decided not to make the purchase, says Kommersant.

It's possible that was because VTB did not approve the shares since Soyuz-Telefonstroi was in a difficult financial situation. In June 2014, the company obtained a loan from Sberbank for 2 billion rubles using its shares as collateral. Two Kommersant sources familiar with the situation said that Soyuz-Telefonstroi then defaulted on its loan. In November 2014, in an interview with Vedomosti, Malofeyev said he was trying to restructure the debt to Sberbank. Then after Soyuz-Telefonstroi got the contract to build the Tele2 network, VTB ceased to need to buy the shares.

So what is the connection between Ivanov and Malofeyev? Well, this is what the Russian independent media has long been trying to get more information about.

Last year, Theinsider.ru published a piece on May 27, 2014 that said Malofeyev was behind Col. Igor Strelkov, who first took part in the Russian occupation of Crimea, then led the takeover of Donetsk and created the self-proclaimed. "Donetsk People's Republic," where he became defense minister until his removal last summer. Strelkov was said to be head of security at Marshall Capital;  blogger Oleg Kashin found this was disputed but nonetheless had sources that conceded that Strelkov was tied to Aleksandr Boroday, who ran a PR firm under contract with Marshall.

The Interpreter has translated an excerpt of Theinsider.ru piece:

It is hard to imagine that Konstantin Malofeyev acted in Ukraine at his own risk without coordination with the presidential administration. To all appearances, this connection is indeed there, as Sergei Ivanov, Jr., the youngest son of Sergei Ivanov, Sr. who is chief of staff, works at Gazprombank and at one point bought shares in Rostelekom as has been reported in the interests of Marshal Capital and with the knowledge of Sergei Ivanov, Sr. According to The Insider's information, Sergei Ivanov and Konstantin Malofeyev were also in touch along the "religious" line (including through their common acquaintance, Fr. Tikhon, Putin's personal spirtual advisor.)

There is also one other line of connection between Malofeyev with Ivanov, Sr. - Prince Aleksandr Trubetskoy. At one time, the government bloc of which Ivanov is the patron nominated Trubetskoi to the post of chair of the board of directors of Svyazinvest (the largest shareholder of Rostelekom). Ivanov himself, in an interview with Kommersant, openly praised Trubetskoi.

The prince also confirms his own acquaintance with Malofeyev: "Relations were established with Malofeyev as well as [Communications and Mass Media] Minister Shchegolev, thanks to talks on the topic of the Russian Orthodox Church, recalls Trubetskoi to Vedomosti. "They are very close to Fr. Tikhon. And this played a certain role. Moreover, Konstantin Malofeyev, as a business, shared his thoughts with me about Svyazinvest, and I hope in the future will provide his recommendations. But the main thing -- I know him as a true Russian Orthodox patriot.

The Kremlin administration may have wanted to keep a distance to the whole "Novorossiya" adventure by having Malofeyev run it and pay for it -- and they had the criminal case hanging over his head with the debt to keep him in line.

Novaya Gazeta released a sensational document last month which purported to be a draft scenario for the takeover of both the Crimea and the Donbass two weeks before former Ukrainian President Viktor Yanukovych was even toppled. This document was said to be authored by a group close to the Kremlin in which Malofeyev took part, and was said to be brought to the Kremlin and approved.

Not long before the document was released, Malofeyev was rumored to have lost an appeal in court to stop a search of his home and office related to the debt case. Some observers theorized then that Malofeyev may be forced to take the rap for "Novorossiya"now that a ceasefire was under way with the Minsk-2 agreement, so that the government could distance itself from the militants they had previously backed -- and the Russian ultranationalists and volunteers who fought along side them.

But now we see that Malofeyev isn't in jail, his debt is paid off -- and apparently at a discount -- and he has a nice telecom contract. Ivanov is being placed on the board of Rostelecom. What could possibly go wrong?

There's still no smoking gun that ties Ivanov to any of this, other than the fact that Putin conceded in a special feature made for state TV for the anniversary of the forced annexation of the Crimea that indeed GRU spetznaz were sent to "reinforce" existing lawful troops guarding Russia's Black Sea Fleet in the Crimea -- something The Interpreter reported at the time.

And blogger Oleg Kashin has found admission from Malofeyev that he financially assisted Sergei Aksyonov, leader of the pro-separatist self-proclaimed "Autonomous Crimean Republic" who was prominently featured in the annexation celebration in the St. George Hall at the Kremlin last March. So that means the Kremlin administration likely knew about this if the army was involved and a businessman was involved close to the Kremlin.

More research is needed to make the case that Ivanov actually guided Malofeyev, and for that, the independent press in Russia will have to stay alive -- they have faced constant threats of libel suits and closures and the proof may not come to light. At any event, from what we see now, those identified as "coup-plotters" are doing fine.

According to a report on Kremlin.ru today, Putin chaired a formal meeting on plans for the May 9 Victory Day celebrations, flanked by Ivanov on his right and Dmitry Rogozin, deputy prime minister in charge of defense on his left.

Putin-Ivanov1.jpg

Screen grab of video at kremlin.ru by presidential press service.

- Catherine A. Fitzpatrick