Bloomberg News

Putin Deports Executives for Speeding as Sanctions Loom

March 14, 2014

Russia's President Vladimir Putin

Vladimir Putin, Russia's president, in Seoul. Photographer: SeongJoon Cho/Bloomberg

Even before the Ukraine standoff, foreign companies in Russia say they were alarmed by the number of executives being deported for minor infractions. Now with the West preparing sanctions, they’re bracing for more.

Almost 1,000 people from countries outside the former Soviet Union have had their work visas revoked for committing two or more “administrative violations” since the end of last year, when the migration service and traffic police linked their databases, according to immigration authorities. Such offenses can be as minor as a parking ticket, smoking in prohibited areas or even jaywalking.

“Individuals have been stopped on the border for having two speeding tickets and told their visa is no longer any good,” said Alexis Rodzianko, president of the American Chamber of Commerce in Moscow, which promotes the interests of Exxon Mobil Corp., PepsiCo Inc. (PEP:US) and 800 other companies.

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Before the Kremlin-backed president of Ukraine, Viktor Yanukovych, was ousted last month, prompting President Vladimir Putin to pour troops into Crimea and prepare to annex the peninsula, officials said they were working with foreign businesses to resolve the deportation problem as quickly as possible. Now those talks are effectively on ice, according to the Association of European Business, which lobbies on behalf of European companies including BP Plc (BP/) and Siemens AG. (SI:US)

Russian Retaliation

Lawmakers meanwhile are preparing legislation that would allow Russian authorities to seize assets of western companies in case of sanctions. Russian Deputy Economy Minister Sergei Belyakov, who’s in charge of luring foreign investment, said that he’s working with the migration service to resolve the visa difficulties.

“On a personal experience, I know of the existence of such problems,” he said today by phone.

The Moscow-based migration authority said by e-mail in mid-February that while it wasn’t planning any legislative amendments, the government is preparing to issue an order on the issue.

Airport Detention

One of the people caught up in the crackdown is Quentin O’Toole, Deloitte & Touche LLP’s local chief operating officer. When the New Zealander tried to return to Moscow from a trip abroad in December, he was detained at the airport and held in a cell overnight before being deported, according to two people familiar with the matter. The reason: speeding tickets.

O’Toole didn’t even commit the offenses -- his wife did, while driving a car registered in his name, the people said, asking not to be identified because the information is private. Moscow’s automated traffic cameras issue tickets by license plate, rather than by driver. It took Deloitte’s lawyers six weeks to get O’Toole’s visa reinstated. O’Toole and Deloitte both declined to comment.

Even foreigners employed by prominent Russian enterprises have been deported. One executive of a mining company said he was detained at Moscow’s Sheremetyevo Airport in mid-January along with his wife and children because his driver had racked up about $1,000 of speeding tickets.

While his family was allowed into the country, he said he was denied a lawyer and held for 12 hours in a detention area with about 30 other people before being deported. His company eventually got the visa reinstated, the executive said, asking not to be identified because of the sensitivity of the issue.

Mayakovsky Theater

Mindaugas Karbauskis, the Lithuanian artistic director of Moscow’s Mayakovsky Theater, said he was banned from Russia for a year when he tried to fly back in February. Karbauskis said on his Facebook Inc. page that he’d received five speeding tickets of about 300 rubles ($8) each, all paid. He was allowed back in only after his bosses at the storied theater intervened.

“We vouched for him,” said Olesya Vartanova, a spokeswoman for the theater, declining to be more specific.

Lawmakers who drafted the legislation in 2011 said at the time that stricter visa rules were needed to curb the number of illegal immigrants, which the government puts at 3.5 million. The vast majority of those come from poorer former Soviet states, according to the Federal Migration Service in Moscow.

Like AmCham, the Association of European Business has warned its members about the risks of even minor legal infringements by foreign employees -- particularly since Russia’s takeover of Crimea, home to its Black Sea Fleet, evolved into the biggest confrontation between Russia and the West since the Cold War.

Nothing Happening

“There is nothing immediately happening and the current political situation will possibly not accelerate providing a solution to the problem,” AEB Chief Executive Officer Frank Schauff said in a phone interview.

“It’s certainly a similar situation to the one we faced in 2008, when the EU threatened sanctions but didn’t implement them,” Schauff said, referring to Putin’s five-day war with Georgia. “The pressure is higher this time. Ukraine is a much bigger country and is more in the center of Europe.”

The migration service won’t comment on how the events in Ukraine are impacting the visa issue, according to the office of spokeswoman Zalina Kornilova.

President Barack Obama said after talks in the White House with Ukrainian Prime Minister Arseniy Yatsenyuk on March 12 that the U.S. and the international community “will be forced to apply a cost” if Putin doesn’t change course. Sanctions on Russia could “get ugly fast” if events justify them, Secretary of State John Kerry said at a congressional hearing.

‘Massive’ Damage

German Chancellor Angela Merkel said in parliament yesterday that Putin risks “massive” political and economic damage if he doesn’t de-escalate the conflict.

The EU announced a three-stage sanctions process against Russia last week, starting with the suspension of trade and visa-liberalization talks. Stage two includes asset freezes and travel bans for as-yet unidentified officials and would be imposed if Russia boycotts international talks on a settlement. Stage three envisages “additional and far-reaching consequences” if Russia further destabilizes Ukraine.

EU foreign ministers meet March 17, a day after Crimea votes in a referendum about joining Russia, to consider asset freezes and travel bans on Russian political and business leaders they consider responsible for instigating and profiting from the events on the Black Sea peninsula.

Kerry arrived today for talks with his Russian counterpart, Sergei Lavrov, in London, where the U.S. will seek to end moves by Russia to annex Crimea.

All Tools

“Russia may use all the tools in the tool box” to retaliate against sanctions, including visa regulations and tax audits, Ariel Cohen, senior fellow at the Republican-leaning Heritage Foundation in Washington, said by e-mail.

Russia has been selective in applying its visa rules to foreigners in the past.

Hermitage Capital Management Ltd. founder William Browder, a U.S.-born citizen of the U.K., was barred from Russia without explanation in 2005. Browder, whose fund was once the largest stock investor in Russia, had spent much of the previous decade tangling with state-run companies over shareholder rights.

“Foreigners are most vulnerable because one swipe of the pen and they’re out for good and there is nothing you can do,” Browder, 50, said by e-mail. “I was the poster child of the use of corrupt visa bans, but they now do it all the time for lots of reasons that have nothing to do with the law.”

To contact the reporters on this story: Jason Corcoran in Moscow at jcorcoran13@bloomberg.net; Henry Meyer in Moscow at hmeyer4@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; Frank Connelly at fconnelly@bloomberg.net Brad Cook, Paul Abelsky, Andrew Atkinson


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