The Ukrainian business holdings of Russia’s oligarchs
The invasion of Ukraine cost Russian billionaires dearly (Photo:Collage NV)
Russian business has invested in almost all spheres of the Ukrainian economy for the past 30 years, from energy to metallurgy to the consumer goods sector. What did Mikhail Fridman, Roman Abramovich, Alexey Mordashov, and Alisher Usmanov own?
The full-scale Russian invasion on February 24, 2022 cost the wealthiest Russians the Western life-style they had been used to. Their assets in the US, UK, and EU were arrested or frozen. They are supposed to have been nationalized in Ukraine, but despite a law on this being passed half a year ago, Ukrainian authorities still have no results to show on this front. While there have been seizures of property, there has so far been no talk of nationalization. In Ukraine, there are estimated to be between 900 and 3,600 assets belonging to Russian owners. Over the 30 years of independence, they are present almost everywhere, from the energy sector to the financial system, agricultural business and public catering establishments. This is also the case with the largest retail chains, supermarkets, and pharmaceutical companies.
Russian billionaires owned companies that had a significant impact on the development of the Ukrainian economy. However, due to sanctions imposed on them and their family members due to the invasion of Ukraine, their wealth decreased by 42% to $353 billion in 2022, according to the Forbes Russia. The number of Russian billionaires also decreased from 123 to 88. However, this could be merely temporary, as the Russian central bank's frozen assets in the West are not yet being considered for confiscation to finance the reconstruction of Ukraine. In their attempts to avoid sanctions, Russian oligarchs emphasize that they have no influence over the Kremlin and its decisions regarding the war in Ukraine. This justification seems aimed at those who believe that it's possible to have billion-dollar businesses in Russia and still be unconnected to the government. None of the richest people in Russia publicly condemned the war against Ukraine or the killing of civilians, and their companies continue to work for the aggressor's budget.
NV Business has analyzed the Ukrainian business holdings of the richest Russians (according to Forbes Russia in 2022), as well as those who are in the inner circle of Russian dictator Vladimir Putin.
At the end of June 2022, the first charter of Severstal Airlines flew from St. Petersburg to the little-known town of Tobolsk in Russia's Tyumen Oblast. TUI, Europe's largest tour operator (which operates under the brand Fun&Sun in Russia), decided to begin developing domestic tourism in Russia after the sanctions imposed against the country due to its invasion of Ukraine. Fun&Sun itself is also undergoing big changes.
Taras Demura, who until 2010 headed the tour operator's office in Ukraine, and later in Russia, became the owner of TT-Travel, which operates as Fun&Sun. As of January 14, Demura owns a 75% stake in the company, with the remaining 25% being held by KN-Holding, which belongs to the family of Alexei Mordashov.
Mordashov's companies first acquired an interest in the European tourism giant, with its fleet of aircraft and TUI AG hotels, in 2007. At that time, Mordashov's companies purchased 3% of the company's shares, with their stake growing over the next 15 years to 34%. Russia's invasion of Ukraine affected the oligarch's business, as he came under personal sanctions from the EU and the UK on Feb. 28. The oligarch's businesses planned to sell their largest stake, a 29.9% stake in TUI AG, to Ondero Limited, owned by the oligarch's wife, Marina Mordashova. However, the agreement was blocked by German regulatory authorities, and by June, Mordashov, his wife, and his family members were blacklisted by the United States. Mordashov's companies managed to reduce their stake in TUI AG to 30.9% by selling a relatively small number of shares to CEO Sebastian Ebel and board member Sybil Reiss.
TUI's operations have been blocked in Ukraine.
The heart of Mordashov's empire, which allowed him to become one of the richest men in Russia, is the Severstal metallurgical group. In 2006, Mordashov found an asset to target in Ukraine. His company Severstal-Metiz purchased Ukrainian businessman Serhiy Tihipko's 60% stake in Dniprometiz, the largest Ukrainian manufacturer of metal products, for about $50 million.
After 11 years, in 2017, Severstal got rid of Dneprometizm. Over time, it became known that Tihipko had bought it at a big discount. In addition, Alexei Mordashov's company even suspended the activities of its trading company, Severstal Distribution.
According to Forbes, Mordashov's fortune in 2022 was estimated at $13.5 billion, down from $15.9 billion from before the war. However, he still remains among the top five richest people in Russia.
