Three oilmen and an accountant
PART 2 of an in-depth investigation into AQUIND's ownership origins
This is the second part in the series
Tracing AQUIND’s ownership origins:
A motley crew assembles (briefly)
Semyon Vainshtok’s eight year term as president of Transneft came to an end in September 2007. Two days earlier, he had been personally appointed by Vladimir Putin to oversee preparations for the 2014 Winter Olympics in Sochi.1
When he abruptly left that post the following April, the departure was said to have been driven by a desire to retire after his 60th birthday:2
Later, the head of the Ministry of Regional Development Dmitry Kozak said that S. Vainshtok's resignation was connected with his retirement. The fact is, the minister explained, that after S. Vainshtok turned 60 (on 5 October 2007), an agreement was reached with him that “he would work for some time and try to establish the work of the state corporation.”
Another factor may have been the actions of his successor at Transneft—Nikolai Tokarev—who had begun, in February 2008, to accuse Vainshtok’s administration of corruption during the construction of the East Siberia-Pacific Ocean (ESPO) pipeline.3
Whatever the reasons, shortly after terminating his presidency of Olympstroy (the company he created to manage the Sochi Olympics) Vainshtok left the country and flew to London.
On 27 May 2008, he joined Temerko on the board of directors of SLPE. Three days later, Temerko was appointed as a director of SLP Production, along with the management trio who owned SLPH: Edwards, Clark and Blyth.
On that same day, 30 May, a number of things happened that radically altered the ownership structure of the SLP group of companies. Effectively, the BVI-registered shell company—OGN Investment Partners—increased its total stake in the share capital of SLPE (and its many subsidiaries) to 95%. Of the management trio, Clark and Blyth no longer owned any of the company, while Edwards retained a smaller stake in the new parent company: SLP Production. Again, it’s unclear what payments were made during these asset transfers.
SLP Production (Production henceforth) was incorporated on 5 October 2007, with Richard Glasspool as the only person on its board of directors. In an intriguing coincidence, this happened to be the 60th birthday of Semyon Vainshtok.
Production was established as the UK holding company through which the new ownership—especially the majority shareholder: OGN Investment Partners—would manage the group affairs of the actually-operational businesses: SLPE and its subsidiaries.
There is no evidence that Vainshtok was ever involved in Production; he was never officially appointed as a director. However, there is an unexplained quirk in the filings of its subsidiary that hints at the possibility. When he was appointed director of SLPE, under the heading ‘Other Directorships’, its parent company—Production—is listed.
Presumably this was an error made by the person completing the form: SLPE’s secretary at the time, Billy French. That being the case, it was the only such mistake he made. It was an odd mistake too, since nobody else was ever appointed to the board of Production before being appointed to that of SLPE (as would have been the case here).
Regardless, two months later, on 25 July, Vainshtok was joined on the board of SLPE by Viktor Fedotov. For precisely one week, the quartet who attended the party at the Palace—Temerko, Vainshtok, Fedotov and Glasspool—all shared the boardroom.
Before we move on, let’s establish a better understanding of the individuals that made up this (short-lived) quartet:
Richard Glasspool
Richard Damien Glasspool, 65, is a chartered accountant from Southampton. He worked at KPMG for 17 years, first as an adviser on Russia, Poland, Bulgaria and the Middle East, then as a partner in KPMG Bulgaria, and finally as a partner in KPMG Russia and CIS (Commonwealth of Independent States; i.e. post-Soviet republics).4
From 2007-2008 he was a director on the board of Russian insurer RESO Garantia. From March-October 2008 he was a director on the board, and head of the audit committee, of Sobinbank. State-controlled Gazprom bought Sobinbank in October 2008.5 [Note: during this time he was also a sitting director of SLP Engineering, as well as all five of the companies that would later form the OGN Group, including Aquind].
From 2008-2014 he sat on the supervisory board of the Credit Bank of Moscow, where he was also chairman of the audit and risk committee.
Glasspool’s involvement with the OGN Group raises few eyebrows: he’s an extremely experienced accountant, with great contacts in Russia and England, an understanding of how business works in both countries, and he’s fluent in English and Russian. It’s clear he played a vital role mediating between the Russian-speaking oilmen and their English counterparts—especially in the early days.
Nevertheless, it would be easy to underestimate the significance of his role as merely facilitatory in nature. Glasspool was the founding director of Production, which—as will soon become clear—would later be the parent organisation of the OGN Group.
