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Financial Times: LSE should encourage the rule of law in Russia

By Robert Amsterdam
Published: August 4 2007 03:00 | Last updated: August 4 2007 03:00

From Mr Robert R. Amsterdam.

Sir, The thinly veiled seizure of RussNeft assets (report, July 30) is further testimony to the willingness of the Russian state to act with both commercial and political impunity within a deteriorating and corrupt regulatory and legal framework that provides no protection to foreign and domestic business in the face of state-sanctioned theft.

In an interview with the Financial Times (July 13), Oleg Deripaska, the middle man in the RussNeft transaction, went as far as proclaiming that he could not be separated from the state.

However, on the one hand, what the owner of Rusal, set to become London’s first Russian primary listing, and all Russian business must understand, is that the Russian government is blackening its international image and therefore directly affecting its global ambitions.

On the other hand, foreign investors cannot close their eyes to the degree to which the Kremlin, which has bullied such giants as BP and Shell into accepting unfavourable deals, is exerting its influence in establishing a new type of corporate state in Russia.

The recent acquisitions of both Rosneft and Gazprom make no economic sense and will only exacerbate a level of inefficiency and corruption that is the despair of Russia’s managerial elite.

In July, the World Bank issued a report that placed Russia on a par with Zimbabwe in terms of governance standards and measured no improvement in the past decade. It is in everyone’s interest (and none more so than the London Stock Exchange) that the rule of law is encouraged to develop in Russia.

The LSE’s silence on this issue speaks volumes about its willingness to win the self-defeating game of regulatory arbitrage.

Robert R. Amsterdam,

International counsel to Mikhail Khodorkovsky

Copyright The Financial Times Limited 2007

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