Sistema share price slumps, Chairman Evtushenkov arrested

Moscow SE has temporarily suspended trading with shares of Sistema, the largest publicly-traded diversified holding company in Russia, after the stock plunged on news of the arrest of Vladimir Evtushenkov, who owns 64.2% of Sistema and is chairman of its board.

Mr Evtushenkov was accused of money laundering related to Sistemas acquisition of Bashnesft, an oil company in the Russian republic of Bashkortostan.

“Sistemas management believes that the acquisition of BashTEK group was legal and transparent,” the company statement read. “The company is fully cooperating with the investigation and intends to use all legal means to defend its position.”

Russia’s investigative committee said it had “reasonable grounds” to accuse Yevtushenkov of involvement in legalizing property acquired by criminal means.

The critical piece of speculation, is that Rosneft, currently the worlds top oil company, was interested in buying Sistemas oil interests.

Rosneft is headed by Igor Sechin, a close ally of Russian President Vladimir Putin and among the first to be sanctioned by the US and EU this year. More importantly, Rosneft is the company which acquired almost all assets of now-defunct Yukos in the early 2000s. Then, the founder of Yukos and then-richest man in Russia, Mikhail Khodorkovsky was arrested and charged with crimes similar to those now attributed to Mr Evtushenkov. Khodorkovsky spent 10 years in prison, while Yukos, the then-largest Russian oil company, was broken down and its assets sold to state-owned Rosneft, run by Sechin, and Gazprom at suspiciously low prices.

“Without doubt this looks very like Yukos 2.0, because the charges apply to the head of a company that paid $2.5bn for assets and is now accused of stealing shares and money-laundering,” Alexander Shokhin, head of Russias Union of Industrialists and Entrepreneurs, told Ria Novosti.

Recently, Rosneft, and the Russian government, lost a Hague-case verdict to now-free Mikhail Khodorkovsky, and were ordered to pay former Yukos shareholders the record $50bn in damages. The Hague court said Russian officials had manipulated the legal system to bankrupt Yukos, and jail its boss.

“This arrest [of Vladimir Evtushenkov] is exacerbating the already negative investment climate in Russia and doesn’t improve the attractiveness of Russian assets,” Oleg Popov at Allianz Investments said for Bloomberg.

The Russian government denies wrongdoing in both cases.

Sistema was down 37% by the time Moscow Exchange suspended trading, though soon slightly recovered to trade at RUB 24.867 (~$0.65) at 10:24 GMT, valuing the company at RUB 351.73bn (~$9.18bn).