February 27, 2008

Whatever happened to Sir Richard Evans?

Eric Ellis tracks down the former chairman of BAE Systems amid the wintry steppes of Kazakhstan, where he is trying to introduce Western notions of corporate governance

I HAD READ — admittedly in the Guardian — that one needed to count one’s fingers after shaking hands with Dick Evans. Anecdotes about the super-salesman who secured UK plc’s biggest and most controversial contract, the $80 billion Al-Yamamah arms deal with the Saudis that saved British Aerospace (now BAE Systems), suggested a crafty Lancastrian who has despots for breakfast, or at least to breakfast, while separating them from their defence budgets.

In his 37 years at BAE and its state-owned predecessors, Sir Richard Evans — the knighthood came in John Major’s last year in office — built a prodigious contact book of warriors from Pretoria to Peoria, while staring down a succession of British campaigners and journalists who alleged corruption in BAE’s dealings under his watch. It’s said that his Saudi deal-clincher, by the way, was his banquet party-trick of swallowing sheep’s eyes as though they were cocktail canapés.

A Financial Times friend had met Evans in Beijing and warned me he could be combative and outspoken. ‘He’s a legend, but you’ve got to be on your toes,’ he counselled, another worrying reference to digital extremities. Though Evans had agreed to discuss his new job — said to be his most significant career move since he stepped down from the BAE chair in 2004, and a good deal more exciting than his other current post as chairman of United Utilities — the fact that the job was in deep-frozen Kazakhstan provided further pause for thought. This is the Central Asian Boratistan where more than fingers have been known to go missing; and I’m not talking frostbite.

As it transpired, all my appendages survived the visit to the wintry steppes. Sir Richard — ‘call me Dick’ — was hail-fellow-well-met charm itself, even in 25˚-below-zero Astana, the futuristic, oil-rich Kazakh capital where he spends a week a month in a post he says is as formidable a challenge as any he’s taken on. That’s saying something for a man who first made his name in the ruthless and secretive world of military aircraft sales.

He was tapped in 2006 by the country’s omnipotent ruler Nursultan Nazarbayev to chair what rapidly emerged as Kazakhstan’s biggest company, a newly created state holding company called Samruk. ‘I was introduced to Nazarbayev on one of his early trips to the UK by Tony Blair while I was still at BAE,’ Evans explains. That meeting led to BAE helping to restructure aviation in Kazakhstan and buying 50 per cent of a new airline, Air Astana, which is a joint venture with Samruk.

‘The President was pressing hard for me to come, and he wore me down. I was over here on a review of the airline, we had lunch at the palace and he said, “We want to talk you again about Samruk,” and there and then at that lunch, after a previous nine months’ warm-up, I said, “Fine, OK, I’ll do it.” I don’t think I could’ve said yes had I not seen a lot of them and got to know them quite well.’

Anchored by the state oil company KazMunaiGas (KMG), which had previously been a playground of Nazarbayev’s billionaire son-in-law, Samruk’s $40 billion portfolio equates to about a third of the Kazakh economy. Its payroll totals more than 300,000.

All that makes Evans notionally more powerful than most ministers in Nazarbayev’s cabinet.

‘There’s a danger of being treated as a cabinet minister,’ he agrees. ‘But the problem is, if you allow it to happen, then the damned organisation becomes another ministry. It’s a really serious issue. It would be very easy for Samruk to become a super-ministry and all it then does is simply put another layer on top. It’s a constant fight to stop it happening. I cannot afford to engage in politics — and it’s not my politics anyway.’

With oil prices high, KMG may be sparkling but the rump of Samruk is a largely dysfunctional mélange of beloved Soviet-era monopolies — telecoms, railways, utilities, airports, Caspian shipping, even the postal service — with a governance culture that Brezhnev would have recognised. That Astana still has a Lenin Street suggests that despite the otherworldly modernism of this new capital, just 100km from Siberia, some things remain deeply resistant to change. Privatisation is an aspiration for the Samruk satellites, but it’s still a long way off.

‘The prime issue for me, coming here,’ Sir Richard says, ‘is to begin a serious programme of corporate governance, brought into Samruk and carried down into the national companies and the economy. This is a country that has a scarcity of human capital [it has only 15 million people, spread over a million square miles of land]. There are high-quality people, but because of the history, it is exceedingly short of people who’ve got Western and commercial business experience. The big challenge is to develop that experience, and that is a generational thing.’

Evans’s brief is part business leader, part troubleshooter, part teacher, part PR man. He presents as a useful Western suit who can open doors in the City. ‘Most people ask me, “Where the hell is Kazakhstan?” Central Asia for the West ceased to exist for 100 years, it just disappeared off the map. But now it’s increasingly coming back, people are paying a lot more attention and understanding that some of these places are going to be the key economies for the 21st century. The opportunities for this country are phenomenal and to be a part of it is hugely challenging.’

His appointment is also a message that unlike the hermit tendencies of many neighbours in the region — including, increasingly and alarmingly to many, Vladimir Putin’s big bear to the north — Kazakhstan is open for Western business.

Primarily though, Evans’s job is to transform Samruk into an efficient ‘sovereign wealth fund’, the buzz-term du jour to describe the cash-rich investment agencies, often hailing from emerging countries such as Abu Dhabi, Dubai and Singapore, that share with Kazakhstan a distinct absence of pluralist democracy, and are now busy bailing out subprime-torpedoed Western banks.

Given the preponderance of President-for-life Nazarbayev’s relatives in corporate Kazakhstan — a widespread trend among the old apparatchik families who continue to rule the Central Asian ‘Stans’ of the former Soviet Union — cynics have inevitably suggested that Evans was hired to chair ‘Nazarbayev Inc’. After all, this is a president who has been described as one of the original oligarchs: he has held all but absolute power since shortly before his country gained independence from Moscow in 1991, and has been widely reported by corruption monitoring groups such as Global Witness to have salted away $1 billion of oil revenues in a Swiss bank account. (The newspaper in Almaty, Kazakhstan’s second city, that first published this claim was sent a decapitated dog with a message pinned by a screwdriver plunged into its carcass: ‘There will be no next time.’ The editor fled to Russia after finding the dog’s head at her home.)

Nazarbayev is also embroiled in ‘Kazakhgate’, a criminal case against American businessman James Giffen, who stands accused in the US of paying $78 million in kickbacks to Nazarbayev and associates to secure oil deals for US companies.