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. Last Updated: 07/27/2016

Investors Pull Out of Shvartsman Venture

A state fund, an Israeli merchant bank and the EBRD have pulled the plug on a Russian investment venture after a minority shareholder said Kremlin siloviki had given him the go-ahead to conduct "velvet reprivatization" in strategic industries.

The proposed Tamir Fishman Russian Venture was being set up to manage 2 billion rubles ($81 million) in investments in high-tech industries. The Russian Venture Company and Israeli bank Tamir Fishman were to be partners in the project, with the European Bank for Reconstruction and Development among the international investors.

"We do not want to be engaged in any way, form or sort, in any part of politics," said Eldad Tamir, chief executive of Tamir Fishman. "So when we found out at the last minute that we have a partner who had decided to become a well-known politician, we pulled ourselves out of it," Tamir said by telephone from Israel on Tuesday.

In an interview with Kommersant published Friday, Oleg Shvartsman, who had a 20 percent stake in the venture, said his firm, FinansGroup, enjoyed close links to Kremlin officials and intelligence services and that he was behind a state-sanctioned "velvet reprivatization" of assets originally sold off in the 1990s.

Shvartsman also claimed that he reported indirectly to President Vladimir Putin's deputy chief of staff and Rosneft chairman Igor Sechin, who has been described as the unofficial leader of the siloviki clan.

Kremlin spokesman Dmitry Peskov has dismissed the article as a "fake."

The man Shvartsman fingered as his link to Sechin, Valentin Varennikov, a former Soviet deputy defense minister, denied the claims Tuesday, describing Shvartsman as a "rogue of the highest order," Izvestia reported.

"If there is the possibility to sue him for this then I will definitely look into it," said Varennikov, a Rodina deputy in the outgoing State Duma.

The interview in Kommersant, a newspaper owned by Gazprom board member Alisher Usmanov, came two days ahead of the Duma elections. In recent weeks, infighting has raged among competing Kremlin clans as Putin prepares to nominate a successor.

In May, Finans-Trust, headed by Shvartsman, won a tender held by the Economic Development and Trade Ministry to manage budgetary funds from the Russian Venture Company, a state firm created in 2006 to support high-tech projects. On Tuesday, Shvartsman said Kommersant had gotten it wrong. The editing of the interview had been "literary" and it had given a "skewed" take on the information, Shvartsman told Ekho Moskvy radio. "In my interview I argued against the essence of illegal corporate raiding, and yet they called me a state-sponsored raider and Sechin's vacuum cleaner," he said.

He said he felt "sorrow" that the venture was being scrapped. He could not be contacted for further comment.

Tamir said he regretted the wasted time, effort and money his company had put into the venture. But his representatives, the Russian Venture Company and the EBRD all said they would be eager to see the project resurrected.