There's always been only one way that Russia can handle its serious problems, just like that relied upon by La Cosa Nostra: Blunt trauma. Russia is a society built upon the notion that the way you deal with competition is to murder it (rather than to improve your own product), and that idea bankrupted the Soviet Union. Its perhaps not surprising, then, to see it raise its ugly head once again in Neo-Soviet Russia (but still depressing). As reported by the St. Petersburg Times:

MOSCOW — Speaking English with a thick German accent, Adolf Winter occasionally slips into his native tongue as he tries to fathom why Russia declared him a threat to national security.

Winter, an Austrian businessman whose firm sells small gas engines, speculated that he was barred because a bureaucrat didn’t want to return 1 million euros in value-added tax. “Or maybe it was a business enemy who paid someone off. Any successful businessman has enemies. But these are only Vermuetungen,” or conjectures, said Winter, 65, speaking by telephone from Vienna.

Winter is among at least 10 businesspeople who have been denied entry over the past two years, apparently for national security reasons, according to a Moscow Times review of more than 30 cases.

The circumstances around the 10 cases are steeped in mystery. Russia, like other countries, is under no obligation to explain its rationale for refusing or revoking visas, and the Foreign Ministry and Federal Security Service, or FSB, routinely decline to comment on the cases. Some foreign business leaders said they believed the expulsions were isolated instances. But a review of explanatory documents obtained by several businesspeople, together with anecdotal evidence from businesspeople, former government officials and others, suggests that the cases may be the tip of the iceberg.

The expulsions appear to be linked to business dealings, and several businesspeople said they believed their Russian rivals had bribed officials to blacklist them. If that is the case, foreign investors could have a new reason to exercise caution when doing business in Russia.
The best-known case, of course, is William Browder, the CEO of Hermitage Capital Management, the largest foreign portfolio investor in Russia, who was stopped at Sheremetyevo Airport in November.

Just two months before that, Winter was stopped at Sheremetyevo and expelled for the same reason as Browder: Point 1, Article 27 of the 1996 federal immigration law, which states that a foreigner may be denied entry “to safeguard military preparedness, state security and public order of the Russian Federation, or the health and safety of its citizens.”

Border guards detained Winter when he arrived on a flight from Vienna on Sept. 3. Three hours later, he said, they put him on a plane for Vienna with no explanation.

“I’ve been working in Russia since 1988, and have done everything correctly. All of the legal necessities — taxes, contracts, work permits, visas — were in order. It really is an economic catastrophe for our company,” said Winter, who owns the company VADO International. After persistently pressing the authorities for an explanation, Winter received a letter from the FSB that said he had been barred under Point 1, Article 27 of the federal immigration law since June 20 — 2 1/2 months before he was denied entry. Winter provided a copy of the letter, dated Dec. 12, to The Moscow Times, sister newspaper of The St. Petersburg Times.

Between June 16, 2005, and the day he was turned back at Sheremetyevo, Winter said he had entered and left the country three times without any problem.

Winter’s case has been raised at meetings between the Austrian and the Russian trade ministries, and the Austrian Embassy has asked the Foreign Ministry why Winter has been barred and what he needs to do to return, an embassy official said. The Foreign Ministry has replied only that Winter was barred due to state security.

As Winter tells it, he and his company pose no security threat. The company signed its biggest deals in 2002 and 2003, contracts worth more than 20 million euros with Bashkirenergo to construct thermal power plants in Bashkortostan, in part by importing gas engines produced by Austria’s Jenbacher.

The company, which maintains Moscow offices, currently has an annual turnover of 7 million to 8 million euros in Russia, primarily from imports of small gas engines made by the German firm Deutz, Winter said.

“This is by no means any sort of dual-use technology,” he said.

Dual-use technology has been cited in several espionage cases opened by the FSB against Russians.

A U.S. businessman who was recently denied entry for security reasons previously had run-ins with the government over dual-use technology.

Thomas Hajek worked for 12 years in Perm on behalf of U.S. jet-engine maker Pratt & Whitney, a subsidiary of Connecticut-based United Technologies, which moved into the Russian defense industry in the 1990s.

