Big names who give the Russians street cred

RUSSIAN business seemed to have turned a corner - and then came the kidnapping of a senior executive at LUKoil, the country's top oil producer. Sergei Kakura, 48, vice-president in charge of the group's finances, was snatched last week in Moscow by armed men and a ransom demand for $6m(£3.9m) - half of it to be paid in roubles - was reportedly made.

The kidnapping rekindled memories of the business vendettas of the 1990s when Russia was equated with corruption, money laundering, the mafia and contract killings.

It is an embarrassment to President Vladimir Putin and the Respectable Revolution that appeared to be replacing the wild capitalism of the past decade. One aspect of the Respectable Revolution has been the secondary listing on the London Stock Exchange of giants such as LUKoil.

Another clear sign that things are changing is the queue of eminent names from the West accepting senior roles in major Moscow companies, some of which had controversial reputations in the rollercoaster years of dodgy privatisations in the 1990s.

A senior diplomat said yesterday: 'Obviously the kidnapping has been a shock, but it doesn't alter the way Russian business is cleaning up its act.'

Leading the list of eminent westerners is Lord Owen, the former Labour Foreign Secretary, now head of the international HQ of Yukos Oil in London. Yukos has made huge strides to improve its reputation and transparency from the days of its contentious privatisation and use of a complex web of offshore companies. The company now has five foreign non-executive directors.

In June, Yukos made public its list of shareholders, an unprecedented act of openness in Moscow. This led to its chief executive, Mikhail Khodorkovsky, being identified as Russia's richest man with almost £5bn. He keeps a room filled with antiques at Somerset House.

Lord Owen brings to Yukos strong business experience gained behind the old Iron Curtain as chairman of metals business Middlesex Holdings and as vice-chairman of Europe-Steel.com. He also has a wide knowledge of the Balkans, where Yukos is seeking a Russia-to-Croatia pipeline.

For Khodorkovsky, the role of Lord Owen is 'to focus on negotiations with European governments and prospective partners and guide the company in its accelerated programme of expansion outside Russia'. Or, put simply, street cred for the Russians. On Wall Street, and in Threadneedle Street, that is.

He is not the only big Western name that confident Yukos has snapped up. John Brown Hydrocarbons and Davy Process Technology were company acquisitions.

Another Russian oil giant, TNK International, recently secured Sir Peter Walters as chairman of its newly created advisory board. He was chairman of BP from 1981 until 1990 and in charge of SmithKline Beecham from 1994 to 2000. He was deputy chairman of the renamed GlaxoSmithKline until May this year.

On board with him at TNK is Sir William Purves, former chairman of banking giant HSBC and an ex-president of the General Council of British Shipping. Purves is president of the Police Foundation and the Institute of Business Ethics.

TNK president Simon Kukes said: 'The experience of members of the advisory committee working at the highest level of international business life will be especially valuable to us, given our commitment to achieving standards of corporate governance and financial integrity that are fully in keeping with global best practice.'

The company took several months to persuade Walters to join, it is claimed, and he is said to want to be happy about access to company information and the relationship with shareholders before making a firmer commitment.

TNK also looked to the US with the appointment of James Harmon to its supervisory board. He was president of the US Export Import Bank in 2000 when it extended half a billion dollars in loan guarantees to TNK, a deal opposed by BP.

LUKoil, meanwhile, has gone down a similar road. Its heavyweight outsiders are Richard Matzke, former Chevron-Texaco vice-chairman, and Mark Mobius, head of the Russian division of Franklin Templeton Investments, the world's largest emerging markets fund.

As Marina Dracheva of Energy Compass said: 'Russian oil companies are now striving to out do one another in showing the world they are both creditworthy and investor friendly.' They are 'eager to tap international financial markets for more cash to feed their appetites for growth and to find strategic investors to fund their global ambitions' - and the appointments reflect this desire.

And not only oil. David Herne, a fund manager with Brunswick Capital Management, is on the board at electricity monopoly United Energy Systems. He sees himself as an independent voice appreciated by investors.

The trend must delight a longtime cheerleader for the exploitation of business opportunities in Russia, namely Prince Michael of Kent, patron of the Russo-British Chamber of Commerce. He may have an image problem at home but here, in Moscow, he was recently voted International Man of the Year by Who's Who of Russia, not least for his work fostering trade when it was not the fashionable thing to do.