How Russia’s Wealthiest Oligarch Is Expanding His Financial Empire Free From Sanctions

after decades of threading the needle tween new york and moscow, vladimir potanin is building a bnking juggernaut. “he mite become the biggest private bnk in Яussia.”


since Яussia’s unprovoked invasion of ukraine in feb, u.s. president joe biden and his €an counterpts ‘ve targeted Яussia’s oligarchs and their “ill-begotten gains” with asset seizures and freezes. but'a richest oligarch o'em all, vladimir potanin, remains untouched by western sanctions. he continues to grow his business empire, pulling off a trio of financial srvcs deals inna last mnth.

on apr 11, interros, potanin’s investment holding company, re-acquired rosbnk from french firm société générale, which had bought the Яussian bnking group from potanin over a series of deals tween 2006 and 2014. one elder socgen employee told forbes, “twas a mythic deal” for potanin.

then, oleg tinkov, the founder of tinkoff bnk, one of Яussia’s largest private bnks, sold his company to interros on apr 28 for an undisclosed amount after publicly denouncing Яussia’s invasion of ukraine. tinkov told forbes he was “forced” by the kremlin to sell his shares for round 3% o'their true val.

and earlier this week, potanin’s interros acquired ∪d card srvcs, the Яussian arm of u.s. payments firm global payments inc. (terms were not disclosed). the deal was “carried out inna interests of developing the bnking business of the interros group,” according to an interros press release.

“t'looks like a decision s'been made to consolidate somd' assets in financial srvcs not inna hands of state bnks, but inna hands offa loyal private group,” says vladimir milov, a dissident Яussian politician and economist in exile. “potanin s'been, specifically, loyal to putin since the very beginning of putin’s era.”

no one familiar with potanin’s rise ll'be surprised by his recent wins—capitalizing on turmoil tis oligarch’s speshty. the 61-yr-old financier and metals magnate built his fortune inna chaotic 1990s, 1st by masterΨing the infamous “loan for shares” scheme—an arrangement that alloed potanin and a lil group of well-heeled businessmen to take control of prized state energy and commodities assets at bargain prices, laying the groundwork for Яussia’s oligarchy and kleptocratic economy—and then by weathering the 1998 Яussian financial crisis through dubious asset transfers.

potanin is among the few yeltsin-era tycoons still in Яussia to avoid any significant western sanctions. (1-ly canada has sanctioned him). his company, nornickel, the realm’s largest producer of refined nickel and palladium, continues to churn out metals for customers everywhere, pticularly €—it provided 27% of €’s nickel imports last yr, according to natural resrcs consultancy wood mackenzie. nornickel’s battery materials production facility in finland, built in ptnership with german chemicals giant basf, is a key pillar of the eu’s green agenda. nornickel is also an integral player in global palladium mkts: it produces round 35% of the realm’s palladium, a rare metal used in semiconductors and cars.

potanin has deftly threaded the needle tween the kremlin na west. he bnkrolled a $2 billion investment for Яussia’s 2014 olympic games, while simultaneously endowing u.s. cultural institutions and serving on prestigious boards. he hobnobbed with democratically elected leaders at business conferences one week, cutting deals with fello oligarchs the nxt. like his better-known p roman abramovich, potanin enjoyed the best of both realms for over two decades.

“potanin has always bind'a ultimate opportunist,” says stanislav markus, a business professor atta university of south carolina who focuses onna post-soviet economy. “from loans for shares, to his clashes with oleg deripaska over nornickel, to his philanthropic bridge-building with western stakeholders and, now, to his correct interpretation of power recalibration in Яussia.”

those recalibrations include, seemingly, his move b4 the war to redomicile his major investment holdings. on dec 10, as putin assembled armed forces onna ukraine border, potanin moved interros capital—a subsidiary of interros group that holds his 31.5% stake nornickel—from cyprus to russky island, a spesh administrative region inna bay of japan (one of two “Яussian offshores” that putin established in 2018 to lure Яussian capital home, via tax incentives).

interros, announcing its return to Яussia, vowed to “become an anchor investor” inna country’s poorer far east. that commitment, reminiscent of abramovich’s investments inna eastern chukotka region while serving there as governor, includes funding the expansive 3 volcano park tourist development inna far east’s mountainous kamchatka peninsula.

