*
In the last decade of the second millennium Russian oil fell into the hands of a small group of powerful oligarchs who in the process became staggeringly rich. However, with the arrival of Vladimir Putin and his clan the Kremlin set in motion a series of changes that would wrest control from the oligarchs in favour of state controlled businesses.
For those oligarchs who hesitated to heed the Kremlin’s calls was the ever present threat of a Siberian prison cell, many of which abounded in Zabaykalsky krai and Magadan oblast in the Russian Far East, both of which had been at the centre of the Soviet Union’s notorious gulag archipelago.
At the height of Stalin’s purges more than five hundred prison camps had existed in the Magadan oblast alone, a desolate region where winter temperatures fell to minus fifty degrees centigrade. Almost the size of France in terms of square kilometres, it counted a population of just one hundred and fifty thousand souls, one five hundredths of France’s. There, countless numbers of political prisoners died from forced labour, hunger and torture.
The oligarch, former head of Yukos Oil, Mikhail Khodorkovsky, one of Vladimir Putin’s enemies, lived to tell the tale of his forced exile in Zabaykalsky krai, an inhospitable region, a frozen waste for most of the year, near the Chinese border, after purging part of his prison sentence in one of its camps.
Russia had long been a nation used to violence. In recent times, following the fall of the Soviet Union, the Western press revelled in lurid stories of murder and violence in Moscow and Saint Petersburg, where each new day delivered its lot of bloody victims as rival interests fought for control of the Federation’s newly privatised businesses and industries.
That was during the Yeltsin era.
Under Putin, however, the victims were the enemies of the state: journalists, whistle-blowers, dissidents and businessmen, who fell foul of the Kremlin. According to some estimates three hundred thousand people rotted in grim Russian prisons for financial crimes alone, many of whom were sentenced on the basis of trumped up charges by corrupt authorities, for reasons of vengeance, profit or to silence the accused.
Those same vast, empty, regions of Eastern Siberia had been exploited for their raw materials since czarist times. They were nothing more than vast mines, worked under the Communist regime by European Russians, most of whom were forcefully displaced. Since the dissolution, the populations of Eastern Siberia shrunk at an alarming rate, men and women voted with their feet, upping and heading west with their families by the tens of thousands. At the same time, under the wary eyes of Moscow, a steady flow of Chinese moved in, establishing themselves in the larger cities of the regions neighbouring China.
WANTED
It was Friday evening after markets closed when a news flash from Moscow announced Tarasov’s holdings had been seized on instructions of the Russian Ministry of Finance. Suddenly, without the least warning, the City based INI Banking Corporation found itself seriously compromised, as one of its most important holdings, the InterBank Corporation, fell under the control of Russian authorities.
Moscow accused Tarasov of financial crimes and demanded London he be extradited to face Russian justice. To make matters worse the oligarch was posted as wanted on Interpol’s website for fraud and tax evasion.
InterBank had invested heavily in Russian energy companies, financing exploration, production and pipelines, which had come under severe pressure following the collapse of oil and the rouble, increasing the risk of default on the loans contracted in the City through INI.
As the news broke the City panicked with the LIFFE FTSE Index Futures1 sharply tumbling. The risk of a banking crisis suddenly loomed sending financial authorities in London scurrying into action.
As London switched into crisis mode, Michael Fitzwilliam was blithely enjoying a winter break on safari in Tanzania and by the time he was contacted the wheel of fate had already been set in motion. Saturday morning at number 11, Downing Street, the Chancellor had convened a Cobra2 committee meeting to formulate an action plan.
Fitzwilliams arrived in London early Sunday morning and by time he contacted the Chancellor’s staff the die was already cast. It was shortly after lunch time when the CEO arrived at the Treasury, where the Chancellor, whose weekend was already ruined, was irritable and little disposed to take into account the banker’s apprehensions.
Fitzwilliams’ tie up with Tarasov’s bank in 2009 had ruffled a lot of feathers, not only in the City, but also in government circles. The Labour government, in the throes of what Charlie Bean, the then deputy governor Bank of England, called the ‘largest financial crisis of its kind in human history’, had given the green light to the deal against the recommendations of many financial advisors, but the Chancellor saw it as positive move in an otherwise grim economic climate.
At three, Sir Alec Hainsworth, chairman of City & Colonial arrived and without further formalities Fitzwilliams was read the sentence. He was to be offered up on the alter of expediency to avoid the risk of a Lehman style crisis, and was informed in other terms that his sacrifice would save the City.
The way in which the diktat was delivered, the banker, already tired after his long journey from a safari camp in Ngorongoro, numbed, in a state of shock, reacted like a condemned man. His plight was like that of Fred the Shred, the CEO of RBS, who had been unceremoniously booted out six years earlier after the liquidation of Lehman Brothers.
Fitzwilliam had desperately tried to contact Tarasov, who following the announcement from Moscow had disappeared. Kennedy was equally unreachable, gallivanting on a junk, off the coast of Hong Kong, somewhere in the South China Sea, thought Fitzwilliam bitterly, celebrating the Chinese New Year or something like that.
As he faced his inquisitors the banker felt small and very lonely in the large conference room. Presiding was the Chancellor, to his right the Governor of the Bank of England, and to his left the head of the City Financial Authority, flanked by other high ranking Treasury officials. At one end of the table sat the executioner in the form of the Hainsworth, waiting for the sign.
The Secretary to the Treasury passed a document to the Chancellor who turned the pages, scanning them in a perfunctory manner, obviously familiar with the contents.
“Michael,” he said in a familiar almost kindly manner like a doctor about to announce bad news to his patient, “this is a memorandum that details the transfer of control of the Europa Bank Holding to City & Colonial in exchange for a recapitalisation and the issuance of preference shares, to the equivalent value, to the new shareholder, represented here by Sir Alec Hainsworth.”
He slide the document across the imposing table which dated back to the time of Gladstone. His hand remained on the paper as he continued: “Your resignation will of course be accepted and in exchange you will receive a generous compensatory package. Naturally your family shares will not be affected.”
Fitzwilliams was thunderstruck.
With no more ado the Chancellor stood up leaving the memorandum to the shocked banker.
“Needless to say, we are following the situation in Moscow very closely. Unfortunately Mr Putin is unpredictable, to say the least. It is easy to criticise the wisdom of your association with Mr Tarasov in retrospective, approved by our Labour predecessors, however, we are not here to judge, but to resolve the situation engendered by that arrangement.”
He paused, looking around for approval.
“I trust you gentlemen will conclude the agreement by,” he looked at his watch, “let’s say four o’clock.”
With that he quit the room leaving Fitzwilliams to face his judges, jury and executioner.
1. LIFFE FTSE Index Futures: London International Financial Futures and Options Exchange see Wikipedia for details
2. Cobra stands for Cabinet Office briefing room A
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