Russian Ex-Minister Accuses Rosneft Chief of Entrapment

By Thomas Grove Features Dow Jones Newswires

A former Russian economy minister on trial for allegedly taking a $2 million bribe accused the head of the state oil company of entrapment on Wednesday, in the first hearing of a case that has raised speculation about power plays at the highest levels of the government.

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Prosecutors allege that Alexey Ulyukayev demanded a bribe in return for giving the greenlight to PAO Rosneft's purchase of shares in mid-sized oil producer PAO Bashneft.

Speaking in a Moscow courthouse, Mr. Ulyukayev denied the accusation. He said he was seized in an October sting operation by the Federal Security Service, the successor of the KGB, when Rosneft head Igor Sechin personally called him and asked him to accept a suitcase with $2 million inside it, according to Russian news agencies.

"The prosecution has completely ignored the circumstances of Sechin handing over to me this suitcase, which in total does not leave any doubt about the provocation carried out against me," Interfax quoted Mr. Ulyukayev as saying.

Russian agencies did not report Mr. Ulyukayev as saying in what capacity he had been given the money. Rosneft spokesman Mikhail Leontiev said there was "exhaustive evidence" regarding Mr. Ulyukayev's guilt and said the former minister had demanded a bribe and tried to get away with it, Interfax reported.

Mr. Ulyukayev, who had served as Russian economy minister since 2013, was dismissed in November by Russian president Vladimir Putin. Mr. Putin accused the former minister of "a breach of trust" after a Moscow court placed him under house arrest on the bribery charges.

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Mr. Ulyukayev's arrest was the highest-profile detention of a sitting government official since Mr. Putin came to power in 2000.

While Russia's security services have opened criminal investigations and occasionally arrested high-profile businessmen and senior officials under Mr. Putin's tenure, detaining a sitting minister--and the president's personal involvement in the case--is unprecedented.

Mssrs. Ulyukayev and Sechin, reputed to have close links with Russian intelligence agencies and a personal relationship with Mr. Putin, had previously butted heads over the sale of Bashneft to the state oil producer Rosneft.

Critics of Rosneft and Mr. Sechin said the sale of Bashneft was meant to plug holes in Rosneft's own operations and lower profits from a falling oil price.

Mr. Ulyukayev spoke out against the deal in August, saying privatization of one state company by another was inappropriate. In early September, however, he said Rosneft would be allowed to participate.

Rosneft eventually bought the shares for 330 billion rubles ($5 billion), higher than the government's initial valuation of the company at 306 billion rubles.

Political analyst and professor at the Moscow State Institute for International Relations Valery Solovei said at the time that Mr. Ulyukayev's arrest looked like fighting between factions of the government.

Analysts say the arrest was retaliation against opponents of Mr. Sechin who were trying to limit his growing oil empire. Among them, Mr. Ulyukayev was the easiest target, they say.

Mr. Sechin's Rosneft is currently involved in an arbitration battle with the former owners of Bashneft, conglomerate AFK Sistema, for 170.6 billion rubles. Rosneft has said Sistema destroyed value in the company during necessary preparations for an initial public offering. Sistema denies the accusations.

The Moscow regional court where Mr. Ulyukayev's case is being heard announced Mr. Sechin would be called as a witness, Russian agencies reported last week following a preliminary hearing that determined the start of the trial.

The next hearing was set for Sept. 1.

(END) Dow Jones Newswires

August 16, 2017 07:59 ET (11:59 GMT)