He was also the only one of the four to join the board of Rockpoint, days after it had been acquired by OGN Investment Partners in March 2007. OGN Investment Partners was the opaque offshore shell company through which the ownership of the OGN Group has been permanently hidden.
A month earlier, Glasspool had been appointed as the only director of Alexander Temerko’s consultancy firm BST Link, shortly after Temerko had joined Lubov Golubeva on the board of SLPE (see Part 1: Temerko and Ms Love—an odd pair).
Glasspool has played a leading part in the group venture—as Temerko’s right-hand man—since the very beginning.
Alexander Temerko
[Note: We’ve already covered parts of Temerko’s story in Part 1, and I would also strongly encourage anyone with a deeper interest to read Catherine Belton’s profile.]
Alexander Viktorovich Temerko, 54, was born in the Ukrainian SSR. According to his own website, “following the collapse of the USSR Alexander Temerko became a key negotiator in the team that formed around Boris Yeltsin”.
From 1991, he held numerous senior roles in the Russian defence ministry, as well as being the founding president of two state weapons companies: Voentech and Russian Weapons.
In 1999, Temerko’s old friend Mikhail Khodorkovsky, who he had known since their days in Komsomol (a youth organisation controlled by the Communist Party of the Soviet Union), brought him into the fold at his privately owned oil company, YUKOS.
When I joined Yukos in 1999, he told me it was vitally important to strengthen our relationship with the federal authorities. That was my role… because I knew them all—the old and the new guys in power. I was responsible for dealing with the federal authorities, the government, the State Duma, part of the Federation Council.6
A large part of his role involved negotiating with Transneft, as the Russian state’s monopoly owner of oil pipelines. That meant regular communication with Semyon Vainshtok, who had recently started his presidency at the company. Eight years later, at the end of that presidency, Temerko was full of praise for the Transneft man:7
Vainshtok was able to fulfil the dream of all oil workers and eliminate the capacity deficit, said former deputy chairman of the Yukos board, Alexander Temerko. According to him, when Weinstock took over the leadership of Transneft, there was a shortage of spare capacity in the pipelines by about 15–20%, and the oilmen were fighting each other for the best routes. Now the capacity is 20% in excess, and the oilmen are competing for the customer.
“He made the work of Transneft predictable,” concludes Temerko.
Semyon Vainshtok
Semyon Mikhailovich Vainshtok, 73, was born in Mogilev, Belarusian SSR, three years after it was liberated from the Nazi occupation in 1944. When Semyon was aged three his family moved to Climăuți, a mile south of Moldova’s modern border with Ukraine, where he would spend the rest of his childhood. His father Mikhail worked at an oil terminal there for 30 years—much of it as a director.8
Two years after Mikhail’s death in 1982, Semyon followed in his footsteps when he became a deputy head of the economic department of the Povkhneft oil and gas production establishment. Povkhneft was then headed by Vagit Alekperov—the President of LUKOIL since its creation in 1991.
From 1986 Vainshtok held the post of deputy general director at three oil producing establishments. In 1995 he became a vice-president of LUKOIL, where he remained until his 1999 appointment as president of Transneft.
Vainshtok's new position made him one of Russia's most powerful men. Transneft controls the world's largest pipeline system with a total length of around 50,000km. All major oil companies have to negotiate with Transneft if they want to export their product.9
It’s hard to overstate the importance of Transneft to Russia’s geopolitical interests. Russian oil exports accounted for 13% of the global total in 2019, with a value of over $121 billion (£91.5 billion)10—more than 7% of the country’s GDP that year.11 Over 85% of all those exports were pumped through pipelines owned and managed by Transneft.12
The president of Transneft is one of the most powerful people in the country; there are only two people above them in their chain of command: the minister of energy and the president of Russia himself.
“I’m a soldier, and the president is the commander-in-chief. Orders are not negotiable.” —Semyon Vainshtok, April 200613
To illustrate the point: Vainshtok was responsible for switching off the Druzhba oil pipeline—which supplied 20% of Germany’s oil—during an international dispute with Belarus in January 2007.14
Only a month earlier, when Temerko hosted his drinks reception at Kensington Palace, he remained one of Russia’s most-wanted fugitives. For Vainshtok to have attended his party at that time was extraordinary.
It is tempting to disregard his short two months on the board of SLPE as insubstantial; indeed that’s what myself and Bloomberg’s Eddie Spence did several years ago, when we first investigated Aquind. Because of the way his name was spelled in company filings—Semen Mikhailovich Vaynshtock—a quick internet search returned no results that were of any help in identifying him as the ex-president of Transneft.
