Chichvarkin

The MVD was crowing in public yesterday about how the Westminster court had given an order for the arrest of Yevgeny Chichvarkin, the former owner of Evroset, Russia's largest mobile phone retailer. In the Soviet lexicon, this would mean that Mr Chichvarkin could kiss his freedom goodbye, as the court would of course do everything that the police want. As Chichvarkin pointed out, a British court will require "something that has long disappeared from Russian jurisprudence, namely evidence." No doubt at some point Mr Chichvarkin will have to appear in court to acknowledge the extradition request, and then the court will start to consider the evidence.

I haven't looked deeply into this one, but as far as I can make out, the accusation against Mr Chichvarkin is that he caused the police to arrest one of his former employees, on the accusation that the employee had stolen from him. This is described by the MVD as "kidnapping" although the actual "kidnapping" was done by policemen, who may or may not have been paid off by Evroset. To be honest, it would be almost impossible for a rich company like Evroset to get the police to press charges without paying - the MVD thinks that it's impolite for rich people not to "share" with them. Anyway the upshot was that the accused was let off, after he had in some way paid back the money that he was accused of stealing. Probably not a very savoury episode, but it's hard to see exactly where the egregious crime was. I'm sure that the "evidence" presented will be hearsay confessions beaten out of Mr Chichvarkin's former colleagues.

The backdrop to all this is our old friends in the Customs Committee - after all, Evroset was a major importer of foreign electronics. This is an area that is full of contraband, but it's not clear exactly who is doing the smuggling, as the retailers buy from wholesalers, and there are various links in the chain where Customs officials get paid off. So Evroset may well have bought its phones with clean customs documents, because the person selling the phones had paid off the appropriate officials. Or it might have been Evroset doing the paying. The total amount paid by all phone importers must have been in the hundreds of millions - there have been well in excess of 100 million mobile phones imported into Russia in the last ten years or so.

So this is a nice little harvest, and there was a turf war over it, about 3 years ago, when the General Prosecutor raided some of Evroset's competitors. This is always a sure sign that some part of the law enforcement apparatus sees that one of its rivals is making money, and they want in on it. Evroset was spared these raids, but then sold out to VimpelCom, which is part of the Alfa group. If memory serves correctly, the deal was mediated by Alexander Mamut, who is often a trusted middleman for ensuring that the proceeds of high profile transactions are properly allocated. My interpretation of this is that Chichvarkin saw that he needed to cash out, and the deal was done in such a way that a number of government officials got a slice of the proceeds and VimpelCom got an excellent retail network.

Chichvarkin's problems began after he collected his money, and this means one of two things to me. Either he was meant to sell it to someone else, at a lower price, or someone just saw that he had just had a big payday, and decided to shake him down. The latter is quite possible - I've heard a story of the owner of a decent size bank who sold out to a bigger bank. The day after this appeared in the press, he was called up by someone who presented themselves at being from the Alfa group, and informed him that he was in fact going to sell the bank to him, for a much lower price. The caller mentioned that he knew where to find the bank owner's wife and children. Happily for the bank owner, he had his own connections, and the deal went ahead as planned. In the same way, it's perfectly possible that Chichvarkin was called and told that he had to sell to someone else, who would then sell to Alfa - he chose not to, and is now suffering the consequences.

The second alternative is that this is a simple extortion operation, organised via the MVD. Chichvarkin is publicly in posession of a lot of money and a number of senior police officers feel that he should share it with them, so they threaten him with jail, and hold a number of his colleagues hostage. Don't forget that Chichvarkin is a legitimate businessman who built up his business from nothing, into something very successful. He didn't privatise any natural resources cheaply - he built a proper modern business, and sold it in the normal way. While you feel some sympathy for the view that the oligarchs who stole state resources should get their comeuppance, Chichvarkin's only real sin was that he was rich and successful in public. This is repeated all over the country - if the law enforcement agencies get wind of the fact that you are making a lot of money, they will immediately try to attach themselves to it. If you're a successful local business, you'll get attacked at a local level.

This situation seems to be getting worse. It existed under Yeltsin, and Putin's arrival in power seemed to make things worse, because he had a lot of old friends in the security services, who now had direct access to the Kremlin. The only way of getting rid of this is to create a genuinely independent court system, something that Putin and Medvedev have acknowledged. In fact, I think Putin is on record as having claimed that he created one. But this is about as realistic saying that Britain needs a better climate in order to become a destination for beach tourism.