Ben Aris -

The revelation in March that Russia's biggest portfolio investor Bill Browder has been banned from entering the country makes the link between politics and business in Russia explicit, though most investors are taking Browder’s ban in their stride.

When the news broke in March that the chairman of the award-winning Hermitage Capital investment firm has been banned from entering Russia since November, there was an almost audible groan of “oh no, not again.” The ban was a surprise, but no one was very shocked, or even worried. Browder is not well liked in the upper echelons of Russia's corporate world, as he has made it his job to expose the routine graft and abuse of companies in his $4 billion portfolio.

“The Kremlin didn't do this. Of all the people working in Russia I am the Kremlin's biggest friend, going out in the West and arguing for many of the policies they are pursuing,”

says Browder from his temporary office in London. “It comes from one of our corporate governance campaigns.”

That means senior management at any of Russia's biggest companies could be behind the visa ban, as Hermitage Capital has big stakes in most of the blue chips.

TAKE YOUR PICK

For example, his report on abuses at Gazprom has become an annual event and always produces a round of embarrassing stories, picked up by all the major media.

Management must hate it.

Last year's report was a cracker as it identified a 28-year-old Russian woman called Elena Russkaya who has corned the multibillion dollar pipe supply business to Gazprom with a company she founded with just $350 of capital.

It also presciently pointed out the dodgy supply deal Gazprom has with the murky gas trader RosUkrEnergo to deliver gas to the Ukraine, lambasting the arrangement which loses the gas giant nearly half a billion dollars in revenue for no good commercial reason.

RosUkrEnergo was at the heart of the gas crisis that erupted between Russia and Ukraine and made front-page news on New Year’s Day.

Apart from embarrassing Gazprom, Hermitage has tried every year to get a representative onto the board of state-owned Sberbank, which it accuses of doing nothing about hugely inflated costs. And every year Sberbank's senior management blocks Hermitage's bid: the last thing they want is Browder running to the press every time it has a board meeting.

BRING 'IM HOME CAMPAIGN

The fund's investors took the news in their collective stride. Only 3.4% of the fund's investors decided to withdraw their money. Hermitage manages the money of more than 6,000 institutional and individual investors from over 30 different countries, for whom it has made an annualised average return of 37% since its inception in 1996. Not bad going in anyone's book.

Now there is a small but active campaign to get Browder's visa reinstated. As Hermitage has more than a $1 billion of US money under management, the American government is actively lobbying on his behalf, and as he is a UK citizen, the British government is also pulling what strings it can; British Foreign Minister Jack Straw brought the issue up at a meeting with Putin in March.

In addition, Browder is on good terms with the liberal ministers in the Russian government.

But the whole story highlights how fragmented the Kremlin is. Even a minister of Economic Development and Trade Minister German Gref’s standing has little sway in the Foreign Ministry, which lords it over the visa regime.

Browder's story also highlights how deeply the tentacles of big business, and especially big state business, penetrate into the political apparat.

“This sort of thing has been going on forever.

In the old days it would have been much worse; instead of this mild administrative punishment, it would have been something much nastier, including physical violence,”

says Browder. “Russia has gone from horrible to just bad, but there is still a long way to go until it is good.”