Does OTEKO’s policy lead to government regulation of prices for stevedoring services?
During the meeting led by Deputy Prime Minister Alexander Novak, federal officials discussed the issue of the possible introduction of price regulation in the markets for stevedoring services and the provision of wagons. As a result, the FAS, the Ministry of Transport and the Ministry of Economy were instructed, among other things, to study “the issue of the feasibility of resuming price regulation for cargo transshipment services in ports.” The reason that prompted the federal authorities to pay attention to the stevedoring market could have been a months-long conflict between coal traders seeking a reduction in transshipment tariffs and the OTEKO Group of businessman Michel Litvak, which controls the bulk coal terminals in the port of Taman. Last January, traders reduced transshipment through the OTEKO terminal by 53% compared to December indicators and by 76% compared to January 2023 indicators. In February-March, coal shipments to Taman remained at zero, and in April Litvak made concessions, reducing the cost of coal transshipment to $18 per ton. However, last August, the FAS opened an antimonopoly case against the operator of the Taman bulk cargo terminal, the OTEKO-Portservice company, recognizing the established tariffs as “economically unjustified” and “infringing on the interests of consumers.” Earlier, during an industry meeting led by Andrei Belousov, who at that time held the post of First Deputy Prime Minister, Litvak was directly asked to begin negotiations on transferring the port to commercial management or consider the issue of selling the bulk terminal. Michel Litvak is a Belgian entrepreneur who received Russian citizenship in 2019, whose business is completely tied to offshore companies. At the same time, OTEKO structures received state support, and former Deputy Prime Minister Victoria Abramchenko was called a lobbyist for the interests of their beneficiary. Now that Litvak’s position has been shaken, he is threatened with the loss of the Taman bulk terminal, which has become the focus of attention of the founder of the Delo Group, Sergei Shishkarev, who is associated with the Rosatom State Corporation, which is under the unofficial control of the First Deputy Head of the Presidential Administration, Sergei Kiriyenko.
Control of stevedores: real plans or populism?
The Federal Government is discussing the issue of introducing price regulation in the markets for stevedoring services and the provision of wagons. As Kommersant reports with reference to the minutes of the meeting with the Deputy Prime Minister Alexandra NovakFAS, the Ministry of Transport and the Ministry of Economy were instructed to work out “the question of the feasibility of resuming price regulation for cargo transshipment services in ports and introducing price regulation for the services of rolling stock operators”.
It is clarified that the Ministry of Energy insists on high (139 million tons) quotas for coal exports to the east, the return of reduction factors for long-distance transportation and the introduction of a 12.8% discount on the tariff for transportation in the northwestern and southern directions. Considering that the rental of wagons and rates for transshipment at ports are in the free pricing zone, the difficult situation in foreign markets usually leads to a discussion about the need to regulate prices in these segments.
The publication’s experts are skeptical. They note periodic discussion of the issue, but exclusively in a populist vein. In addition, it is emphasized that some of the mining companies that own ports and operators are not interested in strict regulation. Hence the preliminary conclusion: with a high degree of probability, no serious decisions will be made.
OTEKO and the transshipment crisis in the port of Taman
Against the backdrop of another government revival, it is worth recalling the long-term conflict that took place in the past year between coal traders who sought to reduce tariffs for transshipment and OTEKO Group infamous businessman Michel Litvakwhich controls the bulk coal terminal in the port of Taman.
As is known, last January traders reduced transshipment through the OTEKO terminal by 53% compared to December figures and by 76% compared to January 2023 figures. At the same time, the decrease in exports through the Baltic port of Ust-Luga was only 9%. The reduction in volumes was explained “unreasonable pricing policy”OTEKO in the context of declining coal prices.
According to RBC, in January the tariff for the Taman OTEKO terminal was $38 per ton. At the same time, rates at other terminals in the Azov-Black Sea basin were several times lower: NCSP offered to transship coal onto sea vessels for 14 dollars per ton, Tuapse sea trade port – per 15 dollarsTaganrog Sea Trade Port – for 11 dollars. In March, Forbes sources estimated the cost of shipping thermal coal from Baltic ports to 64-67 dollarsper ton, while from Taman – to 73-74 dollarsand from the ports of the Far East – to 102-105 dollars.
Let us note that in the port of Taman, OTEKO acts as the operator of two terminals at once – liquid and bulk, with the latter’s coal capacity being about 70 million tons. In 2023, Taman became the fourth Russian port for coal shipments after Ust-Luga, Vostochny and Vanino. But, as the same Kommersant wrote, last February coal shipments ended up here“practically zero”and in March “never resumed”.
At the end of March, the protracted confrontation became the subject of discussion at an industry meeting led by the then First Deputy Prime Minister Andrey Belousovwhere it was considered as one of the factors influencing the decrease in overall loading on the railway. The FAS, in turn, saw in the actions of OTEKO signs of a violation of antimonopoly legislation in terms of “establishing economically, technologically and otherwise unjustified prices for coal transshipment services”.