In March 2003, four years after Hajek took over as head of P&W’s commercial operations in Russia, the Russian Aviation and Space Agency moved to prevent P&W from obtaining more than a blocking 25 percent stake in Aviadvigatel, the designer of engines for most Russian aircraft — apparently over concerns that Aviadvigatel made dual-use products. At the time, a representative of Gazprom-affiliated Tekhnologii Motorov on Aviadvigatel’s board had argued that P&W’s participation could threaten national security because of the dual-use products.

When Hajek left P&W in 2004 to work as an independent contractor and consultant, the Perm Enginemaking Complex, a holding company that includes Aviadvigatel, “had revenues of close to $300 million, was profitable, and was developing new products with funding from P&W and the Russian government,” he said.

It therefore came as a surprise, he said, when he flew into Perm from Frankfurt on Oct. 16, 2005, and was told by border guards that he was not welcome in Russia.

“They just said ‘your entry is forbidden’ and locked me up overnight with no way of getting to anybody or talking to anybody,” Hajek said. “Basically, they told me I had to buy myself a ticket back to Frankfurt, and I left on a Lufthansa flight the following day.”

Hajek said, however, that he did not believe his case was connected to the 2003 controversy over dual-use technology. “That’s a very long time ago. No one talks about that anymore,” he said.

He learned through informal channels that he had been barred from Russia as a threat to national security under Point 1, Article 27 of the federal immigration law and had been accused of having connections with the CIA. He denied any CIA links and dismissed the idea that he posed a security threat.

“After working for so many years on behalf of Russian aviation and space enterprises, hand in hand with business leaders, local administrations and federal ministries to bring in foreign investments, I found this offensive and disappointing,” he said.

Hajek is trying to gain permission to return. But, he said, “this is one of these nebulous areas. Once you’re on file, there has to be a good reason to remove you from the list. They have to go back and look at why somebody put you there in the first place.”

The U.S. Embassy denied to comment on the case, citing the U.S. Privacy Act.

Hajek, Browder and Winter were among only four businesspeople willing to talk openly about their troubles involving national security. The Moscow Times is aware of six additional cases.

Those businesspeople appear to be trying to resolve their problems quietly and refused to speak on the record with a reporter. Browder himself kept mum for several months, and he later explained that he had been trying to resolve the issue from behind the scenes.

What the Law Says

Of the seven reasons for barring a foreigner from Russia listed in Article 27 of the federal immigration law, Points 2 through 6 are relatively straightforward: A foreigner is not allowed entry if he has been kicked out of Russia within the last five years; has not served out his sentence or been rehabilitated for a serious crime committed in Russia or abroad; does not have a visa or relevant documents needed for a visa; has no proof of insurance valid in Russia; or cannot prove he has enough money to support his stay in Russia and subsequent exit from the country.

Point 7 states that a foreigner cannot enter if his presence has been deemed “undesirable” by one of eight federal agencies: the Interior Ministry, the FSB, the Foreign Intelligence Service, the Foreign Ministry, the Defense Ministry, the Justice Ministry, the Federal Financial Monitoring Service and the now-defunct Health Ministry.

It is the vagaries of Point 1 that perplex Vladimir Ryakhovsky, a lawyer who has worked on about a dozen cases over the past four years involving Catholic and Protestant clergymen denied entry for national security reasons.

“Nowhere is it written who decides which foreigners are a threat to national security. It’s a completely arbitrary rule!” Ryakhovsky, becoming visibly agitated, said in a recent interview in his office.

While the law specifies which agencies can decide who falls under the undefined term “undesirable” in Point 7, nowhere in the law is it written who determines who is a national security threat.

The written explanation for Browder’s denial mirrors that of one of Ryakhovsky’s most high-profile cases, that of Father Stefano Caprio, an Italian Catholic priest. Caprio lived in Russia for more than a decade before having his visa taken away at Sheremetyevo Airport in April 2002.

Both letters — Caprio’s from the Interior Ministry and Browder’s from the Foreign Ministry — say “the responsible” government agencies declared them national security threats. No specific agencies are named in the documents.

The FSB, however, is clearly — and logically — one of the empowered agencies. U.S. labor activist Irene Stevenson was turned away at Sheremetyevo in December 2002 “based on information provided by the FSB” that she was a threat to national security, according to a letter from the Federal Border Service to State Duma Deputy Oleg Shein dated Jan. 17, 2003.