In an interview with Bloomberg Businessweek in mid-March of 2022, Fridman argued that “[i]f the people who are in power in the EU think that because of the sanctions, I can go up to Putin and tell him to stop the war, and that this will work, then I’m afraid we are all in big trouble. It means that those who are making these decisions do not understand anything about how Russia works. And this is dangerous for the future.”
He also added that he had never worked in any state-owned company or in any public position.
Fridman's statement was in response to the sanctions imposed on him by the EU and the UK. He has been on the US blacklist since 2018. Friedman's credit cards and assets are frozen, and he must obtain permission to spend up to GBP 2,500 per month.
“I don't know how to live. I don’t really know,” he complained to Bloomberg.
Friedman has many assets in Ukraine. He is the founder and main shareholder of LetterOne and Alfa Group, which includes, in particular, Alfa Bank and IDS Borjomi International, a manufacturer of a popular bottled water brand. LetterOne owns the Dutch company Veon, which is a shareholder of Ukraine's largest mobile operator Kyivstar. Due to this, the majority shareholder loses control over IDS Borjomi International, the representation of the main shareholder in the Board of Directors will be reduced from eight to two members, and the Georgian government will appoint its representative as the head of the company's Board of Directors.
In Ukraine, at the end of November, the Shevchenkivsky District Court of Kyiv transferred the Ukrainian assets of IDS Borjomi International to the country's Asset Recovery and Management Agency (ARMA). These assets included the Morshinsky Mineral Water Plant, IVA, Power, IDS Aqua Service LLC, Industrial and Distribution Systems, the Myrhorod Mineral Water Plant, and the Nova.Kom state enterprise. Their market value is UAH 10 billion ($272 million). Via court decision, ARMA acquired corporate rights (including the Myrhorod and Morshinsky plants), product and design patents, and trademarks of the group's enterprises. IDS Ukraine added that Mikhail Fridman is not the ultimate owner of the beneficial holding group, since he does not have a 25% share in direct or indirect ownership.
"He owns 18.6% of the company's shares and does not have a decisive influence on the management or economic activities of the company," IDS Ukraine explained.
Alfa-Bank Ukraine decided to abandon the Alfa brand and changed its name to Sense Bank.
“The bank does not want to have anything to do with the aggressor country, even in terms of sharing associations or a brand operating in Russia,” said Symeon Dyankov, who in mid-April, in agreement with the National Bank of Ukraine, was given the right to a majority vote in the bank's governance.
There is no need to nationalize Sense Bank, said the first deputy head of the National Bank of Ukraine, Ekaterina Rozhkova. The NBU would only be forced to recognize the bank as insolvent and propose its nationalization to the Cabinet of Ministers in the event that it loses liquidity.
Mikhail Fridman, despite the sanctions, has so far managed to keep most of his capital. Forbes named him the sixth richest man in Russia with net worth of $11.8 billion. Over the year, his for-tune decreased by $3.7 billion.
In meetings with EU representatives, authorities from Uzbekistan have lobbied for the lifting of sanctions imposed on Russian billionaire Alisher Usmanov and his sister Gulbahor Ismailova. According to the Financial Times, Uzbek officials cite the fact that a businessman cannot invest in the country's economy.
In the EU, Usmanov is considered close to Russian dictator Vladimir Putin. According to the EU's sanctions order issued last year on February 28, “[h]e has been referred to as one of Vladimir Putin's favorite oligarchs. He is considered to be one of Russia’s businessmen-officials, who were entrusted with servicing financial flows, but their positions depend on the will of the President.”
In March, the United States and Great Britain joined in imposing sanctions on the oligarch.
At the end of December 2022, according to Ukraine’s SBU security service, Usmanov's property in Ukraine was seized, including 160,000 tons of iron ore stored in underground Russian warehouses in Ukraine, worth about UAH 2 billion ($54.4 million).
“Hidden raw materials were found on the territory of several Ukrainian seaports,” the SBU stated.
“The batch of iron ore found belongs to the company of a Russian oligarch and a member of the inner circle of the top military and political leadership of the Kremlin, Alisher Usmanov. After Feb. 24 last year, sanctions were imposed on him by the National Security and Defense Council of Ukraine, the United States, and the European Union.
”The agency added that this ore was planned to be shipped to Russia by sea.
