BMB: The Battle of Murmansk – A tale of corporate conflict in Russia’s Arctic

Article published on the Bear Market Brief website on December 11th

A padlock stuck on a railroad switch was enough to block Murmansk’s oil terminal for about seven hours, one of the latest episodes of a bizarre corporate conflict in one of the world’s northernmost cities.

Accounts by local media of the incident paint a picture reminiscent of the trade wars from the 90s, when coercion and violence were often the most efficient ways to wrest control of a business from its owners. Early in November, a group of men surrounded the railway in the morning and, after installing the padlock, stood guard next to the tracks to prevent the lock’s removal. The blockade – which prevented an oil shipment from leaving Murmansk First Terminal – lasted most of the day, until local police finally arrived to disperse the group. When asked about their identity, the men claimed to be from the Murmansk Fishing Port’s security service.

The control of the railway, which snakes along the Kola Bay and around the city of Murmansk itself, has been at the heart of a conflict between Murmansk First Terminal, an oil storage facility, and the Murmansk Fishing Port, a struggling former state company that was privatized in 2015. A day after the incident, the Fishing Port published a long article on its website relaying the history of its conflict with the oil terminal and ending with the words “the port is ready to fight for the oil complex […] Perhaps it is time to pick up stones […] and evict this uninvited guest from a territory seized illegally!”.

The relation between the two firms was tainted from the start. Murmansk’s oil terminal is part of the fishing port and was leased to Murmansk First Terminal (MFT) until 2040, a move criticized by the current owners of Murmansk Fishing Port.

With the fishery in perpetual crisis, the loss of its most profitable asset – the oil terminal – in 2006 was a major blow, and not the only one: over the years, the territory of the fishery has become a complex corporate patchwork in which more than 80 companies lease various assets.

Later, MFT also leased the train station through which all of the port’s cargo travels, also previously controlled by the fishing port. Tensions soon mounted over whose goods should get priority when coming through that station, the Novorybnaya rail junction.

“The problem is that the bunkering of fuel is just one activity among many for the [fishing] port, along with the loading and unloading of cargo and other things. But all the key infrastructures have been leased for several decades to the oil terminal, which is exclusively interested in dealing with fuel,” a report on the conflict by a local blogger reads.

This clash of interests has surrounded the railway for several years, but grew more intense in November. On the 28th, the Murmansk Fishing Port published a press release dramatically titled “Blockade of the Fishing Port Has Lasted More Than 28 Days,” claiming MFT was doing the exact thing the fishing port is accused of – blocking the entrance of goods and fuel through its control of the railway. “The port’s losses,” the post reads, “[have] already reached 16 million rubles ($271,000) and continue to grow”. Three weeks before, the fishery had also accused MFT of blocking fuel tanks from reaching a boiler station, threatening to cut the heating to a dozen Murmansk families.

Read the rest here.

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