2G Scam & Admiral Gorshkov Submarine Deal Connection

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One of the allegations against A. Raja in the 2g scam case is setting-up an arbitrary cut off date of 1st October 2007 and then its revision to 25th September 2007 for grant of telecom licenses in 2007-08.

There are many questions on which CBI has failed to investigate or it has been asked not to investigate – (a) What was the reason for having a cut off date and even revision of this date? (b) Why only 25th September as the cut off date and why not, any other date? (c) Who applied on the revised cut off date?

Interestingly, CBI is keeping its mind and eye closed on these questions. It is Sistema Shyam and Indiabulls which applied on 25th September 2007. Of course, Indiabulls cannot be a company for which cut off date was revised back to 25th September because it was not a successful applicant. But, what about Sistema Shyam – was its role investigated by CBI in the 2g scam case? If yes, to what extent?

FIRSTLY, WHO IS SISTEMA

Sistema is the largest diversified public financial corporation in Russia and the CIS, which invests in and is a major shareholder of companies serving over 100 million customers in the sectors of telecommunications, high technology, oil and energy, radars and aerospace, banking, retail, mass-media, tourism and healthcare services. It reported revenues of US$ 7.8 billion for 1st quarter of 2011, and total assets of US$ 46 billion as at 31st March 2011.

SECONDLY, WHAT IS THE RELEVANCE OF 25TH SEPTEMBER 2007

Shyam Telelink applied for licenses in 21 circles on 25th September 2007 (date on which the first cut off date was announced and subsequently, this date was announced as revised cut off date). On the very next day, on 26th September 2007, Sistema announced that it has acquired a 10% stake in Shyam Telelink for a cash consideration of US$ 11.4 million. This deal might not have happened within 1 day of applying for telecom licenses. Why it was announced a day after applying for telecom licenses? Why did such a large company (Sistema) invest in a company (Shyam Telelink) which has got license in only 1 circle (Rajasthan)? If it was serious about Shyam Telelink, why had it not straight-away acquired 49% stake (which does not require any approval)?

Truth is, Sistema is closely connected to the Russian Government. It is doing business in oil and gas also with the Government of India. It is believed that during the Admiral Gorshkov submarine deal discussion, when Defence minister A. K. Antony visited Moscow from 17-19 October 2007, the Russian government asked the Indian Government (PMO) to request Telecom minister to accommodate Sistema and hence the 25th September 2007 was finalised as revised cut off date. Any prior cut off date would have sent Sistema applications for 21 licenses to non-consideration zone like the other 343 applications pending till date with DOT. This belief is confirmed from the fact that Sistema signed the share purchase agreement to increase its stake in Shyam Telelink from 10% to 51% in October 2007 – only after getting an assurance from the Indian government that the telecom licenses will be issued to Shyam Telelink. Otherwise, what was the reason for not signing this agreement in September 2007 when Sistema acquired 10% stake in Shyam Telelink

THIRDLY, WHY WAS SISTEMA SO IMPORTANT FOR THE INDIAN GOVERNMENT –

Ministry of External Affairs (Annual Report 2007-2008) – “The strategic partnership between India and Russia was further consolidated during the year (2007-2008) through exchange of high-level visits and signing of documents, particularly in the fields of defence, space, science and technology, economic cooperation, counter-narcotics and culture.”

To understand this influence of Russia over India more correctly, let’s go through some major events on and around the date when Sistema decided to enter into Indian telecom market and till the date of issuance of licenses to Sistema Shyam:

On 25-26 January 2007, Mr. Vladimir V Putin, Russia President visited India. Russian billionaire tycoon and chairman of Sistema – Vladimir Yevtushenkov – also accompanied him with an eye on Indian telecom sector. During this visit, a Protocol was signed with the Russian Government on holding “Year of Russia in India” in 2008 and “Year of India in Russia” in 2009.

Subsequently, many more visits and meetings were held between Russian and Indian government officials, like-

  1. February 14, 2007 – Fifth Trilateral meeting of Foreign Ministers of India, China and Russian Federation.

  2. 9 April 2007 – Foreign Office Consultations between the Foreign Secretary and the Russian First Deputy Foreign Minister, Andrei Denisov took place in Delhi.

  3. 6-8 June 2007 – Prime Minister Dr Manmohan Singh briefly met President Putin at the Summit of G-8 and Outreach countries in Heiligendamm, Germany.

  4. 9-10 June 2007 – Minister of Commerce and Industry, Kamal Nath visited St. Petersburg to participate in the St. Petersburg Economic Forum.

  5. July 2007 – Joint Study Group set up in 2006 to find ways and means to increase bilateral trade and investment and examine feasibility of a Comprehensive Economic Cooperation Agreement finalized its Report during its fourth meeting in Moscow.

  6. 1 August 2007 – Minister of External Affairs met Russian Foreign Minister Sergei Lavrov on the sidelines of the ARF/ASEAN/EAS meeting in Manila.

  7. 13-14 August 2007 – Special Envoy of Prime Minister, Shyam Saran visited Moscow.

