From: MSN NicknameEagle_wng  (Original Message)    Sent: 11/30/2006 4:18 AM
Russia takes a golden opportunity

Julia Finch
Thursday November 30, 2006

Guardian
Just two months ago in this column we quoted George Soros's view of Russia as "a country that does not hesitate to use its monopoly power in devious and arbitrary ways". Mr Soros was referring to letting the state-controlled Rosneft list in London, but his view was also a good description of events that had just unfolded at the huge Shell-led Sakhalin-2 project. Just as the state-controlled Gazprom was agitating to buy a 25% stake in the $20bn (£10bn) venture, Shell lost its operating licence on environmental grounds.

Yesterday, as if relations between Russia and the UK were not strained enough, the Russian Natural Resources Ministry was at it again. This time it was Peter Hambro Mining in its sights.

With no notice the Russians threatened to withdraw five of the Aim-listed group's exploration licences, wiping 20% off its value, although the shares regained some composure and ended down 14%. As with Sakhalin-2, the man wielding the big stick was Oleg Mitvol, deputy chief of the Rosprirodnadzor natural resources watchdog, a wealthy businessman-turned-civil servant.

Peter Hambro Mining has been something of a success story in recent years. Peter Hambro, of the banking dynasty, has built PHM into one of Russia's biggest gold mining groups and the company has thrived as the gold price has risen to 25-year highs. It has ambitions to boost production from 250,000 ounces to 1m ounces by 2009 and, with costs currently at only about $150 per ounce, could be highly profitable.

Until yesterday Hambro had insisted his company was protected because it had hired Russians and given them shareholdings. Uppermost among them is deputy chairman Pavel Maslovsky, once a missile specialist and part of the Soviet old guard, who has a 23% stake worth nearly £200m. In the last election, Maslovsky was the personal representative to the president, Vladimir Putin, in the Amur region. There are also several former Russian civil servants on the books who deal with local and government relations.

Last night Hambro was still trying to ascertain what PHM had done wrong. Of the five licences, he said, only two would have an impact as PHM had recently sold its interest in the other three. PHM has 54 licences and the two affected are not production sites, but Mitvol's action, and his threat to inspect every one of PHM's other facilities for similar environmental violations, will hit corporate confidence and investor sentiment.

The west is pouring billions into Russia and companies from every sector involved will be worried. The fear that Putin's Russia might tear up and rewrite contracts has moved from energy to mining. Where next? Marks & Spencer in Moscow?

A regulation moan

Let's face it, no one signs up to work at the Financial Services Authority to win a popularity contest. The City regulator exists to stop malpractice in the financial business and to try to protect hapless consumers from losing their shirts. It is little wonder that the firms regulated by the FSA have a string of complaints about how they are regulated. The big banks that operate in the wholesale markets where consumers do not tread moan regularly.

But smaller firms, which deal with retail customers and make up 90% of the FSA's membership list, have taken their whingeing to a new level. They say their relationship with the FSA is deteriorating rapidly. Some are even wondering aloud whether it would make sense to just give up and shut up shop. Clearly this would be a jolly good thing if the threats were coming from those at the dodgy end of the market who simply can't cope with the regulator's demands.

But Roy Leighton, chairman of the Financial Services Practitioner Panel, says too many FSA staff are not up to the job. He wants to root out the "dead wood". He says small firms who ring the FSA about how to interpret a rule want answers, not a direction to read the handbook or get a lawyer.

But if dealing with the FSA was a pleasure it probably wouldn't be doing its job. This is one contest where popularity doesn't matter.

Red Ken's exchange

Cast your mind back to the glory days of the GLC, when the Sun dubbed Red Ken Livingstone "the most odious man in Britain" for his "loonie left" views.

Who would ever have imagined that 20 years later Livingstone - who once observed that "capitalism has killed more people than Hitler" - would be speaking out to defend the position of the London Stock Exchange? Clara Furse, the LSE boss, probably cannot believe her luck. Livingstone has a talent for getting bandwagons rolling. Now he clearly believes a lot is at stake - votes of Londoners and at least 1.2m jobs.
Guardian Unlimited © Guardian News and Media Limited 2006
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