Always In The Shadows, Always In Control

This Isn’t A Business – It’s A 400-Year-Old Dynasty

And It’s Trading At A 30% Discount From Fair Value

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“We all remember Alexander the Liberator… Well, now we’ll have Vladimir the Underpants Poisoner.” 

So spoke Russian political dissident Alexei Navalny – hanging on to life in a Berlin hospital in September 2020 after Russian President Vladimir Putin’s goons had dusted the inseam of his jockey shorts with Novichok nerve gas.

Two days earlier, Navalny pulled up his drawers in a hotel room in Siberia, hopped on a plane for Moscow, and became violently ill midflight. After an emergency landing – and an airlift to the hospital during which he was completely naked – Navalny survived and ultimately blew the whistle on a series of intricately corrupt Russian oil deals.

Navalny was just one in an impressive lineup of Vladimir Putin’s poisoning victims – the rare one who lived to tell the tale, at least for four more years. (In Russia, if the nerve agent doesn’t get you, the Arctic Circle penal colony will.)

To be fair to Putin, he was just carrying on a grand Russian poisoning tradition that dated back a hundred years. 

In 1921, Vladimir Lenin, the first chairman of Soviet Russia, narrowly dodged a bullet… realized he had too many enemies… and commissioned a secret poison lab called simply the “Kamera,” or “Chamber.” There, government scientists experimented on political prisoners to create odorless, tasteless, undetectable poisons… often with symptoms that cleverly mimicked other illnesses. (Some of their greatest hits included a gas pistol that could shoot liquid up to 65 feet and a special poison that could be sprayed onto a lightbulb and dispersed via heat.)

Officially, the Kamera didn’t exist. It shifted from building to building, underground room to basement hideaway. While no one knows exactly where the lab is located these days, defected Russian spies – like Alexander Litvinenko, who died in 2006 after drinking radioactive tea – report that it’s still fully operational.

During the 20^th century, the Kamera’s ingenious poison menu would serve a Who’s Who of Russian political enemies, including in 1955 defector Nikolay Khokhlov (thallium-laced coffee), Afghan leader Hafizullah Amin in 1979 (poisoned food), anti-Soviet writer Lev Rebet in 1957 (a puff of cyanide mist to the face), and anti-Communist journalist Georgi Markov in 1978 (a single subcutaneously injected pellet of ricin).

And when Putin took over as Prime Minister in 1999, he was only too happy to carry on the good work…

Putin – the diminutive strongman who’s spent the past quarter-century as the leader of Russia – generally gets what he wants. And in 2008 – after he’d tested Kamera poisons on a few lower-level antagonists – he knew exactly what he wanted next.

His next round of odorless, tasteless nerve gas would snuff out the top man at BP Energy.

In Soviet Russia, Gas Gets You

Putin had had his sights on BP for quite awhile.

With an eye to creating a Russian oil mega-monopoly, he’d already forced independent Russian energy companies Yukos and Sibneft to fall under the ownership of state-owned oil giant Rosneft in the early 2000s. (Yukos’ CEO, who didn’t like the plan, was thrown in prison on trumped-up tax evasion charges, and the CEO of Sibneft sold quietly – at a 75% discount.)

Now, Putin was circling in on bigger prey: multinational oil conglomerates TNK-BP. The TNK half of TNK-BP was already controlled by Russian holding company AAR. However, British oil supermajor BP owned the other half… and they weren’t keen on selling their slice of a lucrative 1.6-million-barrel-a-day concern.

BP CEO Bob Dudley was a particular pain in Putin’s zadnitsa. Under Dudley’s leadership, TNK-BP’s oil output had increased by a third, and he refused to step down from a successful business.

When buyout negotiations stalled, Putin ramped up his pressure campaign. Armed police halted operations at BP’s Moscow headquarters and conducted mysterious document raids. Dudley and his American employees all began to experience “visa problems.” Dudley himself – in a clear callback to the Yukos CEO’s fate – was questioned for five hours about tax evasion.

Nothing worked. So Vladimir the Underpants Poisoner brought out the good stuff.

It wasn’t in Dudley’s drawers, though – it was in the food in the company cafeteria. A subtle dusting, meant to ramp up illness over time. But Dudley – who’d already started passing notes rather than speak aloud in his office – was on high alert…

According to a U.S. Embassy cable later released by WikiLeaks, “On a trip out of Russia, according to three people close to BP, he had his blood tested, and poison was found in his bloodstream. He stopped eating food provided by the company and began to feel better.”