  8. 28-29 August 2007 – National Security Adviser, M.K. Narayanan visited Moscow.

  9. August 2007 – Department of Science and Technology of India and the Russian Foundation of Basic Research, Moscow signed a Memorandum of Understanding (MoU) on cooperation in basic sciences.

  10. August-October 2007 – The five Joint Working Groups under the Inter-Governmental Commission on Trade, Economic, Scientific, Technological and Cultural Cooperation: (i) Trade and Economy (ii) Energy (iii) Metallurgy and Mining (iv) Technology and (v) Tourism and Culture discussed cooperation in their respective fields in Moscow.

  11. 7-10 October 2007 – President of the Indian Council for Cultural Relations, Dr. Karan Singh visited Moscow to discuss cultural cooperation, particularly preparations for ‘Year of Russia in India’ in 2008 & ‘Year of India in Russia’ in 2009.

  12. 11-13 October 2007 – Minister of External Affairs, Pranab Mukherjee visited Moscow to cochair the 13th session of the India-Russia Inter-Governmental Commission on Trade, Economic, Scientific, Technological and Cultural Cooperation (IRIGC).

  13. 24 October 2007 – Minister of External Affairs had a bilateral meeting with the Foreign Minister of Russia, Sergei Lavrov on the sidelines of the India-Russia-China Trilateral Foreign Ministers meeting held in Harbin, China.

  14. October 2007 – The Joint Task Force on Mutual Financial Obligations met in Moscow and the Sub-Group on Banking met in Jaipur.

  15. 28 October-1 November 2007 – Acting Secretary of the Security Council of Russia, Gen. Valentin Sobolev visited India.

  16. November 11-12, 2007 – Prime Minister, Dr. Manmohan Singh visited Moscow and held delegation-level talks with the President of Russia, Vladimir Putin. He also met the Prime Minister of Russia, Viktor Zubkov and attended a business meeting with senior Indian and Russian trade and industry representatives. Many documents were signed during the visit, including Letters of Exchange (on utilization of Rupee debt funds for Russian investments in India).

Why suddenly, were there so many visits to Moscow and so many crucial meetings after January 2007 when Sistema desired to enter the Indian telecom market? What was the need of signing protocol on holding 2008 as “Year of Russia in India”? Had such a protocol has been signed with any other country?

In January 2008, Sistema guaranteed USD 520 million of total USD 630 million (82.5% of total amount) to be paid for obtaining the licences by Shyam Telelink despite having a shareholding of 10%. Subsequently, in the same month on 18th January 2008, Sistema increased its shareholding in Shyam Telelink from 10% to 51% (for which share purchase agreement was signed in October 2007). It shows that Sistema had been assured in October 2007 itself that Shyam Telelink will be issued licenses in 21 circles for which application was filed on 25th September 2007 – otherwise, why was the share purchase agreement signed in October 2007, and why not in September 2007 when it acquired 10% shareholding in Shyam Telelink.

In February 2008, Sistema said that it would increase its stake in Indian telecom operator Shyam Telelink from 51% to 74% in the next 1-2 years. Why had it not acquired 74% stake in the first instance when it had got FIPB approval for 51% stake? Sistema also spoke about investment of USD 4-7 billion to roll out a pan-Indian network. Why was such a large investment committed by Sistema when it was holding just 51% stake? Was a proportionate amount committed by the other shareholder holding 49% stake or was this 49% shareholder just acting as a nominee of Sistema? This presumption becomes a reality when on 6th June 2008, Sistema increased its stake in Shyam Telelink from 51% to 74%.

On February 12-13, 2008, Prime Minister of the Russian Federation, Viktor Zubkov, accompanied by a large business delegation, visited India. He participated in the Second India-Russia Forum on Trade and Investment and inaugurated the ‘Year of Russia’ in India in 2008 and took part in the opening of the Delhi representation of Russian largest financial corporation “Sistema”. He said that “Sistema” is a pioneer in high-tech and telecommunications field in India. Facing tough competition, this company, first of all, established a strong foothold in the Indian market and recently “managed” to obtain a license, which allows “Sistema” to carry out pan-Indian telecom operations.

Just a day before the visit of Victor Zubkov to India, an agreement on expanding peaceful nuclear cooperation with India was initiated. This shows the influence of Russia on the Indian government. Could the Indian Government have afforded to annoy its Russian counterpart by fixing any date prior to 25th September 2007 as the revised cut off date?

Even today also, Russian government is using its influence over the Indian government to ensure that Sistema Shyam is kept out of investigation zone and they have got assurance from the Indian government. It is apparent from the fact that prior to filing of first chargesheet by CBI, UAE government officials met with the Indian government and Norway Prime Minister wrote a letter to Indian Prime Minister, expressing their concern over ongoing investigations and to protect their investment in India. But, no such formal visit or communication was made by the Russian government. What it means is that either it is not concerned about its investment in India (which is difficult to believe) or it has got assurance from the Indian government that there will be no action against Sistema Shyam (which is most likely the case considering influence of the Russian government over Indian government).

This shows how the government of our country can control the investigation agencies and commit fraud with us – the citizens of this country.

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