The deal is distinct from the common practice of oil majors and other corporations outsourcing security in hot spots in the Middle East and elsewhere. Under the contract, the wells are not just to be guarded, but to be captured first, the article said.
“The arrangement returns to the times of Francis Drake and Cecil Rhodes,” it noted, referring to two figures from British history whose careers mixed warfare and private profit.-NYT
A couple years back, I came up with a concept that more accurately described the type of contracts PMSC’s were conducting in the war. Current contracts are more or less classified as ‘Defense Industry’, where companies profit from the defense of a client and their property. This kind of contract is more favorable because it is not geared towards destroying the enemy. You actually want the enemy to stick around so you don’t work yourself out of a job. lol
The second type of scheme is ‘Offense Industry’. Basically we are talking about contracts where a company profits from the destruction of a client’s enemy and their property. If XYZ company destroys ISIS, then they are payed 50 billion dollars for example. In my post about it, I brought up past examples of offense industry–like privateering.
Fast forward to today’s news coming out of Syria. According to the news site Fontanka, there is an offense industry contract that has been arranged between Syria and several Russian PMSC’s. Here is the quote from the NYT’s article on it:
So far, two Russian companies are known to have received contracts under the new policy, according to the reports: Evro Polis, which is set to receive profits from oil and gas wells it seizes from the Islamic State using contract soldiers, and Stroytransgaz, which signed a phosphate-mining deal for a site that was under militant control at the time.
The agreements, made with the Syrian government, are seen as incentives for companies affiliated with Russian security contractors, who reportedly employ about 2,500 soldiers in the country, to push the Islamic State, also known as ISIS or ISIL, out of territory near Palmyra, in central Syria.
Most Middle Eastern wars are suspected of having some variant of this deal, but it is seldom made as explicit as in the Russian contracts.
“It’s all very simple,” Ivan P. Konovalov, director of the Center for Strategic Trends Studies, said by telephone of the deals, struck in December but just recently reported. “If a company provides security, then the country getting that service should pay. It doesn’t matter how the payment is made.”
In the petroleum deal, Evro Polis, a corporation formed last summer, will receive a 25 percent share of oil and natural gas produced on territory it captures from the Islamic State, the news site Fontanka.ru reported.
This contract is not just about defending a client’s asset. This first requires these companies to conduct offensive operations and seize this territory, and then defend it! That is a big difference and greatly adds to the risk of these types of contracts. But there is a big reward if they can take it.
It is that reward mechanism that creates an incentive for an investor to put so much into something like this. It is why investors put so much money into privateering vessels during the Revolutionary War and War of 1812 in the US–they were ‘incentivized’. But they also had a legal contract with the backing of the US Constitution and congress in the form of a Letter of Marque. I have not seen such legal protections talked about in this article by the NYT or Fontanka. Although I have to imagine the backroom dealings on this would be pretty comprehensive.
A final thought on this is that I held back on putting this story up at first. I do not have the resources to go to Syria and confirm all of this. So these forces might be legitimate Russian PMSC’s, or they might be just Russian special operations dressed up to be PMSC’s (little green men anyone?). I have written about PMC Wagner in the past, as well as the Slovanic Corps and the story always seems to be a little different that what was reported. There are a lot of groups out there pushing agendas and trying to trade up the chain as they say. So are we seeing the beginnings of new offense industry in Syria? We will see where this goes…. –Matt
Russian EOD personnel in Palmyra, Syria. -NBC
Russia Deploys a Potent Weapon in Syria: The Profit Motive
By ANDREW E. KRAMER
JULY 5, 2017
The Kremlin is bringing a new weapon to the fight against the Islamic State militant group in Syria, using market-based incentives tied to oil and mining rights to reward private security contractors who secure territory from the extremists, Russian news outlets have reported.
So far, two Russian companies are known to have received contracts under the new policy, according to the reports: Evro Polis, which is set to receive profits from oil and gas wells it seizes from the Islamic State using contract soldiers, and Stroytransgaz, which signed a phosphate-mining deal for a site that was under militant control at the time.
The agreements, made with the Syrian government, are seen as incentives for companies affiliated with Russian security contractors, who reportedly employ about 2,500 soldiers in the country, to push the Islamic State, also known as ISIS or ISIL, out of territory near Palmyra, in central Syria.
Most Middle Eastern wars are suspected of having some variant of this deal, but it is seldom made as explicit as in the Russian contracts.
“It’s all very simple,” Ivan P. Konovalov, director of the Center for Strategic Trends Studies, said by telephone of the deals, struck in December but just recently reported. “If a company provides security, then the country getting that service should pay. It doesn’t matter how the payment is made.”
In the petroleum deal, Evro Polis, a corporation formed last summer, will receive a 25 percent share of oil and natural gas produced on territory it captures from the Islamic State, the news site Fontanka.ru reported.
The website has a record of accurately reporting about private security companies in Russia, and just last month Washington appeared to corroborate one of its earlier reports by imposing sanctions on a Russian whose activities first came to light in the publication.
Fontanka’s latest article on the topic, published last week, detailed how Evro Polis was cooperating with a shadowy Russian private security group called Wagner, which American sanctions suggest has also provided contract soldiers to the war in Ukraine.
The deal is distinct from the common practice of oil majors and other corporations outsourcing security in hot spots in the Middle East and elsewhere. Under the contract, the wells are not just to be guarded, but to be captured first, the article said.
