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The Moscow Times: The Mysterious Influence of Inspector Mitvol

oleg mitvol

(Marina Lystseva / Itar-Tass
Oleg Mitvol inspecting energy facilities on a recent tour of Sakhalin Island.)

By Miriam Elder
Staff Writer  
Tuesday, December 12, 2006. Issue 3559. Page 1.

Oleg Mitvol loves to grab the headlines. He barges onto private oil fields unannounced, takes posses of reporters on environmental inspections and wreaks havoc with share prices by threatening to pull licenses from multibillion-dollar projects.

How Mitvol came to be an environmental crusader and a thorn in the side of foreign oil companies is just one of the mysteries that surround the former businessman. Before landing the seemingly obscure job as deputy head of the Natural Resources Ministry’s environmental watchdog, Mitvol was a business partner of Boris Berezovsky, the Kremlin insider-turned-critic.

Mitvol broke with Berezovsky in early 2003, when he closed Noviye Izvestia, a liberal newspaper that he oversaw for the tycoon. The closure silenced one of the country’s last opposition-minded papers, and one year later, Mitvol resurfaced to lead a high-profile environmental campaign that has since targeted some of the country’s most prominent liberals and biggest foreign investors.

“I wanted to do something that no one else was doing, And no one was dealing with ecology,” Mitvol said of his change of career in a recent interview in his Moscow office, whose walls are adorned with two photo calendars — one of cuddly pandas and the other of a stern-faced President Vladimir Putin practicing judo.
 
Yet his biggest campaign to date, focused on Shell’s Sakhalin-2 project, has prompted widespread concerns that he is merely the face of a darker plot to wrest control of oil and gas resources that were liberally handed out to foreign oil companies in the chaotic 1990s.

“He is a gadfly with a mysterious scope of influence,” said Denis Maslov, an analyst with Eurasia Group, a Washington-based risk consultancy. “Without a high formal position, he has managed to annoy everyone from oligarchs to oil companies to the occasional high government official.”

Mitvol came to the watchdog in February 2004 through his connection to Vitaly Artyukhov, whom Putin fired as natural resources minister one month later in a Cabinet shakeup.

“I approached Artyukhov at the end of 2003 and told him I wanted to work with ecology. He told me not to be stupid, that there were more interesting positions elsewhere. But I insisted,” Mitvol said.

Artyukhov was let go amid allegations of corruption and incompetence, his ministerial legacy marked by two events — the issuing of an inordinately high number of environmental licenses on the eve of his departure, and his call to withdraw licenses from Yukos as the firm was battling the huge back tax claims that would lead to its downfall.

Yury Trutnev, who replaced Artyukhov, swept the ministry clean of Artyukhov’s associates after the licensing scandal. Yet Mitvol remained. He sees the former minister rarely, he said, but stays in touch with his younger son, Albert, with whom he founded a company in 1996.

“I don’t even remember how I met Artyukhov — I’ve known him forever,” Mitvol said.

The company, a car and spare-parts dealership called Avtopromkonsulting, never got off the ground.

It was just one of a dozen businesses where Mitvol tried his hand before turning to government, with a deft ability to seize upon the fad of the moment.

As the Soviet Union opened its borders in 1989, he founded Westphalia Club, a prototype tourist agency that helped foreigners explore the country. He remained as president of the firm until 1993 and then moved to bank Neftyanoi Alyans. He left the bank in 1997, one year before the sector was struck by the 1998 default.

On Berezovsky’s Team

It was then that he teamed up with Berezovsky to help set up Noviye Izvestia, as Berezovsky was building up the media empire that he would use first to promote Putin’s presidency, then attack it.

Mitvol held Berezovsky’s 76 percent stake in the paper and chaired the board of directors, dabbling with other investments on the side. Then, in early 2003 Mitvol abruptly seized control of the paper, accusing its leadership of financial mismanagement and shutting it down. One of the few remaining newspapers openly critical of the Kremlin — particularly of its policy in Chechnya — was silenced.

“I have nothing to say about Oleg Mitvol,” said Valery Yakov, who was the paper’s deputy editor during the Mitvol-Berezovsky days, in response to questions about the 2003 closure. Yakov is now editor of a revamped version of the paper, which reopened a couple months later under new management.

Berezovsky declined through a spokesman to comment for this story.

Moscow’s chattering classes have suggested that there might have been a Faustian pact between the Kremlin and Mitvol that gave him access to a government position in exchange for selling out Berezovsky.

Mitvol, however, provides a more mundane explanation. “It was understood that big fortunes aren’t made at newspapers and I would never be a rich man, so when I got bored with it, I left,” he said.

Upon joining the ministry’s environmental watchdog, he went from overseeing the headlines to making them.

Mitvol became a household name across the country with his highly public campaign against the suburban dachas of some of the country’s richest and most powerful people. No one — not even Unified Energy Systems chief Anatoly Chubais, former Prime Minister Mikhail Kasyanov or pop star Alla Pugachyova — appeared to be safe from Mitvol’s threats to raze dachas that he said were illegally built on environmentally protected land.

Now that Mitvol has turned his sights on some of the world’s largest oil companies, his notoriety has carried beyond Russia’s borders.

His calls in September for work on Sakhalin-2 to be shut down over a host of purported environmental violations attracted headlines around the world, and scarcely a few days have gone by since without him issuing new threats to natural resource projects, both foreign and Russian owned.

In the latest case, Mitvol last month claimed that British gold miner Peter Hambro had violated the terms of some of its licenses in Russia, prompting the company’s share price to drop by nearly one-quarter in two days.

“When pressure is exerted on a major project by the Russian state, very frequently the political leadership chooses [not so obvious] people to do it,” said Maslov of Eurasia.