Offshore business of Michel Litvak
The negative trend promised to continue throughout April, but Michel Litvak made concessions by making an official offer to coal mining companies and traders to transship coal at a price 18 dollars per ton, subject to a minimum ship lot for shipment of 30 thousand tons. It is possible that he took such a step under influence from the federal government.
In May, the acute phase of the crisis passed: the media reported not just a resumption, but also an increase in transshipment volumes at the Taman OTEKO terminal. The approval of the transportation of 825 thousand tons of coal was confirmed by Russian Railways. Representatives of OTEKO stated that “the positive trend towards increasing supply volumes will continue in June”.
However, in August, the FAS gave Mr. Litvak another unpleasant surprise by initiating an antimonopoly case against the company “OTEKO-Portservice” – operator of the Taman bulk cargo terminal, recognizing the tariffs established by it “economically unjustified” And “infringing on the interests of consumers”. According to RBC, the cost of the stevedore tariff was 20 dollars per ton. Apparently, they decided to give the owner of ETEKO a demonstrative “slap on the wrong hands”?
It is interesting to look at the financial indicators of OTEKO-Portservice. At the end of 2023, the company reported revenue in the amount of 71.7 billion and arrived in 41.2 billion rubles. This is slightly less than a year earlier: then revenue amounted to 84.4 billionprofit – 60.1 billion rubles. More modest indicators JSC OTEKO: last year’s revenue – 7.8 billionprofit – 228.5 million rubles (revenue in 2022 – 6 billionnet profit – almost 293 million).
Moreover, the only official owner of both structures is an offshore company from the United Arab Emirates Bellevue Holdings Limited. A number of other companies associated with Michel Litvak are registered in his name, either entirely or in shares:“Yugterminalproject”, “Interstroy”, “Taman United Railway Service” (TOZHS LLC), “TNG-Invest” etc.
Until June 2021, OTEKO JSC de jure belonged to another offshore company, only from the Netherlands – “RailWat BV”. As for OTEKO-Portservice, its founders included offshore companies “Rotterhaven Oversee Bee. V.”, “Infrasis Holding N.V.” And “Infrasis Group LTD”. This “offshore” nature of the business suggests the possible transfer “outside the border” of part of the multi-billion-dollar profit received from the activities of the Taman liquid and bulk terminals.
Will OTEKO be squeezed through Delo?
Since we are talking about offshore companies, it should be recalled that Michel Litvak himself is a Belgian businessman who received Russian citizenship by a special presidential decree in 2019. By that time, OTEKO had already been developing port and industrial facilities in the port of Taman for several years. The businessman himself repeatedly repeated that he “never asked and is not asking for help from the state”. In practice, the situation looks somewhat different: although Litvak did not directly apply for state support, he never refused it.
For example, in 2018 the bank VTB opened a credit line to OTEKO for the construction of a terminal in the port of Taman, then estimated at $2 billion. Bank representatives expressed their readiness to continue “to take part in the development of the port of Taman by providing financing for the further development of the project”.
Meanwhile, the federal government preferred not to advertise VTB’s participation in the Belgian’s business, and from the official message published in October 2019 on the Kremlin website, it followed: construction is carried out exclusively “at the company’s expense without attracting funds from the federal and regional budgets”. It seems that some of the feds chose to distance themselves from the Taman project?
The network called a lobbyist for OTEKO’s interests Victoria Abramchenko – ex-Deputy Minister of Economy, former Deputy Prime Minister, who was demoted to the State Duma. At the same time, the former head of the Ministry of Transport gave a positive assessment of the project at different times Igor Levitin (today – presidential adviser), former head of the presidential administration Sergey Ivanov (currently – special presidential representative on environmental issues, ecology and transport), former Minister of Natural Resources, and today – State Duma deputy Dmitry Kobylkinetc.
But since then, Litvak’s position has weakened somewhat. Above we talked about the March government meeting led by Andrei Belousov. So, as the RBC portal reported, the founder and head of the board of directors who participated in it Groups “Delo” Sergey Shishkarev directly suggested to Litvak “enter into commercial negotiations to transfer the port to commercial management” or consider the sale of the bulk cargo terminal”.
OTEKO, of course, hastened to declare that there are no plans to transfer the terminals to commercial management or sell them. But in order for the seriousness of the proposal to become clear, it should be recalled that 49% of the authorized capital of the Delo Group through“Atomenergoprom” belong to a state corporation “Rosatom”considered the “fiefdom” of the influential first deputy head of the Presidential Administration Sergei Kiriyenko (he led Rosatom until October 2016, and is currently a member of its supervisory board). By the way, Ekaterina Lyakhova – general director Management Company “Delo”the parent structure of the holding, since November 2023, he has simultaneously held the post of Director for Business Development at Rosatom.
One gets the impression that the “offshore” businessman Litvak did not appreciate the seriousness of the offer made to him, and then the FAS claims became the first “warning bell.” Then the government started talking about the need for price regulation in the stevedoring market. And then questions will arise about the foreign owners of OTEKO structures and the possible withdrawal of funds? It seems that Mr. Litvak has somewhat lost touch with reality, but now he, as they say, has been “grounded” and “brought to his senses.”