When Dudley didn’t die, Putin – tired of cat-and-mouse games – sent the police to the CEO’s front door to arrest him. From WikiLeaks, we learn: “He went out the back door of his apartment to a waiting car and left the country.”

Clearly, though, Dudley was spooked. Five months later, he officially tendered his resignation from TNK-BP. The buyout proceeded without incident, and Russian-state oil giant Rosneft absorbed the entire concern – for $27 billion, 40% of fair value – in 2013.

The Underpants Poisoner gets what he wants. Almost always.

With one very notable exception.

Not Even Putin Will Go After This Company

At least 20 high-profile deaths or imprisonments, including lawyer Sergei Magnitsky (died in custody in 2009 after exposing fraud) and Alexander Litvinenko (poisoned in 2006 and pictured here shaking hands with Putin) were linked to Putin’s efforts to control all of Russia’s energy complex.

Why did Putin seek to dominate this industry? The oldest reasons of all: wealth and power. Putin saw that the Western powers were weak – feminized and fragmented. He knew NATO wouldn’t engage in things like espionage, blackmail, or murder. 

He knew he could seize their assets easily, as if from children, without consequence. Today, through various front men, known internationally as “wallets,” Putin owns and controls virtually the entire Russian energy industry. 

Russia’s government holds 50.23% of Gazprom and over 50% of Rosneft. That gives Putin effective control of these companies, where his loyalists appointees – Gazprom CEO Alexei Miller and Rosneft CEO Igor Sechin – siphon billions in tribute to Putin every month. The 2016 Panama Papers – a compilation of leaked international documents – proved other Putin associates like Sergei Roldugin hold hundreds of billions worth of shares in these companies directly. Other “wallets” like Gennady Timchenko ($20 billion net worth from energy deals) receive rich contracts and royalties. All are fronts for Putin. 

As a result, it’s likely Putin is the wealthiest man in the world. 

But during Putin’s power-driven energy blitzkrieg, there was one institution not even Putin was willing to cross. 

It is an ancient keiretsu – a network of closely collaborative businesses – one that no one mentions by name. It owns virtually nothing openly or directly. It follows the single most important law of power: the greatest trick the devil ever played on men was convincing them he wasn’t real. And, just as Sun Tzu taught, the ideal general “wins without a battle” by focusing on long-term advantages rather than short-term clashes. 

Asia is controlled by only a few dozen families. And the most powerful families are hidden from the public. They do not operate directly, or in the open, but instead through a huge web of holding companies… keiretsus. They control banks, insurance companies, and have privileged access to government capital. Rather than seeking formal control, they sell majority stakes to prominent operators, while always secretly holding the reins of power. 

They are masters of discretion. Masters at accounting. Masters at being able to accurately value each portion of a corporation’s capital stack. And most of all, they are the uncontested masters at long-term strategy. They do not measure results quarterly. They measure results by the century. 

And by doing so, they maximize their return on invested capital in ways no other business in the world can. Most of all, they do not lose money. Nor do they allow any business difficulty – even a war, like Putin – to distract them from their goal, which is the long-term appreciation of their capital. 

And like Putin, they are capable of doing whatever must be done to protect their rights and interests. There isn’t anyone they won’t kill. Not even Putin. But conflict is always their very last option. Over hundreds of years, they’ve learned that real power is having the ability to destroy everyone… but choosing not to do it.

There are perhaps a dozen companies like this in Asia. But the leading five are in Japan. They are known as the sogo shosha, which translates into “integrated trading company.” 

They are integrated in the sense that they control both their sources of capital and have integrated supply and production chains. The only American business that functions even remotely in this fashion is Berkshire Hathaway, which uses its massive insurance float (around $175 billion) to fund its investments in dozens of leading U.S. companies. 

But in Japan, the sogo shosha play a far deeper cultural role, functioning in many ways like ancient Shoguns – protectors of Japan’s long-term interests. And they lord over the entire society, including the government. And there’s one master that rises above all of these ancient houses. It maintains a 400-year-old tradition as the most powerful of all keiretsu. It is the master of Japan’s financial markets, trading houses, and industries across all of Asia…