“They frequently pass the task to mid-ranking prosecutors or tax authorities because it offers the Kremlin the chance to say it’s not political — it’s a procedural or regulatory issue taken up by good, hardworking people who don’t have political access,” he said, pointing to the example of Yukos.

Indeed, Mitvol said he had never even met Putin and had seen the president at meetings just five times.

A Kremlin spokesman said he was not sure if the two had ever met, but said “it could not be excluded.”

Government Infighting

Mitvol has also been caught up in the infighting between various factions within the government, with some Kremlin officials apparently backing Mitvol’s campaigns and others obstructing them.

In October, prosecutors raided Mitvol’s office over allegations of misspending on his inspection trips around the country, but the inquiry was later quietly dropped. Last week, he was appointed to a commission within the ministry that decides which subsoil resource licenses should be revoked, but then mysteriously was barred from attending a meeting of the commission.

In the infighting, Mitvol appears to have the support of Trutnev, who on Friday called for Mitvol’s boss as head of the ministry’s environmental watchdog, career geologist Sergei Sai, to be reprimanded for not checking oil firms more often for violations.

Mitvol appears to comprehend the power of the media like few state bureaucrats. Although his university studies focused on engineering, he took a doctorate in history in 2003 at a Moscow pedagogical institute, where his thesis explored the power of information politics in the Soviet Union and at the time of the Bolshevik Revolution.

“Mitvol also has the power of personality. He has a crusading style, so is well-suited for this task,” Maslov said.

Mitvol’s environmental audits — whether to the sites of dachas outside Moscow or the Shell-run oil and gas plant at the southern tip of Sakhalin Island — often come with the fanfare of a three-ring circus, with dozens of journalists in tow.

For one Sakhalin investigation in September, Mitvol even chartered a jet to ferry reporters to and from the far eastern island. On one trip around the island by bus, he escorted reporters from one site to another for 12 hours and took a group by helicopter to visit more sites the next day. At the end of an exhausting three-day tour, the seemingly indefatigable official was hanging out with reporters until the wee hours of the morning.

During the return flight, he happily held forth for several hours to a reporter on the subject of environmental damage on the island, when many state officials might have been content to take a few hours’ rest.

The Gazprom Dimension

Mitvol insists that his attack on Sakhalin-2 carries no ulterior motive, shrugging off a widespread belief that the state is putting pressure on Shell so that negotiations over Gazprom’s entry into the project swing in the gas giant’s favor.

“Now is the best time, and where are they? Why isn’t Gazprom taking it now?” Mitvol said of Shell’s invitation last year to Gazprom to take a 25 percent stake in the project in return for a 50 percent stake in Gazprom smaller Zapolyarnoye field in west Siberia.

Gazprom walked out of talks with Shell this spring, after the British-Dutch oil major doubled cost estimates for Sakhalin-2 to $22 billion.

“Gazprom simply walked away after the audit, because nothing is going right there,” Mitvol said. “The costs weren’t confirmed, it’s all a mirage.

“They will only join the project if you offer them an enormous amount of money,” he added.

Reports on Monday that Shell had offered Gazprom a majority stake in the project suggested that the pressure from Mitvol and others may have produced a result.

Ahead of Monday’s news, a source at Gazprom said negotiations with Shell were contingent on the outcome of Mitvol’s investigation.

“These talks can go on after the questions brought up by the Russian leadership and its agencies, namely the environmental agency, are resolved,” the source said.

Mitvol may not have had orders from on high, Maslov said, but “he can be slapped down, and the fact that they’re not slapping him down shows he does have political sanction.”

Yet Mitvol insists his cause is genuine. Above all, he claims deep patriotism and does little to hide his scorn for Sakhalin-2 — the country’s only major oil and gas project without a Russian partner.

“Of course, ecological questions are the ones I deal with, but to explain the situation we must ask, ‘Why are former government officials working there?'” Mitvol said.

Igor Ignatyev, who was head of the Kremlin press service from 1995 to 1996 and spokesman for the Security Council from 1996 to 1998, now holds the post of vice president in Sakhalin Energy, the company that operates Sakhalin-2 on behalf of Shell and minority shareholders Mitsui and Mitsubishi.

Mitvol said a former deputy energy minister, Gurami Avalishvili, also had held a senior post in the company, but Sakhalin Energy could not confirm this.

“There exists a moral question,” Mitvol said. “In a Russian state-run company like Gazprom, it’s fine if officials work there. But to have Russian officials who gave approval to the project working [for Sakhalin Energy], that poses an ethical problem.”

Mitvol said the stage was set for a huge lawsuit against Sakhalin Energy. He is seeking $15 billion in compensation for purported environmental damages on and around the island, and is seeking to have the company charged with knowingly covering up the extent of those damages. A team of New York- and London-based lawyers was due to present the agency with a proposal Tuesday, Mitvol said, declining to name the firm.

Mitvol says he will then seek approval for the lawsuit from Prime Minister Mikhail Fradkov. Sakhalin Energy has denied that any cover-up took place.

“We have very authoritative American sources on our side, while they have former government officials,” Mitvol said.

Under the production sharing agreement signed between Shell and the Russian government in 1994, any disputes should be heard by an international arbitration court in Stockholm and be governed by New York law.

“Sometimes, of course, you get depressed,” Mitvol said. “But on the other hand, I know I can’t walk away from this. If I left, the situation would be completely awful.”

Mitvol, 40, dismissed any talk of running for higher office, saying Russia was not yet ready to elect a Jew as president.

He also ruled out taking part in the State Duma elections set for next fall. “Working in the Duma is useless. Your voice isn’t heard there.”

And being heard, above all, appears to be what Mitvol wants.

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