Britain’s secret service is questioning how a controversial Russian oligarch with links to military hardware production was allowed to float his company on the London Stock Exchange, reportedly raising £1 billion.
Oleg Deripaska, one of Russia’s richest men and said to be a close ally of President Vladimir Putin, listed his energy company EN+ in London last November.
But MI6 have now raised concerns about why the flotation was permitted without a proper consultation with the intelligence services, at a time of heightened tensions between London and Moscow. One senior intelligence official told The Telegraph newspaper that the decision to let EN+ list was a “scandal”.
EN+ has strongly rebutted the claims, saying: "These allegations are highly damaging and we totally refute them in the strongest possible way."
In a statement on Wednesday, the company added: "The EN+ Group IPO was fully compliant with all relevant UKLA and FCA regulations and listing rules. The use of proceeds by EN+ did not breach any US and EU sanctions.
"Both EN+ Group and UC Rusal have necessary policies and procedures to ensure full compliance with US and EU sanctions applicable to their operations. EN+ Group has always been sanction-compliant."
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Mr Deripaska is president of Russian aluminium firm Rusal, which produces a metal powder used “in the production of military equipment”.
According to The Telegraph, the same powder was used in the production of a Russian-built Buk missile which investigators said took down Malaysia Airlines flight 17 over eastern Ukraine four years ago, killing all 283 passengers and 15 crew on board.
Former defence minister Sir Mike Penning has put forward a number of questions about the flotation of EN+ to MPs in the House of Commons.
The questions include whether Russian companies listed on the LSE, which supply aluminium to Russia, “represent a threat to the UK’s national interests and security”.
“Questions have to be raised about how a company led by a Russian oligarch with close ties to Putin has been allowed to register on the London Stock Exchange,” The Telegraph reported Sir Mike as saying.
“It is linked to military hardware and missiles that are being pointed at Nato and the West.”
The concerns come at a time when relations between the two countries are already at a very low ebb.
It followed disputes over alleged Russian meddling in European elections, and incidents of hacking with alleged links back to the Kremlin.
Adding to the controversy, EN+ is also part-owned by Russian state-owned bank VTB which faces sanctions from the EU and the US.
The sanctions mean VTB is prohibited from raising money in Europe. However, they do not apply to EN+. The Telegraph reports that the bank lent the company £697 million towards funding the flotation.
According to a source, cited by the newspaper, neither MI6 nor the National Security Council were consulted about the flotation.
“Serious concerns have been raised about the apparent failure to make proper checks about the likely implications for Britain’s security of allowing the EN+ sale to take place in the City,” the source said.
“There are concerns that the funds raised in the City could be used to circumvent sanctions, as well as providing a boost to Russia’s military industrial base at a time when the Russian military is posing an increasing threat to Britain’s security interests.”
Sir Mike added: “Russia is an enemy. As a former defence minister it was me that got called early in the morning because there were Russian Bears [planes] flying over. The sanctions were put in place for a reason.”
A spokesman for the Financial Conduct Authority told The Telegraph that the Treasury had been consulted on whether the deal breached sanctions. “We are not aware of any concern that the deal breached sanctions legislation as EN+ and other principal entities involved in the deal are not sanctioned entities,” he said.