Stevenson, the AFL-CIO’s pointwoman in Russia, had lived and worked here for nearly 15 years, and shortly before her expulsion had helped provide legal assistance for a strike of air traffic controllers. The strike disrupted flights at regional airports and forced the government to offer a sizable hike in salaries to the controllers.

The Defense Ministry, the Justice Ministry and the Foreign Intelligence Service also appear to have the authority to declare foreigners a security threat, according to legislation posted on their web sites.

Written inquiries sent in mid-July to the eight agencies mentioned in the immigration law went largely unanswered as of Monday, July 31. By law, the agencies have 30 days to reply, if only to say “no comment.”

Health and Social Development Ministry spokeswoman Lyudmila Politayeva said her ministry’s involvement in determining whether a foreigner’s presence was “undesirable” ceased two years ago and referred all other questions to the Interior Ministry. The Health Ministry was disbanded in March 2004 and replaced by the Health and Social Development Ministry. Foreign Intelligence Service spokesman Sergei Guskov referred all questions regarding the federal immigration law to the Foreign Ministry.

Boris Jordan in 1997

The first high-profile case of a foreign businessman’s visa troubles ostensibly related to national security dates back to the Yeltsin years. In October 1997, prominent U.S. investment banker Boris Jordan was stripped of his multiple-entry visa when leaving Moscow for London.
Boris Berezovsky, then the deputy head of the Security Council, said at the time that Jordan’s visa was revoked because he had “gained access to information that could cause serious damage to the safety of our government,” though observers believed Jordan was merely a pawn in a feud among big banks.

Reached by telephone, Berezovsky stood by his earlier statements regarding Jordan’s refusal.

“But that was in 1997, and these are completely different times,” he said. “The motivations now are completely different. Now it’s Kremlin policy to squeeze foreigners out of strategically important areas.”

Jordan, who was later allowed back into Russia, did not reply to an e-mailed request for comment.

After the Jordan incident there was a lull in cases — at least those made public — of foreign businessmen deemed threats to national security.

That is, until Feb. 14, 2005, when U.S. businessman Frank Neuman, former owner of the Abitare high-end furniture chain, called The Moscow Times from Sheremetyevo Airport and said he had been denied entry into the country without explanation. A Sheremetyevo spokesman promptly confirmed Neuman’s detention.

Five days earlier, Neuman had filed a complaint with city police that his former business partners, Oleg Lototsky and Marat Chekanov, had used a brigade of security guards in January 2005 to seize Abitare’s five stores in Moscow.

Neuman claimed $4.9 million in damages, but the status of his complaint to police remains unclear. A city police spokeswoman said she was authorized to disclose such information only to Neuman himself. And it is unlikely Neuman will be knocking at the doors of the city police headquarters at Petrovka 38 any time soon.

I’ve given up,” Neuman said by telephone. “I lost everything. It’s a sad, sad situation.” Neuman said he was never given an official explanation for his entry denial, but when he inquired at the Russian consulate in New York, he was told he had been deemed a threat to national security but given no further details.

Neuman, however, says he is convinced he was denied entry because of the business dispute. He claims that Grigory Rabinovich, president of a company called GI Group Corporation, told him “to my face” he had paid the FSB $500,000 to block Neuman’s visa.

Rabinovich called the accusation “absurd.”

“I don’t know the type of people who could have someone kept out of Russia, and I don’t know anyone in the FSB,” Rabinovich said by telephone, adding that he had not spoken with Neuman since November 2004.

Shortly before Neuman’s expulsion, Lev Polyakov, identified by Abitare employees at the time as the company’s vice president, told The Moscow Times that contrary to the police report, no criminal case had been opened in the “so-called robbery” of the U.S. businessman. Polyakov said Neuman had simply sold his shares in the company.

Reached recently by telephone, Polyakov, now vice president of GI Group Corporation, also dismissed Neuman’s accusations. “I can’t imagine whom someone would have to pay. Buy the whole Interior Ministry? I don’t think so,” he said.

