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Daily Telegraph: F&C hoists red flag on Russian firms listing in UK

By Russell Hotten
Last Updated: 12:07am GMT 23/12/2006

One of the City’s leading shareholder groups has warned about the “inhospitable” and “difficult” climate facing investors and companies wanting to do business in Russia. F&C Asset Management also questioned the wisdom of allowing so many Russian companies to list in London when their standards of corporate governance were below those in the UK.  

The comments, by Karina Litvack, F&C’s head of governance and sustainable investment, come after Royal Dutch Shell’s bruising encounter with the Kremlin over the company’s huge Sakhalin-2 oilfield. Ms Litvack said: “We take into account the extent to which a government creates an inhospitable climate for investors and is prepared to enforce the rule of law. What’s happened makes it a very dodgy place [for investors].”

F&C, which has £100bn under management, is an investor in Russia’s Lukoil, but is wary about many other businesses in the country. “We look on Lukoil positively because it is not tight with the government and has no politicians on the board,” Ms Litvack said.

But doing business with a company such as Gazprom, the energy giant that on Wednesday took control of Shell’s Sakhalin project, was a different matter, she said.

Gazprom is a “perfect example” of a company in league with the government. “It’s OK until the government changes, and then the uncertainty induces people to behave in ways that are not in the interests of shareholders,” Ms Litvack said.

She continued: “The irony is, some Russian companies are reasonably well run, but they are caught in the cross-fire between the government and a judicial system that is not independent.”

She was also wary about the future for many smaller western exploration companies operating in Russia. Many of these Aim-listed firms think they are below the Kremlin’s radar screen and will continue to do business unfettered.

But Ms Litvack was not sure. “Shell has other businesses around the world to cushion itself against something like Sakhalin. Other companies might not be so robust,” she said.

She also thinks that UK financial regulators should review rules that allow Russian companies “to come to London in their droves”. The firms seek access to foreign capital by listing their depository receipts in London. “They come here rather than New York because of the tougher listing rules in America under Sarbanes-Oxley,” she said.

The eponymous chief executive of Peter Hambro Mining (PHM), Russia’s third-largest gold producer, said its own brush with Moscow’s authorities had damaged investor confidence.

Reports that PHM’s licences could be revoked caused the company’s shares to plummet. PHM was cleared of breaching licences, but Mr Hambro said it has “raised the risk premium” for investors. and its sister websites,,,,, and are all owned by John Donovan. There is also a Wikipedia article.

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