Fed money may benefit Russian-backed firm

Republican Sen. Richard G. Lugar, one of the deans of Congress, and his junior colleague, Democratic Sen. Evan Bayh, have been leading the charge to secure federal money for a company that wants to build the next generation of advanced lithium-ion batteries.

The Indiana lawmakers have secured $6.5 million in congressional earmarks for Ener1, Inc., and have talked up the company’s efforts to secure a slice of nearly $3 billion in two Energy Department programs offering grants and loans as part of President Obama’s stimulus package.

Their pitch sounds as American as apple pie: The New York-based company would create much-needed jobs in the nation’s heartland and help jump-start production of energy-efficient hybrid and electric vehicles.

But there’s one detail they don’t mention.

Ener1 has substantial financial ties to Russian industrialist Boris Zingarevich, a wealthy timber magnate and longtime business associate of Russian President Dmitry Medvedev. Mr. Zingarevich is frequently listed among the powerful and influential businessmen known in Russia as oligarchs.

According to federal records, Mr. Zingarevich is the “provider of substantially all of the funding” for Ener1 and its wholly-owned subsidiaries. The companies he owns, controls or is associated with - including Bzinfin SA, an off-shore firm that holds 66 percent of the shares of Ener1’s parent company - have the potential to exercise substantial sway over Ener1’s operations, documents filed with U.S. securities regulators state.

Foreign ties

Rep. Duncan Hunter, California Republican and a member of the House Armed Services Committee, said there should “definitely be concern” about foreign-controlled or owned companies attempting to break into the lithium-ion market in the United States and using multimillion-dollar government loans and grants to aid their development and production.

“It also presents significant security concerns that need to be thoroughly examined before any decisions are made,” said Mr. Hunter, a former U.S. Marine who served two combat tours in Iraq and one in Afghanistan. “Our nation’s energy market should be reserved for U.S. companies and workers, especially now when we are looking to be a global leader in this technology.”

Mr. Hunter’s father, Duncan L. Hunter, who retired from Congress in 2008 after 28 years, steadfastly supported the development of the lithium-ion battery because of its military applications, but as chairman of the House Armed Services Committee, he advocated that the Defense Department purchase its needs from U.S. sources.

Some security experts see a risk in giving Ener1 federal money and access to hybrid technologies that are supposed to fuel the next generation of American products and U.S. military equipment. They note that Russia has taken an increasingly competitive stance toward the United States under Mr. Medvedev and his mentor, Prime Minister Vladimir Putin.

Frank J. Gaffney Jr., former assistant secretary of defense for international security policy in the Reagan administration, described as “insanity” any plan that would allow “building a national battery infrastructure in the pockets of the oligarchs of the past and future Soviet Union.

“We ought to be very concerned about this deal,” said Mr. Gaffney, founder and president of the Washington-based Center for Security Policy. “The Putin regime is not an entity we can trust.”

Mr. Zingarevich’s office has not returned calls for comment, and his attorney, Patrick T. Bittel in Geneva, did not respond to telephone calls or e-mails seeking comment.

Ener1 confirmed Mr. Zingarevich’s significant role in funding the company but told The Washington Times there was no factual basis for any security concerns. It said its wholly owned subsidiary, Indiana-based EnerDel Inc., which would build the batteries in Indiana, has cooperated “productively and consistently” with the U.S. government on a wide range of high-priority projects.

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