An FSB spokesman said he was unfamiliar with the Neuman incident and asked for a written request for comment. A fax sent July 22 remained unanswered as of Monday, July 31.
Graft, Yukos, Chechnya

Several authoritative studies have shown an increase in corruption under Putin, including one last week by the World Bank. Corruption watchdog Transparency International bunches Russia with Sierra Leone, Niger and Albania when it comes to corruption. A 2005 study by Indem, an anti-corruption think tank, study found the value of the average bribe had increased by 70 percent since 2001.

Indem head Georgy Satarov said he had no specific information about cases related to foreign businessmen being kept out of the country due to a bribed official. “But such a situation is entirely realistic,” Satarov said. “Buying off officials is absolutely an instrument to get rid of a competitor.”

The Indem report found that the size of the average bribe was $136,000 and growing.

Berezovsky said any bureaucrat at any level would be ready to put a foreign businessman on a blacklist for the right price. “No question about it,” said Berezovsky, who lives in political asylum in Britain.

Five months before Neuman was barred, a foreign businessperson who had worked for several years in Russia was quietly deported under unclear circumstances. The person, who asked to remain anonymous to protect friends and colleagues working in Russia, was turned back by border guards at Domodedovo Airport in September 2004. The deportation document, a copy of which was obtained by The Moscow Times, had a box ticked as “other” as the reason for the denial.

The person said border guards had recommended clarifying the situation with the embassy where the visa had been issued.

The embassy did not provide a clear explanation.

“Based on what the embassy official learned from Moscow, he tried to guess at the reasons,” the person said. “He asked if my company invested in Chechnya or Yukos.”

The person later learned through informal channels that $300,000 was the price to get off the blacklist. “But I understood that money wasn’t the issue,” the person said. “That sum was just a way of saying that it wasn’t a problem I can solve.”

Yukos and Chechnya have come up in other visa cases as well.

Robert Amsterdam, a lawyer for Yukos founder Mikhail Khodorkovsky, was expelled from Russia in September. Amsterdam, who holds dual U.S. and Canadian citizenship, said five men went to his hotel room at the Hyatt Ararat in central Moscow at about 1 a.m. on Sept. 23 and confiscated his passport. Two hours later, the passport was returned with his visa revoked, and Amsterdam was told to leave the country within 24 hours or face arrest.

Amsterdam said by telephone that he was still trying to get a written explanation as to why he was kicked out. He said he has never heard anything about national security regarding his case.
On Nov. 15, two days after Browder was refused entry at Sheremetyevo from London, British human rights lawyer Bill Bowring, who has represented Chechen clients in the European Court of Human Rights in Strasbourg, was denied entry at Sheremetyevo. “I was given no explanation at the time,” Bowring said by telephone.

Bowring eventually did obtain a letter from the Foreign Ministry, which he provided to The Moscow Times, saying he was turned back because he failed to hand over his migration card the last time he had exited Russia.

He called the claim “absolutely ridiculous” and said he turned in his migration cards “religiously.”

Is There a Trend?

If, indeed, foreign businessmen are increasingly being kept out of Russia as supposed security threats, representatives of foreign business associations are not aware of it.

Andreas Romanos, head of the Association of European Businesses, said Winter’s entry denial was the only case he knew of an AEB member being barred from Russia on national security grounds. AEB comprises roughly 500 companies and individual businessmen, around 85 percent from European countries but includes Russian and U.S. members as well.

The U.S. Embassy said it could not comment on the issue.

Putin said at the recent Group of Eight summit that he was in the dark about the Browder case.

“To be honest, I don’t know why this particular person has been refused entry to Russia. I can imagine that this person has broken the laws of our country, and if others do the same we’ll refuse them entry, too,” Putin replied heatedly to a reporter’s question.

Browder has battled with Gazprom over inflated corporate spending and nontransparent gas trading deals. He also clashed recently with Kremlin-linked oil major Surgutneftegaz over its murky ownership schemes. His Hermitage Capital Management firm holds about $4 billion in investments in Russia.

The Kremlin has refused to comment in the past on the reasons for declaring Browder a security threat.

Putin said fears that barring investors like Browder could deter foreign investment were groundless. “We are extremely interested not only in attracting investment but also in working with decent, professional investors, who really want to work in Russia on a long-term basis,” Putin said.

Browder said by telephone that he had never broken any Russian laws and that he was still trying to do everything possible to return to Russia.