It all began as a promising partnership. In November 2005, Eugene Bokserman, a Toronto businessman with investments in Russia and Canada, introduced his friend, billionaire tycoon Alex Shnaider, also of Toronto, to Michael Shtaif. As Russian-born Jews, Shtaif and Shnaider shared much in common. They had immigrated to Canada as children, only to return as Canadian citizens to Russia, where they successfully navigated its free-enterprise culture in the wake of the collapse of the Soviet Union.
Each also had something the other needed. As former vice-president of operations in the services division for TNK-BP, one of Russia’s largest oil independents, Shtaif knew how to cut a deal in the oilpatch. (Houston oilman Frank Rieber, who worked with Shtaif at TNK-BP, describes him as an upstanding businessman who has a “very good reputation.”) Shnaider, the owner of a multibillion-dollar global shipping, real estate and steel empire, the Midland Group, had capital, as well as a growing reputation as an entrepreneur. “The two men liked each other,” Bokserman recalls. So they agreed to form a joint venture, Magellan Energy. But instead of making money, Bokserman says the relationship turned ugly. “Everybody is fighting, and nobody is making money,” he said in a recent telephone interview. “What a turn of events.”At the centre of the dispute lies an oilfield in northern Russia that Shnaider’s lawyers describe as “never worth the money our client was told it was worth” but that Shtaif and Houston oil analysts value at least US$157 million or more. The whole tale — or what one source close to the standoff dubbed “a typical Russian day” — reads like a story by Fyodor Dostoyevsky....MORE