This is an extract from Martin Vander Weyer’s ‘Any Other Business’ column.
In connection with the receding possibility of a London Stock Exchange listing for Saudi Aramco, I wrote that the City authorities’ apparent eagerness to accommodate companies ‘from places not best known for their accounting standards, business probity or general attachment to democracy and the rule of law’ smacked of Brexit-driven desperation. Russia was one of the places I had in mind. Now along comes a listing candidate that rings more alarm bells than the secretive Saudi oil giant.
The company concerned is called EN+ Group, and it is the first Russian entity to come to the London market since Russia’s aggression in Ukraine and Crimea provoked US and EU sanctions in 2014. EN+’s business is ‘energy and aluminium’; its controlling shareholder is Oleg Deripaska, the Russian billionaire often described as a member of Vladimir Putin’s inner circle and best known in the UK for entertaining George Osborne and Peter Mandelson on his yacht in Corfu in 2008. More topically, Deripaska has a well-documented history of dealings with Paul Manafort, the former Trump campaign chief who has been indicted for money laundering.
Gossip aside, EN+ is clearly a big business, with revenues of $5.8 billion in the first half of this year; and even if its published numbers so far are no more than ‘highlights’, we can expect advisers and listing officials to do the necessary due diligence. Likewise in reassuringly old-fashioned style, EN+ has a lord on the board in the person of its recently appointed chairman, the former climate change minister Lord (Greg) Barker. Its $1.5 billion flotation will generate fees for blue-chip banks such as Citigroup, Credit Suisse, J.P. Morgan and Merrill Lynch, and will tie in a major Chinese investor, AnAn Group, of the sort that the City is also keen to attract. So why be sniffy about a deal which reaffirms London’s pre-eminence in global capital markets?
Well, some might say that the City shouldn’t be doing business with anyone so close to Putin’s Kremlin; but such fastidiousness broadly applied to unsavoury regimes might rule out trading with half the emerging world, which isn’t where we want to be as Brexit approaches. More specifically, EN+ says it intends to use the ‘primary proceeds’ of the share offering ‘to repay a portion of its debt’ — which is owed largely to Russian banks such as VTB (also an EN+ shareholder) that helped bail out Deripaska’s businesses with Kremlin support after the 2008 crash, and are currently subject to US and EU sanctions. So London investors’ money will be flowing back into Putin’s other-wise ostracised banking system.
Deripaska himself was rather scathing about London’s continuing financial clout after he chose to list his aluminium company Rusal (now controlled by EN+) in Hong Kong in 2010. Perhaps today he thinks the City is turning into a soft touch.