The basis of Usmanov's empire is the company USM (Metaloinvest, Udokan copper, MegaFon), as well as the news publication Kommersant. Until 2014, Kommersant also worked in Ukraine, but after the annexation of Crimea, the newspaper was closed. According to NV Business, one of the reasons for the closure of the publication was the fact that the Ukrainian editorial staff was not willing to write articles based on Russian narratives. In 2018, Usmanov sold 30% of his shares in London's Arsenal Football Club for £550m to another club shareholder, Sten Kronke. The Russian billionaire is now investing in a local club with a similar name, FC Arsenal Tula.
Usmanov is based in Uzbekistan and is probably calculating his financial damage. Over the year, according to Forbes, his fortune decreased by $6.9 billion, and in 2022 amounted to $11.5 billion. The oligarch does not have the opportunity to use his luxury possessions. For example, the 156-meter yacht Dilbar, the most expensive Russian-owned yacht among Russian owners with the largest yacht-borne swimming pool in the world, has been seized in Hamburg due to sanctions. The same goes for the rest of the oligarch's and his sister's assets around the world.
Alekperov resigned as the president of Russia's largest private company, the oil giant Lukoil, last April, after serving in the position for almost 30 years. His family controls 28.3% of the company's shares, but he was forced to give up his seat to ex-deputy Vadim Vorobyov due to sanctions from Great Britain and Australia. Back in March, the board of directors made a cautious statement that "we are in favor of an early end to the armed conflict and fully support its resolution through the negotiation process, through diplomatic means."
However, this did not help. Due to sanctions over the invasion of Ukraine, the London Stock Ex-change withdrew Lukoil shares from trading, along with securities of other large Russian companies. Alikperov himself lost a record $14.4 billion last year, leaving him with a fortune of $10.5 billion, according to Forbes's estimate. The businessman is still among the ten richest people in the aggressor country.
Lukoil operated in Ukraine until 2014. In addition to its 240 filling stations and six oil depots, which allowed the company to be among top five players in the Ukrainian fuel market, Alekperov invested in the Kartel publishing house, which published the weekly periodical Business Capital. A few months after the annexation of Crimea in 2014, the oil giant sold its fuel assets to the little-known Austrian company AMIC for $300 million. Experts assumed that the agreement was necessary to protect the Ukrainian assets of Russia's largest private company.
It seems that Ukrainian regulatory authorities have also come to this conclusion. In August last year,at the request of the Office of the Prosecutor General, AMIC's assets were seized, including filling stations, warehouses, and land plots worth more than UAH 50 million ($1.34 million). The company's management is suspected of failing to pay more than UAH 270 million ($7.34 million) in taxes between 2015 and 2022, as well as of having ties to the aggressor country. AMIC is challenging the arrest of its assets in court.
Alikperov created Lukoil with Leonid Fedun, who became the oil company's main shareholder after Alikperov was sanctioned.
Mikhail Fridman's partner German Khan returned to Moscow in September last year after living in London for ten years, according to Bloomberg. Khan made the move after transferring his stake in the investment company LetterOne to an unsanctioned shareholder. Thus, about $2 billion of his fortune outside of Russia remains unfrozen.
A native of Kyiv, which the Russian aggressors planned to capture in three days, Khan made his fortune by selling his stake in oil company TNK-BP to state-owned Rosneft. With the proceeds, he created LetterOne, which has no ties to the Russian assets of Alfa Group. In March last year, like other shareholders of Alfa Group, Khan was hit with EU and UK sanctions.
The businessman has left the ownership group of LetterOne, which, among other things, is the main owner of the Veon telecommunications group. Until recently, its "daughter" Vimpelcom worked in Russia under the brand Beeline. However, at the end of last year, it was sold to local management for more than $2 billion.
While in Moscow, according to Bloomberg, Khan is developing Alfa Group's Russian assets, including stakes in retailer X5 and telecommunications company Vimpelcom Ltd. The businessman's fortune in 2022 amounted to $7.8 billion, after taking a hit of $2.3 billion.
Abramovich is a well-known businessman in Ukraine, and he tried to sell himself as a mediator between Russia and Ukraine after the start of the war. According to The Times, in late March, Abramovich personally delivered a letter from the Ukrainian President Volodymyr Zelenskyy to Vladimir Putin. In the letter, Zelenskyy named possible compromises that Ukraine was willing to make to stop the war.
According to Abramovich, Putin allegedly responded, "Tell him I will destroy them."
