An oligarch who has supplied building materials to the Russian military machine and for construction in occupied areas of Ukraine is being assisted by Morgan Stanley and Allen & Overy in his attempt to gain control of a huge Russian oil asset, the Guardian can reveal.
Sergey Kolesnikov, originally from Russia but now a Maltese citizen under its “golden passport” scheme is estimated to be worth $1.2bn (£940m) as a result of the building materials business he co-founded.
Only Poland has imposed sanctions on the 51-year-old but Ukraine has included him on its list of people it wants the EU to use sanctions against.
Morgan Stanley, the US investment bank, and Allen & Overy, one of the elite “magic circle” law firms headquartered in London, have been helping Kolesnikov as he attempts to take ownership of the Verbluzhye oilfield, said to contain 100m barrels of oil, in Astrakhan in southern Russia.
While there is no suggestion that they have broken any laws or regulations, their work for Kolesnikov illustrates how blue chip companies continue to work with oligarchs and their businesses that have profited from the Russian defence industry and the invasion of Ukraine, despite international efforts to isolate the Putin regime and its beneficiaries.
Kolesnikov’s Inflection Management company, which is registered in Cyprus, is one creditor of Astrakhan Oil Corporation (AOC), through a 2012 facility of loans of more than $70m negotiated by Morgan Stanley, which had a majority of shares in AOC’s subsidiary – the Russian drilling firm Southern Oil Company (UNK) – pledged as security.
AOC fell behind on repayments in 2014 when the rouble crashed after Russia’s invasion of Crimea and Morgan Stanley is trying to help the creditors take a majority stake in UNK. The Russian courts have so far rejected the attempts – partly because of a law that forbids foreign ownership of strategic assets – and there are now proceedings taking place at the London court of international arbitration.
During the Russian proceedings, an appeal court criticised a valuation of the UNK shares at one rouble (£0.01) by an expert witness put forward by Morgan Stanley, seeking to determine the price at which it could obtain the shares.
Another court judgment noted that an Allen & Overy partner had given an opinion on Morgan Stanley’s claim but said that, given his position, he “was not an independent expert” and his firm “had an interest in achieving success for the client” (Morgan Stanley).
Allen & Overy, now in the process of merging with the US law firm Shearman & Sterling, announced in March 2022 that it was closing its Moscow office due to the “illegal and senseless invasion of Ukraine and the ensuing humanitarian crisis”. In December 2022, Morgan Stanley said: “We are not entering any new business onshore in Russia and our activities in Russia are limited to helping global clients address and close out pre-existing obligations.”
Both firms declined to comment for this article.
Kolesnikov’s TechnoNicol company has supplied Russian construction projects in Crimea, seized from Ukraine in 2014, and in Mariupol, which was bombarded by Putin’s army for more than 80 days before being captured, as well as Russian defence companies.
TechnoNicol products feature prominently in photographs in news reports illustrating reconstruction projects in occupied Ukraine. Other websites offer its materials for sale in Crimea as well as occupied Donetsk and Luhansk.
The Proekt investigative media website, citing publicly available data, reported that TechnoNicol’s sales in Russia had skyrocketed since the start of the war, with profits 55 times higher in 2022 than the previous year.
Russia has restricted access to details of military contracts but TechnoNicol won tenders to supply roofing, waterproofing and thermal insulation materials to 18 defence enterprises until at least 2018.
Kolesnikov did not respond to a request to comment for this article. However, he previously told the German newspaper Taz that he could not assess whether businesses supplied by TechnoNicol were defence companies or not, while insisting he does not do business with the arms industry. He added that all orders were for civilian purposes and he had never sold products to the Russian armed forces or other groups active in the Ukrainian war. He did not deny that TechnoNicol products were being used in eastern Ukraine but stressed that it is not a construction company.
In 2022, the Scottish government was criticised after it emerged that it had backed an upgrade to a factory in Stirling owned by Kolesnikov’s Inflection Management company with almost £500,000 of public money. The upgraded factory was unveiled by the then Scottish first minister, Nicola Sturgeon.