“The arrangement returns to the times of Francis Drake and Cecil Rhodes,” it noted, referring to two figures from British history whose careers mixed warfare and private profit.
Evro Polis, according to Fontanka and public company records in Russia, is part of a network of companies owned by Evgeniy Prigozhin, a St. Petersburg businessman close to President Vladimir V. Putin and known as “the Kremlin’s chef” for his exclusive catering contracts with the administration. His company, Concord Catering, also supplies food to many of Moscow’s public schools, according to Russian news reports.
Journalists have reported that Mr. Prigozhin engaged in another recent Russian experiment in restoring influence abroad while keeping costs down: He set up a factory of so-called internet trolls in St. Petersburg, an office packed with low-paid people posting online under assumed identities to influence public opinion in foreign countries, including the United States.
Last month, the Treasury Department in Washington imposed sanctions on Dmitri Utkin, the founder of Wagner, the private security group the report said would capture the Syrian oil and gas wells for Evro Polis. Fontanka first linked Mr. Utkin to Wagner in an article in 2015.
In the other deal, the Russian energy company Stroytransgaz won rights to mine phosphate in central Syria under the condition it secure the mine site, the Russian news outlet RBC reported.
Stroytransgaz, which is majority owned by another Russian under United States sanctions, Gennady Timchenko, signed a deal with the Syrian government to resume mining at the Sharqiya phosphate deposit, which was under Islamic State control at the time, RBC reported. Under the agreement, an unidentified Russian private military contractor would guard the site.
In this instance, however, Russian, Iranian and Syrian soldiers — rather than private contractors — conducted the operations in May that expelled Islamic State militants from the mining site, RBC reported.
In anticipation of the commercial payoff, the report said, a Russian ship laden with mining equipment docked at the Syrian port city of Tartus, where Russia has a naval base, even before the military operation began.
Russian officials have not commented publicly on either deal.
The Russian Energy Ministry did not respond to written questions about the reported oil and gas deal. The owner of Evro Polis did not reply to an email sent to an address listed on company records.
Asked on a conference call with journalists about the Syrian oil deal, the Kremlin press secretary, Dmitri S. Peskov, said “We do not monitor some entrepreneurial activity” of Russian companies abroad.
Mr. Konovalov, the military analyst, said the Syrian government was more than willing to strike such deals, trading natural resources for security.
“They get the better side of this contract,” he said. “They get our participation in the security sector in Syria, which is very valuable.”
The Fontanka report suggested that Russian security contractors had already put the agreement to work, fighting to expel the Islamic State from natural gas fields near Palmyra.
The Russians are training and fighting alongside a unit of the Syrian Army called ISIS Hunters, whose exploits are widely promoted in the Russian state news media. The Fontanka report linked to a video filmed from a body camera worn by a Russian-speaking soldier with ISIS Hunters during a firefight in the desert.
“Friendly, don’t shoot!” the soldier yelled in Russian, apparently to other Russian soldiers nearby.
Company associated with Putin’s Chef to get share of Syrian oil sales proceeds
Evro Polis, the company associated with “Putin’s Chef” Yevgeny Prigozhin, undertakes to release the oil and gas fields seized by Bashar Assad’s enemies in exchange for a quarter of all oil and gas produced in the country under an agreement with the Syrian government, reported Fontanka with reference to its sources.
Apart from that, Evro Polis LLC will be reimbursed for all costs of combat operations, according to a five-year memorandum the Ministry of Energy signed. “This was not an obligatory document since a new Syrian law needs to be adopted for the memorandum to come into force, and its effect will be retroactive: they will pay starting from the day the memorandum was signed,” Fontanka’s source said. The Ministry of Energy declined to comment.
Prigozhin’s interest in the Syrian deposits is further confirmed by a source of RBC.
Evro Polis LLC was registered in July 2016 with Oleg Erokhin as its only employee and the general director. Erokhin is a former fighter of Russian Ministry of Internal Affairs. After his retirement, he was seen in the company of Yevgeny Gulyaev, his former colleague and current head of Prigozhin’s security service. In addition, Erokhin is the founder of the League for Protection of Interests of Veterans of Local Wars and Conflicts, a St. Petersburg public organization.
Extraction of minerals (since 2017) and wholesale of food products (such as ice cream and coffee) are the company’s main activities. In addition, since May 23, 2017 the company has had a representative office in Damascus (Shuokli Kuatli Highway, office 509), while its authorized capital grew from 10.000 rubles ($170) to 3.000.000 rubles ($50.860).
ZAO Neva and Marina Smirnova are listed as Evro Polis founders. Neva general director is Valery Chekalov, who is also the general director of Kollektiv-Servis, whose telephone numbers happen to be identical with the contacts of several companies associated with Yevgeny Prigozhin.
Since early 2017, the Federal News Agency, which is part of Prigozhin’s media holding, has enthusiastically covered the activities of ISIS Hunters, a special unit of the Syrian army. The key tasks of ISIS Hunters are liberation, protection and defense of oil fields near Palmyra. Fontanka believes that the fighters of the unit are also Evro Polis employees.
Prigozhin met Vladimir Putin in 2001. Now his companies provide restaurant and catering services to the Kremlin, the military and schools. Apart from that, FBK linked Prigozhin with the “troll factory” in Olgino referring to Anonymous International hacker group.Story here.