However his brief reunion with an old comrade at SLPE provided a crucial clue in uncovering their collaboration during the ESPO pipeline construction.
Viktor Fedotov
Viktor Mikhailovich Fedotov, 73, was born in Ufa, Russian SFSR. He worked alongside Vainshtok at LUKOIL, where he was a vice-president from 1990-98.
In 1998 he was appointed general director of the Caspian Pipeline Consortium (CPC), which had been created six years earlier to build a dedicated pipeline from oil fields in Kazakhstan to export routes in the Black Sea.
A year later, the CPC began work on a pipeline that would transport oil from the Tengiz field on the coast of the Caspian Sea to the Novorossiysk-2 Marine Terminal on Russia's Black Sea coast. Upon completion in 2001, it became the only oil export pipeline in Russian territory not wholly owned by Transneft (and it remains so to this day).
It’s unclear what Fedotov did from 2001-2003, but from 2003-2007 he was chairman of the boards of two companies that were involved in the ESPO project: VNIIST and IP Network.
When the Accounts Chamber (Russian equivalent to the Audit Office) ordered Transneft to conduct an internal audit of the project, in July 2008, both companies were alleged to have embezzled several billion rubles in state funds (10s of millions of pounds).
When Alexey Navalny brought attention to the affair in 2010, much of the blame was directed at Vainshtok who—as the president of Transneft—had been responsible for the project. Another target was Andrei Gorbatsky, who at that time had been the owner of Stroykredit Bank, which had allegedly played a vital role in IP Network’s embezzlement scheme.15
Fedotov on the other hand, despite controlling two of the companies alleged to have profited from the fraud, had never been mentioned in relation to the ESPO embezzlement (until my investigation with TBIJ).
[Note: Fedotov and Vainshtok have been close business associates for decades, as I will reveal in more detail over the coming months—including the years after they shared the board at SLPE.]
Vainshtok resigned from the board a week after Fedotov’s arrival at SLPE, in what appears to have been the end of his fleeting involvement with the group. The following month, Fedotov joined Temerko on the board of the parent company, Production.
A number of share transactions took place between May and October of 2008, but they had little effect in altering the nature of control over SLPE. Rather, the changes served the purpose of reorganising and simplifying the ownership structure.
The result was that Production owned 100% of SLPE and its subsidiaries. In turn, Production was owned by Singapore’s Keppel FELS (5%), David Edwards of Britain (7.5%) and BVI-registered OGN Investment Partners (87.5%).
The ultimate controlling party of OGN was, at that time, the Cyprus-registered shell company Yoli Holdings [more on Yoli later].
Fedotov and Temerko joined Vainshtok in resigning from the board of SLPE in November 2008, though both men—unlike Vainshtok—remained on the board of the parent company Production.
In September 2009, Fedotov resigned from that directorship as well, leaving Temerko as the only remaining Soviet-born board member in the SLP group of companies.
SLP is dead, long live SLP!
In the first half of 2008, the price of oil soared to a peak of more than $145 (£73) a barrel in July. Then, it crashed, to an extent never seen before or since, reaching cents over $30 (£21) a barrel in December—a fall of over 79% in half a year.16
It was within this economic climate that, in February 2009, Maersk Oil Qatar—a subsidiary of the Danish shipping powerhouse Maersk—initiated legal action against SLPE. The previous September, Maersk had terminated a contract with SLPE worth $100 million (£56 million), explaining:17
At the time a very significant number of man-hours of contractual work remained incomplete, despite concessions on the work schedule, payment terms and, most recently, the provision of financial support to SLP Engineering by Maersk Oil Qatar.
SLPE denied the claim, arguing the contract had been “substantially completed”, adding: “The company considers that [Maersk] wrongfully terminated this contract”.
Nevertheless, Maersk sued SLPE for $55 million (£38 million).
SLPE issued a counterclaim “for the recovery of contract related costs”—to the tune of $91 million (£64 million). In the first annual report for Production, the company’s directors noted that the arbitration hearing would likely take place in the summer or autumn of 2010.
Ultimately it was never heard: at the end of November 2009, SLPE and some of its subsidiaries were placed into administration.18
Here the story gets fairly complicated and very messy, so I will revisit this chapter in more detail at a later date. The main thing to take away for now is that some portions of the SLP business group were sold off by the administrators.
For a while, the new ownership’s holding company Production—which avoided administration since it was non-trading—was left without any business to ‘hold’…
Part 3: AQUIND ready to set sail (at last?)
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