Putin targets Stoli boss in the battle for vodka billions

The ubiquitous Russian export and favourite tipple of Boris Yeltsin and Ab Fab's Patsy is at the centre of a bitter war between government and big business as President Vladimir Putin tries to wrest control of Stolichnaya vodka back to the state.

The battle for control of one of Russia's key assets claimed a high-profile scalp last week as the General Prosecutor's Office issued an arrest warrant for a vodka magnate, charging him with threatening to kill a government official.

A manhunt was launched, although the businessman, Yuri Shefler, who dismisses the allegations as 'a lie and international slander', is thought to live in Switzerland where his company manages exports of Stolichnaya.

Russians drink 4 billion litres of vodka a year, netting the state $1.5 billion in revenue. After his election, Putin said he wanted to renationalise the industry, which had been privatised in the Nineties. Many saw his move as a bid to be tough on big business and allow Russians again to associate their favourite drink with the state.

Shefler rose in the industry in the Nineties. The main trademarks, such as Stolichnaya and Moskovskaya, were then owned by Soyuzplodoimport. In 1997, Shefler became its president and formed another company, Soyuzplodimport - the same as the vodka giant he was president of, minus an 'o'. Soyuzplodimport allegedly paid Soyuzplodoimport $300,000 for 43 of Russia's main vodka brands.

An investigation by the Audit Commission valued the trademarks at $400 million, prompting the state to declare the sale illegal. Some have even valued the brands at $1.4bn. Shefler has since built up a massive spirit exporting business, SPI Group in Switzerland, which exports 25 million litres of vodka a year, sending its Stolichnaya to Britain, to the fury of the Russian government.

In May, 200 masked police ransacked the SPI headquarters in Moscow. An SPI spokesman said: 'These stormtroopers openly said they were assigned to destabilise our business rather than find any proof of our guilt.'

A few months later, the government issued a decree 'to restore and protect the exclusive rights of the Russian Federation' to vodka brands, and to punish 'those guilty of harming the interests of the Russian Federation'.

In October 2001, a Russian court ruled Soyuzplodoimport was wrongly privatised and it renationalised 17 vodka brands, including Stolichnaya. The government resurrected its company, Soyuzplodoimport - also reinstating the missing 'o' in its name - to sell the 17 brands on the domestic market. But SPI kept exporting Stolichnaya abroad - an estimated $680m worth a year.

Furious at SPI's continued use of the brand name, the government's Soyuzplodoimport released its own Stolichnaya last February - identical to SPI's product, bar fine print saying: 'Produced under licence of the Agriculture Ministry of Russia.'

The charges last week, prosecutors say, follow Shefler's refusal to turn up for questioning. They want to speak to him about a conversation he allegedly had with the current director of Soyuzplodoimport, Vladimir Ligonov, during which they say Shefler threatened his life.

Putin's attempts to tackle Shefler have been seen by many as a sign that Russia is not a place where Western business can invest or work fairly.

Shefler remains defiant, intent on selling his Stolichnaya in Russia again. 'I hide from no one, and I have no intention of hiding,' he said.