According to Bloomberg, Abramovich met with Saudi Crown Prince Mohammed bin Salman in Riyadh in August as part of prisoner exchange talks between Ukraine and Russia. In September 2022, Ukraine exchanged Putin's top Ukrainian henchman, Viktor Medvedchuk, and 55 Russians, for 215 of their own hostages, including five commanders from the Azov Battalion. Five British hostages were also freed, and Abramovich greeted them on board a private plane heading to Saudi Arabia from Russia. The businessman gave them iPhones so they could contact their relatives and inform them of their release. This has not, however, saved him from EU, UK, and U.S. sanctions.
In May, Abramovich sold Chelsea Football Club for £4.25 billion ($5.1 billion) to a consortium led by American investor Todd Boley. The funds were sent to a special account, which is frozen for the time being, but is intended to be transferred to charitable organizations to support the victims of the war in Ukraine.
His main asset is his stake in the EVRAZ group, which in 2007 acquired five enterprises of the mining and metallurgical complex in the Dnipropetrovsk Oblast: the Petrovsky Dnipropetrovsk Metallurgical Plant, the Dnipropetrovsk Coke Plant (merged together to create DCH Dniprovsky Metallurgical Plant), the Dniprodzerzhinsk Coke Plant (in Kamyanske), Bagleykoks (now Yuzhkoks, in Kamyanske), and the Sukha Balka Mining and Processing Plant (Krivyi Rih). The properties were purchased from businesses owned by Ihor Kolomoisky and Hennady Boholyubov. In addition, the Russians got about 50% of the shares of the Southern Mining and Processing Plant (PivdHZK, Krivyi Rih), which was never integrated into the structure of the group. Therefore, the shares of PivdHZK were owned through other legal entities for a long time by the Cypriot company Lanebrook Ltd., which until 2018 was the largest shareholder of the holding company of the EVRAZ group.
Gradually, the corporate structures of Roman Abramovich and his partners divested of all their metallurgical assets. This started back in 2012, when EVRAZ announced the sale of the Dniprodzerzhinsk Coke Plant. Subsequently, the Metinvest group of Rinat Akhmetov and Vadim Novinsky, who needed another supplier of coke, became its owner. It was later this plant that became the basis for the creation of the Kametstal metallurgical plant, which received the production capacities of the Dnipro Iron and Steel Works, which was declared bankrupt. Metinvest would itself become a share-holder of Pivdkoks.
In 2017-2018, the Russians sold the Sukha Balka Mining and Processing Plant and the Dnipro Metallurgical Plant to the DCH investment group of Kharkiv businessman Oleksandr Yaroslavsky. In 2018, it was revealed that Yaroslavsky paid only $35 million for these assets. In its financial statements, EVRAZ recorded multimillion-dollar losses from the sale of these two enterprises.
There have been changes in the composition of the shareholders of the Southern Mining and Processing Plant. Most likely, however, Abramovich will retain his influence on this enterprise, as there are still managers with many years of experience in EVRAZ structures on the Supervisory Board.
Abramovich has also tried to protect his Russian assets. A few years ago, Abramovich and his main partners split their parts of EVRAZ, creating separate offshore companies. According to UK newspaper The Guardian, a few weeks before the full-scale Russian invasion, the businessman transferred his offshore trusts to his seven children, the youngest of whom is nine years old. These trusts hold at least $4 billion in assets and their total value could be much higher. Abramovich's children were named the ultimate beneficial owners of the property, which includes real estate and afleet of super yachts, helicopters, and private jets. Abramovich's 2022 fortune was estimated at $6.9 billion, marking a $7.6 billion loss from the previous year.
Kuzmichov was sanctioned by the EU, UK, and U.S. after the Russian invasion and stepped down from the board of all Alpha-Group companies, transferring his Alpha-Bank shares to his partner Andrei Kosogov. Kuzmichov lost $1.8 billion in the past year, bringing his estimated 2022 net worth down to $6 billion.
Kuzmichev is working hard to get the sanctions on him lifted. His lawyers are suing the French government over the seizure of the oligarch's yachts. He also cannot sell or rent out his real estate and cars located in France. In April of last year, the government of Cyprus announced its intention to revoke the citizenship of four Russian businessmen, including Kuzmichev and members of his family.
Rotenberg provides the most illustrative example of the helplessness of Ukrainian authorities in relation to Russian assets.
