MenuThe Globe and Mail
May 22, 2014
By Richard Blackwell
A close ally of Vladimir Putin – and a target of Western sanctions – has emerged as a key player in the dramatic expansion of energy ties between Russia and China.
Gennady Timchenko was named as the head of the Russian-Chinese Business Council a few weeks ago and accompanied Mr. Putin on his recent trip to China. He he told reporters in St. Petersburg Thursday that Mr. Putin introduced him to Chinese businessmen as “our man for China.”
Mr. Timchenko, who appeared on the United States’ sanctions list in March, described Russia’s deal to supply $400-billion (U.S.) worth of natural gas to China as “the most important economic event of the past decade.” Under the multidecade deal, China will buy a huge volume of gas from Russia’s OAO Gazprom.
Mr. Timchenko’s rise to prominence on the crucial China file shows that the current sanctions against individuals are ineffective, and Russia can essentially ignore them in many circumstances, said Ariel Cohen, a Russia and energy expert at the Heritage Foundation in Washington.
“Mr.Timchenko has played a role in Russian national resource development for a long time,” he said. “This is the reality of Russia that has been in place for many years, and the fact that we put him on the sanctions list doesn’t change that reality.”
China doesn’t need to pay any attention to the sanctions, Mr. Cohen said. “They can whistle past the graveyard.”
He questions the overall value directing sanctions at individuals, when they can still do business – as Mr. Timchenko clearly is continuing to do. “Sanctions in their current shape have very limited applicability and efficacy,” he said.
Larry Herman, a trade lawyer at Herman & Associates in Toronto, said he sees Mr. Timchenko’s placement in a key role as “international gamesmanship” where Russia is “trying to show that the West has few meaningful levers.”
He thinks sanctions are having some effect on foreign investment activity in Russia, although “there is no doubt that Russia wants to show that the sanctions will not deter it from its strategic objectives.”
Mr. Timchenko is reported to have said he expects to see other major energy deals with China, some of which will involve Novatek, a gas producer he co-owns through his private investment company Volga Group.
When Mr. Timchenko was added to the U.S. sanctions list, the Treasury Department made it clear it was because of his ownership position in Swiss-based commodities trading company Gunvor, which the U.S. says has ties to Mr. Putin.
The sanction notice described Mr. Timchenko as “one of the founders of Gunvor, one of the world’s largest independent commodity trading companies involved in the oil and energy markets,” and said “Timchenko’s activities in the energy sector have been directly linked to Putin. Putin has investments in Gunvor and may have access to Gunvor funds.”
However, the day before the sanctions were announced, Mr. Timchnenko sold all his holdings in Gunvor to his partner, Swedish businessman Torbjorn Tornqvist. That was done to “ensure with certainty the continued and uninterrupted operations of Gunvor Group Ltd.’s activities,” the company said.
Gunvor also denied vehemently that Mr. Putin had any ownership or economic interest in Gunvor, which trades oil as well as coal, natural gas, biofuels, carbon emissions and grains.
Mr. Timchenko, who is not on Canada’s list of sanctioned individuals in Russia, has given very few interviews in the past although he has been positively chatty with the press in the past few days.
Aside from his comments on China, he told Tass this week that he plans to transfer all his assets to Russia before the end of 2014. Sanctions have caused him to pick up the pace of the transfers, he said, because “we, as businessmen, would not want to be dependent on … political decisions.”
Mr. Timchenko’s first major interview was in 2008, when he talked at length to reporters from the Wall Street Journal. He told the paper he has known Mr. Putin since the early 1990s, but that they are not friends. He also denied receiving any favours from Mr. Putin.
Mr. Timchenko is ranked number 68 on Forbes list of billionaires, with a net worth of about $14.7-billion.