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Daily Telegraph: Kremlin finds renewed power from oil

By Ambrose Evans-Pritchard
Last Updated: 2:57am BST 17/07/2007


Flush with oil and gas wealth, Russia has acquired the economic might to inflict punishing wounds on British interests – if it so wishes.
With the world’s third largest foreign reserves ($405 billion), the country is unrecognisable from the basket case that defaulted in 1998. The economy is growing at 7.7 per cent a year, and the Moscow bourse has just reached the big league with a worth of $1,000 billion (£491 billion).

The Kremlin says it aims to keep business matters entirely separate from the escalating Litvinenko affair, not least because Russia itself will pay a global price if its reputation is tarnished any further in the City of London.

If tempers flare, however, the London Stock Exchange is directly in the firing line. Russian companies make up a third of all stock markets floats in the City so far this year.

There are now 42 Russian groups listed on the LSE and the junior AIM exchange, with a combined worth of roughly £267 billion. The floats have been a boon for City bankers, accountants and lawyers. There is now a risk that Russia will strive to keep the business at home. It is already drafting a law aimed at turning Moscow into a financial hub. The most vulnerable British companies are the big oil groups BP and Shell, and a long list of miners, many of which have invested in remote parts of Siberia and the Arctic.

Peter Hambro, the chairman of the gold group Peter Hambro Mining operating in the Yamur region, said the dispute was causing heartburn.

The Kremlin has already played rough with foreign firms, revoking environmental licences as a means of annulling contracts agreed a decade ago when Russia was on the back foot. Shell has been forced to cede control of its $22 billion liquefied natural gas project on Sakhalin Island to Gazprom.

Mr Putin believes that the country’s crown jewels were sold off cheaply in the 1990s “sale of the century”. He is systematically reclaiming what he calls the birthright of the Russian people.

BP’s huge energy partnership with TNK kicked off in 2004 with the full blessing of Mr Putin, so it may be shielded from reprisals.

Christopher Granville, a Russia expert at the risk group Trusted Sources, said it was highly unlikely that the Kremlin would retaliate against business.

However, Stephen Pope, the chief strategist at Cantor Fitzgerald, said that Russia might make British companies feel the heat in countless little ways. and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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