The government is a powerful factor in almost every part of Russia’s economy
By Bernard Condon and James Ellingworth
Associated Press
MOSCOW (AP) — A shipping company partly owned by President Donald Trump’s commerce secretary is one of the few in the world that can transport liquefied petroleum gas in cold and icy conditions. Russia is known for its brutal winters as well as its giant, state-controlled oil and gas producers.
So, for years, Wilbur Ross’ company has been moving LPG for a Russian gas giant.
But now, in what might seem almost an echo of the Red Scare that lasted in America for generations, this business relationship is seen as tainted, an ominous connection to a country that unleashed cyberwar against American democracy and the 2016 election that put Trump in the White House.
Are all connections to Russia now suspect? Or are they sometimes merely an inconvenient consequence of doing business in a country where major corporations often are controlled by the Kremlin?
The latest tie between Russia, Trump and his campaign and administration officials came to light Sunday with news that the U.S. commerce secretary is a part owner of Navigator Holdings, a shipping company that transports LPG produced by Sibur, a big Russian company with ties to the Kremlin.
Some shipping business experts who follow the company are shrugging off the news.
“Russia has a lot of commodities that need to go somewhere else,” said Benjamin J. Nolan, a financial analyst who covers Navigator for Stifel, Nicolaus & Co. He added, “Odds are, they are going to have long term contracts with Western shipping companies.”
The Russian government is a powerful factor in almost every part of the country’s economy. Some of Russia’s biggest banks, such as Sberbank and VTB, are state-controlled with their management answering directly or indirectly to the Kremlin.
Then there is Gazprom, a big gas supplier to Europe, and Rosneft, the oil producer. Both are majority state owned.
The new Russian giant in the spotlight, Sibur, has its own special connections to the state, and President Vladimir Putin in particular. It is partially owned by a man said to be Putin’s son-in-law, and two of its biggest shareholders are oligarchs close to Putin. One of them is his old judo partner.
The details of Ross’ stake in Navigator were found among 13.4 million leaked records on offshore entities used by the rich and powerful and famous. They are the biggest leak on the shadowy offshore financial system since the Panama Papers last year, and could shed more light on the byzantine ways companies and individuals hide their wealth or lower their taxes.
Following news of the leak, Ross has said in interviews that his ties to Russia are being blown out proportion. He told Britain’s Sky network that his Navigator stake had been previously disclosed in financial documents filed with government ethics officials, and noted that Sibur is not under any U.S. sanction. For its part, Sibur has said that only a tiny percentage of shipping business goes to Navigator, less than 3 percent of “logistics expenses.” It said that it was surprising to hear the “politically driven interpretation” in some media reports of its “ordinary business operations.”
Trump himself also has faced scrutiny over his business ties to Russia. In prepared remarks to the Senate and House intelligence committees, Trump’s personal lawyer, Michael Cohen, disclosed that the Trump Organization had been pursuing a business proposal in Russia during the presidential campaign. Cohen has said that the proposal for a Trump Tower Moscow never came to fruition and denied it had any impact on the campaign, saying it was “solely a real estate deal and nothing more.”
No evidence has yet emerged that the business deals are being examined by special counsel Robert Mueller. The former FBI director is investigating the Kremlin’s interference in the 2016 election and any possible coordination with Trump associates.
As for Ross, the most obvious link to Putin is Kirill Shamalov, who is married to a woman who is said to be Putin’s youngest daughter. Shamalov once owned more than 20 percent of Sibur, but has since cut that stake to 3.9 percent, according to the International Consortium of Investigative Journalists, the group that has been reviewing the new trove of documents.
Another Kremlin link is Putin’s old judo partner, Gennady Timchenko, the second largest shareholder of Sibur.
Businessmen with Kremlin links are sometimes tapped to work on key projects with political symbolism, such as the bridge to Crimea or the Sochi Olympics. Timchenko’s construction company has a role in building stadiums for next year’s soccer World Cup.
Timchenko was sanctioned by the U.S. after Russia annexed the Crimea. The U.S. also barred banks from providing long-term financing to a gas company belonging to Sibur’s largest shareholder, Leonid Mikhelson.
Ross has never met Sibur’s Shamalov, Timchenko and Mikhelson, according to a Commerce Department statement, and was not involved in his shipping company’s negotiations with Sibur.
Kremlin connections can boost the fortunes of U.S. companies, but they can also backfire. Russian partners sometimes come under suspicion abroad that they are acting out of political, not purely commercial, motives.
The state gas company Gazprom, in particular, has been accused of manipulating price talks over natural gas to put pressure on governments of other European countries, particularly Ukraine. That’s prompted many European countries to seek gas supplies from elsewhere.
A deal between Rosneft and Exxon Mobil also has run into trouble. The Treasury Department fined Exxon Mobil $2 million in July over what it called “reckless disregard” for U.S. sanctions by signing deals with Rosneft’s sanctioned head, Igor Sechin, in May 2014. Secretary of State Rex Tillerson was the U.S. oil firm’s CEO at that time.
Exxon has maintained it did nothing wrong and sued the U.S. government in an effort to stop the fine.
As for Ross’ Navigator, some experts say it’s hardly surprising the company counts a Russian company among its customers.
“Russia is the biggest producer of oil, and that needs to be sold in a global market place,” said Jonathan Chappell, a financial analyst at Evercore. “Navigator is perfectly positioned.”