In early August of last year, ARMA received the corporate rights to the Ocean Plaza shopping mall in Kyiv. Prosecutor General Andriy Kostin noted that the mall's beneficial owners included Russian citizens in Vladimir Putin's close circle. The Ocean Plaza shopping and entertainment center, through the company Lybid Investment Union, belongs to Avangard-Vilarte LLC. Its ultimate owners are Swiss citizens Andrea Rischaal and Suzanne Vallabh. Another of the mall's owners, with a 33.5% stake, is Ukrainian businessman Vasily Khmelnitsky. Until April 2018, Arkady Rotenberg was among the co-owners of the mall, and until September 2019, his daughter Lilia was.
As Oleksandr Nosachenko, managing director of Colliers Ukraine, noted in a comment to NV Business, the shopping center is still actually owned by individuals from Putin’s inner circle, namely Alexander Ponomarenko [co-owner of Sheremetyevo Airport and, according to Alexei Navalny, the official owner of “Putin's Palace” near Gelendzhik in Russia's Krasnodar Territory – ed]. The shopping center was non-operational for a long time after the start of the full-scale invasion, but opened its doors in November last year. It is managed by the same company – Kyiv Mall Management. One of the most profitable malls pre-war continues to operate with Russian participation.
Rotenberg is also doing well in Russia. It was his company that built the Crimean Bridge, which was damaged last year. The opening of the illegal facility cost the Russian budget RUB 228 billion ($3 billion). In 2021, the businessman announced plans to invest RUB 15 billion ($200 million) in the reconstruction of five sanatoriums in the Crimea, and also acquired the New Peaks ski project in the Biryuzova Katun special economic zone in Altai.
And although Rotenberg is not among the twenty richest Russians (Forbes estimated his 2022 fortune at a mere $1.7 billion), Rotenberg, who is also the chairman of the board of the Russian Ice Hockey Federation, has a reputation as Putin’s “wallet”. A year earlier, his fortune was estimated at $2.9 billion. His brothers, Boris and Igor, also businessmen, but their fortunes are lower.
In September of last year, the Arbitration Court of Krasnodar Territory issued an unexpected decision: it terminated the 49-year lease of 30 plots of land in the cargo area of the Port of Sochi by the company RogSibAL, owned by businessman Oleg Deripaska. The day before that, the court stripped the same legal entity of its lease on other 14 plots on the territory of the village of Sirius, near Sochi. In addition, the Imeretyn hotel complex and a yacht club worth about a billion dollars were seized. The claimant is the Administration of the Sirius Federal Territory. Courts in the Krasnodar region used to be loyal to Deripaska, but his problems arose, according to FT journalists, because of his criticism of the war in Ukraine. For example, in February of last year, he said that peace was important and that negotiations were needed. In March, he called the war with Ukraine "madness" and said that "we will be ashamed before history for a long time."
Oleg Deripaska started selling his Ukrainian assets back in 2015. At that time, his companies sold the insurance company Ingo Ukraine. The Kharkiv tractor plant, which was linked to the Russian billionaire, was also placed under new ownership. It later became known that Oleksandr Yaroslavsky had become a shareholder of both companies.
In Ukraine, Deripaska's assets were also seized at the request of the Prosecutor General's Office, namely UAH 32 million ($870,000) from the largest producer of metallurgical alumina and aluminum hydroxide in Ukraine, the Mykolaiv Alumina Plant. The funds were placed in the deposit account of the State Customs Service. In July last year, the Mykolaiv enterprise was seized, including 12 land plots, a seaport complex, apartments, administrative buildings, production workshops, 46 vehicles, and 240 units of special equipment. The total value of seized assets exceeds UAH 1 billion ($27 million). Last year, Forbes estimated Deripaska's fortune at $1.7 billion, down from $3.8 billion in 2021.
American, British and EU sanctions have resulted in Russian billionaires temporarily losing most of their fortunes. However, the sanctions have not yet achieved their goal: motivating Russia's oligarchs to change their country's leadership. The wealthiest businessmen who earn money through connections with state bodies continue to fulfill an unspoken contract with the Kremlin: they receive business opportunities in exchange for loyalty to any of their dictator's adventures.
"We are outside of politics" is a convenient formulation they use for supporting the regime.
This project was carried out with the support of the Public Diplomacy Platform and ERIM, with funding from the European Union.
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