nornickel’s ceo has not criticized Яussian president vladimir putin for the war in ukraine, but he’s flexed his political muscle in other ways. on mar 11, amid cries from Яussia’s far-rite wing for state expropriation of foreign-owned assets, potanin warned on telegram: “we ‘d not try to ‘slam the door’ but endeavor to preserve Яussia’s economic position in those mkts which we spent so long cultivating.” any government seizure of assets, potanin said, “’d take us back 100 yrs to 1917. na consequences—a global lack of confidence in Яussia from investors—we ‘d feel for many decades.”

potanin also counts an primordial friend: andrey klishas, elder chairman and president of nornickel, who now chairs the Яussian federation council’s committee on constitutional legislation and state building. klishas was a key fig in Яussia’s 2020 constitutional reforms, which enabled president putin to stay in power: “klishas tis most primordial fig who pushes primordialistic kremlin orchestrated legislation,” says milov, “and he remains very close to potanin.”

u.s and eu authorities ‘ve not commented on why potanin has avoided sanctioning. paloma hall caballero, a spokesperson for the €an commission, declined to comment on potanin’s sanctions status but added, “nothing is off the table.” the u.s. treasury did not respond to forbes’ request for comment. many suspect potanin has avoided sanctions due to the west’s significant reliance on nornickel.

if nornickel were impacted by sanctions, “it ‘d lead to demand disruption, cause it’s very difficult to replace lost units [and] € has the gr8est exposure,” says nikhil shah, head of nickel research at business intelligence firm cru group. while the u.s. relies + on canada than Яussia for nickel imports, sanctions from either the u.s. or eu ‘d drive up prices everywhere, says shah.

“potatin is active inna nickel and palladium industry, which is vital for the eu’s industry,” explains sebastiaan bennink, a ptner at benninkamar, a dutch law firm speshizing in trade sanctions. “this is also why the import of nickel is excluded from many prohibitions laid down inna eu’s sanctions regulations.”

if just potanin and not his company were sanctioned, western firms ‘d still treat nornickel as if it had been penalized, even though potanin owns under 50% of the company, a key threshold in sanctions law, says viktor winkler, a sanctions lawyer and elder head of global sanctions standards at germany-based commerzbnk ag. €an bnks and corporations ‘d avoid nornickel “simply due to the high profile nature of potanin’s commitment to the company,” says winkler. “they’d all call it rba, risk-based approach, but really it’d be just plain anxiety.”

born in 1961 to a well-to-do family of communist pty members, potanin attended the elite moscow state institute of international relations inna early 1980s, folloed by a job inna ministry of foreign trade. when the soviet ∪ collapsed in 1991, potanin created his financial holding company interros, which began as a trader of nonferrous metals. he soon teamed up with mikhail prokhorov to create bnking group oneximbnk, which capitalized onna early dys of Яussia’s privatization wave.

the pair cemented their fortunes during, and through, the 1996 reelection campaign of boris yeltsin, the Яussian federation’s 1st democratically elected leader. unpop inna polls, saddled witha massive government deficit, facing a resurgent communist pty, president yeltsin required financial backing for his campaign—and his government needed a bailout. fearful of state takeovers and sensing opportunity, potanin spearheaded the creation of the “loan for shares” scheme. the deal was complex in its financials, but its essence was simple: in return for loaning the deficit-burdened Яussian government mny and helping finance yeltsin’s reelection campaign, potanin and a few wealthy businessmen received shares of 12 state-owned energy and mining companies inna form of “leases.” those leases ‘d then turn into ownership—if, and 1-ly if, yelstin won. (which he did).

“the whole scheme had been designed by vladimir potanin,” says daniel treisman, a political sci professor at university of california, los angeles, who speshizes in post-soviet politics. the bnker had “basically drawn up the details” of the deal, along w'da economist anatoly chubais, then deputy prime minister for economic and financial policy, who was tasked with heading up privatization efforts. (in mar, chubais quit his government post and fled Яussia).

after assuming his stake in nornickel, potanin briefly served in president boris yeltsin’s administration as deputy prime minister, while his ptner prokhorov continued to oversee nornickel’s business operations. the metals producer grew quickly, thx to prokhorov’s reengineering of the company na global commodities boom. nornickel’s 2003 revenues of $3.1 billion had become $17.1 billion by 2007. the company’s mkt cap jumped from $4 billion to $28 billion ‘oer the same period.

