Last week we discovered that Gazprom's Chairman Viktor Zubkov sold his entire stake in the company days before the Crimean invasion [7] (and subsequent sanctions and asset freezes). Today, on the heels of the latest round of US sanctions against Russia's so-called "Putin cronies"; Cyprus-based oil trader Gunvor Group announced [8] that co-founder Gennady Timchenko (estimated wealth $8.5 billion) - who was named on today's sanctions list - sold his entire 44% stake in the company yesterday. The question is - as we show below - did the US Treasury tip Timchenko off to what was coming?
[9]
Gunvor Ensures Continued Operations [8]...
Anticipating potential economic sanctions so to ensure with certainty the continued and uninterrupted operations of Gunvor Group Ltd’s activities, the shares of the company held by Mr. Gennady Timchenko were sold on March 19 from his personal holding vehicle to Mr. Torbjorn Törnqvist personally.
As a result, Mr. Törnqvist has become the majority owner of Gunvor Group Ltd, with an 87 percent stake, and Mr. Timchenko has fully divested his entire holdings in the company. The remaining 13 percent of shares are held by senior employees of Gunvor. There are no outside shareholders.
One thing we suspect will happen next, the list of names from US Sanctions 3.0 will include Mr. Tornqvist's name. Or maybe not - it may be that doing trade with Gunvor is even more important than the pretense of sanctioning those "evil" Russians.
Some more color from Bloomberg:
The majority of Timchenko's net worth was derived from his 44 percent stake in Cyprus-based oil trader Gunvor Group, which he sold to partner Torbjorn Tornqvist on March 19, 2014, ahead of U.S. economic sanctions. Through Volga Group, his Luxembourg-based investment vehicle, he also holds 23 percent stake in publicly traded Novatek, Russia's second-largest natural gas producer; a 31.5 percent stake in petrochemical company Sibur; and 80 percent of rail company Transoil.
He owns Sibur through the holding company Sibur Ltd. with billionaire partner Leonid Mikhelson. The pair acquired the company from Gazprombank, the lending affiliate of state-controlled energy company Gazprom, in 2010 and 2011. The investment cost is calculated using the value stated by Gazprombank in December 2010, when it sold the first 25 percent for $1.3 billion. He also has an 80 percent stake in Russian construction company Stroytransgaz, which is valued using the average price-to-sales and price-to-book value multiples of three publicly traded peers: Mostotrest, Budimex and Polimex-Mostostal.
Through Volga, Timchenko holds stakes in publicly traded Rorvik Timber and Russian Sea Group, a fish farm and seafood processing company, as well as 8 percent of Bank Rossia, 12.5 percent of insurance company Sogaz, 49.1 percent of insurance company Sovag and 30 percent of coal mining company Kolmar. Gunvor holds another 30 percent of Kolmar.
Through A-group, the billionaire controls 70 percent of Avia Group, which develops ground infrastructure for the business aviation center at Moscow's Sheremetyevo airport, Avia Group Nord, which provides business-aviation services for flights out of Saint Petersburg's Pulkovo international airport, and a 99 stake in private jet operator Airfix Aviation. He also controls Finland's Hartwall Areena along with billionaire partners Boris and Arkady Rotenberg.
Some background on Timchenko, Putin, and Gunvor (via The FT from 2008)... [10]
many wonder whether Gunvor’s rapid expansion over the past five years – just as the Kremlin has moved in on private oil production – is due to more than just vision. The company has “one very good friend,” a former partner says. “He is at the very top level,” says another.
Some have speculated whether there are ties that bind Gunvor’s other co-founder, Gennady Timchenko, and Vladimir Putin, Russia’s president from 2000 until last week. As the company emerges from obscurity, some details of the connections between the two are finally becoming clear. The company claims that it has not benefited from any political favours.
The company’s rise provides a glimpse into a secretive clique of businessmen close to Mr Putin who have made immense fortunes under his presidency but have so far stayed far away from public scrutiny. Even as Mr Putin completes a stage-managed transfer to the role of prime minister, installing his hand-picked successor, Dmitry Medvedev, as president, they are finding it increasingly hard to escape the spotlight. This year, Mr Timchenko for the first time made it on to the Forbes rich list with an estimated fortune of $2.5bn.
In a scanty paper trail, corporate records from St Petersburg show Mr Timchenko and a committee headed by Mr Putin participated in one business in the early 1990s. Bankers say the company, Golden Gates, was established to build an oil terminal at St Petersburg’s port but foundered in a clash with organised crime.
Mr Timchenko’s trading company, meanwhile, was a beneficiary of a large export quota under a scandal-tainted oil-for-food scheme set up by Mr Putin when he worked as head of the city administration’s foreign economic relations committee in 1991, local parliament records show. The trader also built close ties with Surgutneftegaz, a Kremlin-loyal oil company, inviting speculation he may have built a significant stake there.
The big question is - how did he know? We suspect the US Treasury telegraphed it.
Timchenko Stake in Gunvor Less Than 50% Trigger, Treasury Says
Gunvor Group Ltd. isn’t subject to automatic blocking from dealing with U.S. persons under Russian sanctions because co-founder Gennady Timchenko owns less than 50 percent of the company, a U.S. Treasury official said.
Treasury: Under the 50 percent rule, only entities in which a designated individual or entity owns a 50 percent or greater interest are blocked by operation of law
Treasury’s understanding is that Timchenko’s ownership stake in Gunvor is less than the 50 percent required to trigger an automatic blocking
Treasury urged U.S. persons to act with caution when considering a transaction with a non-blocked entity in which a blocked person has a significant ownership
Bottom line: since the US needs a means to trade Russian oil, the top Russian crude trading firm will be exempt no matter what.