2 Arrested on Oil Espionage Charges

APAn investigator leaving the TNK-BP offices on Wednesday after a search for evidence of commercial espionage.
The Federal Security Service said Thursday that it had charged two Russian-American brothers with industrial espionage in connection with an investigation into embattled Russian-British oil firm TNK-BP.

The announcement came a day after unidentified law enforcement officers spent hours combing the headquarters of TNK-BP and its parent company, BP, in a move seen as a blow to the firm's efforts to maintain independence from the state.

The FSB said the brothers -- Ilya Zaslavsky, a TNK-BP employee, and Alexander Zaslavsky, who heads the British Council's British Alumni Club -- had colluded to undermine the efforts of Russian energy firms.

"According to FSB information, the people mentioned were illegally collecting classified commercial information for a number of foreign oil and gas companies to gain advantages over Russian competitors, including in CIS countries," the FSB said in a statement, Interfax reported.

They were detained on March 12 while attempting to get classified information from a Russian citizen employed by a "national hydrocarbon institution," the FSB said. They were released later that day under orders not to leave the country and were charged on Tuesday, it said.

"TNK-BP is a commercial organization engaged in normal legitimate commercial activity," TNK-BP said in a statement.

Ilya Zaslavsky, 29, works as a manager in TNK-BP's international affairs office, according to his business card. Several Internet profiles refer to him as an adviser for gas business development at the firm.

His brother, Alexander, 33, is head of the British Alumni Club, which groups graduates of British universities. He is also a former employee of Eurasia Group, the political risk consultanc, and now acts as an independent energy consultant.

Both brothers graduated from Oxford University, and Ilya heads the Moscow Oxford Society.

Automatic messages on the two men's cell phones said the numbers had been disconnected.

The arrests put further pressure on TNK-BP, a 50-50 joint venture between BP and three Russian oligarchs, and threatened to plunge relations with both Great Britain and the United States to even deeper lows.

The FSB said searches of the TNK-BP and BP offices on Wednesday had turned up "business cards of representatives of foreign defense departments and the CIA."

A spokesperson for the U.S. Embassy declined to comment, while a British Embassy spokesman said they were monitoring the situation. "We are in touch with BP about this," he said.

Relations between London and Moscow deteriorated sharply following the death of Alexander Litvinenko by radioactive poisoning in November 2006 in London. Russia refuses to extradite top suspect Andrei Lugovoi, while Britain has refused repeated Russian requests to extradite self-exiled oligarch Boris Berezovsky.

The two sides traded tit-for-tat expulsions of embassy officials last summer but insisted that the spat would not spill over into the economic sphere.

The British Council, the cultural arm of the British Embassy, has also run afoul of the Kremlin and said it was forced to suspend operations at its St. Petersburg and Yekaterinburg offices in January because of security concerns for its staff.

"Members of the alumni club are highly valued contacts for the British Council, so obviously we are concerned by the reports," British Council spokesman Anthony Watson said Thursday by telephone from London.

He said the British Council had helped create the alumni club, which maintains around 1,800 members across Russia, but did not directly finance it.

BP, which had its offices searched for several hours Wednesday evening, was functioning as normal, spokesman Vladimir Buyanov said.

Yet at TNK-BP, foreign workers assigned by BP were warned to stay away, a source inside the company said. Computer servers and e-mail were still down following the day-long raid on Wednesday, several sources inside the company said.

TNK-BP agreed to sell its flagship Kovykta gas field to Gazprom last summer following months of wrangling with environmental authorities, but the deal has yet to be finalized, fuelling market speculation that Gazprom hopes to buy out the firm's Russian shareholders.

The 50-50 Russian-British venture does not fit into the current landscape of majority state control over the energy industry. The State Duma is due to vote Friday on a law enshrining state control over strategic sectors.

Gazprom Deputy CEO Alexander Medvedev told the Financial Times in an interview published Thursday that he expected the Kovykta agreement to be sealed by the end of April.

The Kremlin hopes to conclude a broader deal, which could see Gazprom take over the TNK-BP stakes currently held by Viktor Vekselberg's Renova, Len Blavatnik's Access and Mikhail Fridman's Alfa Group, before the inauguration of President-elect Dmitry Medvedev on May 7, analysts said.

Medvedev currently chairs Gazprom's board of directors.

"We are a Russian company and we work successfully on a fair commercial basis with many other Russian companies, both state and privately owned," TNK-BP said in a statement.

The company said it did "not condone illegal activity nor do we rely on unfair competitive practices."

"The company has never countenanced or supported any activities designed to conflict with or damage Russia's interests," the statement said.

Kremlin spokesman Dmitry Peskov said late Thursday that the actions of Russian law enforcement should not be politicized.

"They are doing their job and doing it well," he said, adding that charges of economic espionage are deemed serious everywhere. "Everyone is equal before the law."

Peskov added that it was not yet clear whether the matter concerned the company as a whole or just isolated individuals.

TNK-BP is a "respected company that feels comfortable and earns significant profit here," he added. That, he said, is due to government efforts to ensure a good investment climate in the country.

Friends spoke glowingly of the two brothers and appeared shocked by their arrest.

"He's a bright, young guy," one friend said of Ilya Zaslavsky. Ilya Zaslavsky's profile on the Facebook networking site features a self-description as "First Oil Poet of the Russian Federation."

A friend of Alexander Zaslavsky's from Oxford said: "Sasha was a brilliant student. For his degree [in philosophy, politics and economics] he got one of the best grades in the university."

Staff Writers Nikolaus von Twickel and Anna Smolchenko contributed to this report.