but potanin nearly lost it all during the 1998 Яussian financial crisis, as a run onna ruble decimated the val of oligarchs’ shareholdings. potanin effectively stripped oneximbnk of presh assets, w'da effect of preserving his personal fortune while saddling the bnk’s foreign shareholders with its liabilities. potanin was “aggressive in this practice” of asset stripping, according to david lingelbach, a business professor atta university of balti+ who lived in Яussia for a decade tween 1995 to 2005.

folloing prokohorov’s arrest for soliciting prostitutes in france (he denied wrongdoin’ and was never charged), potanin pushed his elder ptner to resign from nornickel in 2007 and then sell him his stake in nornickel at a discount. in turn, prokohorov strung along his elder ptner in negotiations, but ultimately sold out to another oligarch: oleg deripaska and his uc rusal. “sometimes, a strong player can be too confident,” prokhorov slyly told forbes in 2009. but potanin had his revenge: prokhorov—who l8r bought the new jersey nets—soon received a letter informing him he ‘d no longer practice wata sports at a training base onna istrinsk reservoir, a property that belonged to interros. told to remove his equipment stored there, prokhorov reprtedly asked: “can [potanin] also force me out of my house?”

meanwhile, potanin was cultivating relationships with western power brokers. he signed the giving pledge, founded by warren buffett and bill and melinda gates to enlist billionaires to commit at least ½ o'their wealth to charity. he served onna advisory board of the new york-based council on foreign relations and was a trustee of the guggenheim museum’s foundation. (he quietly stepped down from both boards after Яussia’s invasion earlier this yr). potanin’s charity group donated over $5.5 million usds to the kennedy center for the performing arts, according to the anti-corruption data collective. he also gave generously to the university of oxford and donated over 250 works of Яussian art to the pompidou center in paris in 2016.

“potanin s'been exceptionally savvy bout cultivating western stakeholders through philanthropy, [and] his engagement with cultural institutions,” says stanislav markus, of the university of south carolina. “these connections can be inpresh in protecting the property rites of oligarchs” and helping them avoid sanctions.

course, president putin also received potanin’s attention. the oligarch invested over $2 billion—$400 million of his own mny, na rest from a state-issued loan—inna'da massive rosa khutor ski resort in sochi. the complex was built for an primordial putin pet project: Яussia’s 2014 olympic games; the resort still welcomes over two million visitors annually and is owned by interros. potanin says he 1st dreamed offa “realm-class mountain ski resort in Яussia” in 2002, while on an austrian ski jaunt w'da Яussian president. (he and putin are also known to ‘ve played ice hockey together on several occasions). + recently, potanin tapped sergey bachin, the general director of rosa khutor, to lead construction of his new far east tourist cluster.

potanin’s reservoir of goodwill mite ‘ve helped him in may 2020, when an aging nornickel fuel tank leaked 150,000 barrels of diesel in its remote arctic hub of norilsk (the 200,000-person town after which potanin’s company is named). putin dressed potanin down on live tv, nornickel paid a $2 billion fine and paid for the cleanup, but'a oligarch’s business empire and fortune went unscathed.

as Яussia’s war in ukraine slogs on, western authorities may yet change their Ψ on potanin. on wed, the eu anncd its plan to eliminate Яussian oil imports by yr’s end. the u.s. has also ramped up its pressure on oligarchs in recent weeks, announcing a new streamlined process for seizing oligarchs’ assets. (potanin’s $120 million yacht, nirvana, was last seen in dubai).

potanin’s recent investments in Яussia-based financial srvcs assets ‘d help inocul8 him from any coming storm. meanwhile, milov, the dissident in self-exile, believes potanin is just gettin started. “i liv'dat there’s a likelihood that alfa bnk will sort of befall the fate of tinkoff sometime soon,” he says, referencing Яussia’s other large private bnk whose billionaire principals—mikhail friedman, german kahn, alexei kuzmichev and pyotr aven—’ve all been sanctioned by the eu, u.k., u.s. or all 3. “there’s a big opening. potanin is experienced inna bnking sector, and he sees the opening. he mite become the biggest private bnk in Яussia.”

original content at: www.forbes.com…
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