The St. Petersburg Times: Oleg Mitvol Facing Ministerial Rebuke

Issue #1231(97), Tuesday, December 19, 2006
By Miriam Elder
Staff Writer
 
MOSCOW — Oleg Mitvol, the state official leading the charge against Shell-run Sakhalin-2, was threatened with disciplinary action Thursday. Yet it looked like his boss was the one in greater danger of losing his job.

Sergei Sai, the head of the Natural Resource Ministry’s environmental watchdog, sent a letter to Minister Yury Trutnev seeking disciplinary action against Mitvol, his deputy.

The latest infighting among state officials came just days after Gazprom said it was close to reaching a deal on securing a stake in Shell’s huge oil and gas project at Sakhalin-2, which Mitvol has accused of gross environmental violations.

If Trutnev approves the request, Mitvol will be formally disciplined. If he is reprimanded a second time, he will be fired, ministry spokesman Rinat Gizatulin said.

“Minister Trutnev will examine the letter by next week. No decision has yet been made,” Gizatulin said.

Yet it appeared that Sai, a relative unknown in Moscow’s political circles and a career geologist who joined the watchdog last year, could be the one on his way out.

Mitvol said Sai had received a letter from the Prosecutor General’s Office on Tuesday criticizing his work. Mitvol declined to provide details, saying only that Trutnev had told him of the letter. A note from the Prosecutor General’s Office would imply the threat of legal action.

“Sai has received a letter from the Prosecutor General criticizing his work and I think this is how he’s chosen to react,” Mitvol said by telephone.

Trutnev has thrown his support behind Mitvol in the past, and earlier this week said he would seek to discipline Sai for failing to check oil firms regularly for noncompliance. Mitvol echoed Trutnev’s calls for Sai to be fired.

“I’ve already had three bosses and each of them has made such a declaration before his own departure,” Mitvol said, Prime-Tass reported.

Analysts dismissed the possibility that calls for Mitvol’s departure were linked to the likelihood that Gazprom would soon take a large stake in Sakhalin-2. Mitvol’s high-profile campaign against Sakhalin-2 has widely been seen as a way to pressure Shell into giving Gazprom a bigger stake in the project.

Project operator Sakhalin Energy said Wednesday that the campaign — which has seen Mitvol suspend water-use licenses for a key subcontractor and threaten to pull the project’s entire environmental license — had begun to threaten the project’s production timetable.

The project is due to start shipments to customers in Asia and the United States in mid-2008.

Also on Thursday, Mitvol pulled back on threats to withdraw five licenses from London-based Peter Hambro Mining, Russia’s third-largest gold miner.

Mitvol told CEO Peter Hambro at a meeting in Moscow that he would recommend just two licenses for projects in the Arctic be withdrawn, but that 20 projects had passed environmental inspections. Checks will be carried out on the remaining 22 Hambro-affiliated projects operating in the country, he said.

“All foreign and Russian companies must understand that if they have a license agreement, they must fulfill every point,” Mitvol was quoted by news agencies as saying.

“Investors should understand that sooner or later, the state will ask how these resources are being used,” he added.

Peter Hambro shares lost more than one-third of their value after Mitvol, a former businessman, said two weeks ago that he might call for five licenses to be withdrawn. After Mitvol’s comments Thursday, the company’s shares soared by more than 12 percent by 5 p.m. London time.

Hambro said the company was ready to invest $380 million in Russia over the next three years, but warned of the effects of Mitvol’s threats.

“The market hates uncertainty. Investors in the West will put a higher risk premium on Russia if things like this happen,” he said, Reuters reported.

Mitvol said that the company’s main operational mine, Pokrovsky in the Amur region, had passed inspections. He will recommend withdrawing two licenses from Yamalzoloto, a company based in the Yamal peninsula that is ultimately owned by Peter Hambro, Reuters reported.

“The government generally sends signals to strategic resource communities, reminding them who is the boss,” said Denis Maslov, an analyst for Eurasia Group, a New York-based risk consultancy. “It’s more than oil and gas — gold and other metals are strategic resources as well,” he said.
 

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