Russian security services arrest two brothers for espionage in oil industry

RUSSIAN SECURITY services have arrested two Russian-American brothers for industrial espionage in the oil industry, in a move that analysts say could mark the start of a bid by Kremlin-backed companies to seize control of more prime energy assets.

The suspects are Ilya Zaslavsky, an employee of a joint venture between Britain's BP and Russian energy firm TNK, whose Moscow offices were raided by police this week, and his brother Alexander, president of the British Alumni Club, whose members are Russians who have studied in Britain.

TNK-BP, which is the biggest investment by a British firm in Russia, was forced to sell its majority stake in a Siberian gas field last year after officials accused it of breach of contract. The buyer was Kremlin-controlled energy giant Gazprom.

The British Alumni Club, meanwhile, is run by the British Council cultural organisation, which has been forced to close its offices outside Moscow in a tax row, and was described by incoming Russian president Dmitry Medvedev as a "well-known" front for spies.

Relations between Russia and Britain deteriorated dramatically after the murder in London in 2006 of former KGB agent Alexander Litvinenko, and a subsequent row that prompted both countries to expel four of the other's diplomats.

Moscow refuses to extradite the main suspect in the killing.

Russia's domestic security service, the FSB, said in a statement that the Zaslavsky brothers "were illegally collecting classified commercial information for a number of foreign oil and gas companies to gain advantages over Russian competitors".

They were charged with espionage on Tuesday, and the next day raids were conducted on the offices of both BP and TNK-BP in Moscow. The companies deny any wrongdoing.

"During the raid, material proof confirming the industrial espionage was found and confiscated", including classified official documents and "business cards of employees of foreign military agencies and the CIA", the FSB said.

Analysts immediately raised the prospect of a grab for energy assets by Kremlin-run firms such as Gazprom and Rosneft, which seized most of the huge Yukos oil firm after it was dismantled in a devastating legal attack over tax arrears that began in 2003.