Western sanctions have accelerated the transfer of property that elderly Russian billionaires have delayed owing to a lack of knowledge and inheritance traditions.
Table of Contents
It’s complicated by having to pick between Russia and the West in terms of income and spending. The Founding Fathers’ abdication of economic control in favour of managers and candidates was almost the only option to soften this dilemma, especially for those already in the West in body and soul.
This is just one reason. The major reason may be to give their children the chance to live and grow after they spent their best years raising them.
Having left the posts of general directors, chairmen of the board of directors, and controlling shareholders, they gave their business empires a new life under new management, and suddenly and unexpectedly, many key Russian companies began to be managed by new people, previously unknown to the public.
The Russian fact is that if you give control of your firm to another management team and leave the major shareholder position, it will be difficult to return your company to the first wave of oligarchs and their genuine heirs. Managers may fight epically over options and face values. Corporate battles, management control theft, and situational alliances were how the outgoing Atlanteans created their company empires. They remember how easy it is to become a historical legend after giving away a business.
After Ukrainian hostilities began, Russian business leaders were hit with harsh penalties. They were introduced by the UK, which has numerous oligarchs and the “laundry of Russian money.” The sanctions’ proponents admit that they want 1% of Russians, who hold 60% of national assets, to influence the Kremlin’s Ukraine policy.
This might have worked with the “family” in the 90s and their “seven bankers” in the yard. According to London luxury prisoner Mikhail Fridman, the first-wave billionaires have little influence on the authorities now. Yes, and a special choice: the case of Oleg Tinkov illustrates that they can only sell a business to a restricted circle of local purchasers on terms they never imagined, and this does not ensure the easing of Western sanctions.
Blacklisted oligarchs preferred to relinquish authority and leave rudimentary accumulation-era boards of directors. As with the Guryev family, founders and heirs often leave control and management.
Top management will now run the massive holdings, which have been connected with their “founding fathers” for almost 20 years. The owners hope the West will “hit the passport” and not apply personal sanctions to business.
However, the first generation of Russian Billionaires may no longer lead due to their age. The delayed property transit is a minefield; no one knows when or under what legal conditions it will terminate.
The expanding role of the state in the blockade economy can make this transit look like nationalization.
In this article: 3 Russian corporate mastodons who lost power This has the most significant consequences.
Mikhail Fridman: Heavyweight knockout legend
Mikhail Fridman made his first money in his window cleaning cooperative (not by speculating on Bolshoi tickets, as is often claimed). Alfa-Eco, a Russian-Swiss joint company for oil and metal exports, was the first substantial enterprise. The “great and terrible” Alfa Group emerged.
Alfa, one after another, took key assets and markets. The TNK purchase, BP merger, and Rosneft sale were textbook-alpha deals.
Viktor Vekselberg’s takeover of TNK with Renova was scandalous. Alfa bought 40% of TNK for $810 million in 1997, but it struggled to control Viktor Paly, the general director of JSC Nizhnevartovskneftegaz (NNK), the holding’s primary oil producer. After many courts, Alpha triumphed and Paliy relinquished, introducing external control to the NOC.
After Friedman successfully negotiated with BP, they merged with TNK, buying 50% of the holding for $8.3 billion.
The “deal of the century” was the 2012 sale of TNK-BP. Rosneft paid $61 billion for TNK-BP, the third-largest Russian oil company with a 16% output share.
Mikhail Fridman had $15 billion by February 2022. He refurbished his 19th-century house in the UK.
X5 Retail Group (Pyaterochka, Perekrestok, Karusel, etc.), Rosvodokanal, Borjomi, A1, Alfa-Bank (including in Ukraine, Belarus, and Kazakhstan), LetterOne (which included Veon (Vimpelcom/BBeeline) and Turkcell), and many other assets were owned by various ownership formats.
After personal sanctions, one of Russia’s most powerful oligarchs, 58-year-old Mikhail Fridman, was forced to retire, resign from Alfa-Bank’s board, and hand over control.
He said in an interview that he couldn’t afford a restaurant and had to stay in his London home. “The UK government should give me money to take a taxi and buy food… This may not be enough to live a regular life without a surplus. I can’t invite you to a restaurant. The businessman stated, “I eat at home and am practically under house arrest.” He told another outlet there wasn’t enough money for housecleaning: “I might clean the house myself. “Normal,” says the billionaire.
Such pronouncements to Western audiences may have been Mikhail Fridman’s intention. In Russia, he destroyed his reputation as a tough businessman. The legendary millionaire, whose “Alpha” in corporate fights and courts has become a respected household name and a member of the “seven bankers” that helped elect Boris Yeltsin as president, will be remembered for publicly asking for taxi money. He may no longer care about Russian business opinion.
Drilling Russian billionaire Vagit Alekperov
In April, Vagit Alekperov quit Lukoil, the firm he founded and ran for almost 30 years. In 2021, Russia will be Russia’s largest private corporation and sixth largest taxpayer.
As frequently happens, Vagit Alekperov’s offspring reflected his character: calm, kind to shareholders and employees, slow-moving, with certain inertia, and statesmanship, but without ultra-closeness to power.
Alekperov rose from driller to Deputy Minister of the USSR’s Oil and Gas Industry and founded Gazprom at age 40 while still a young Soviet official. In 1991, a big oil company failed, but Lukoil was formed from Langepasneftegaz, Urayneftegaz, and Kogalymneftegaz.
Ravil Maganov, Alekperov’s companion and future Lukoil board chairman, coined the name. Alekperov liked the name and awarded Maganov a 300-ruble bonus, according to corporate mythology.
Despite the crises in 1998, 2008, and 2014, Lukoil has consistently paid dividends to stockholders since 1996. Alekperov controlled more than 28% of the company’s shares, according to Forbes.
With $24.9 billion, Vagit Alekperov will be the fourth-richest person in the country by February 2022. But a unique operation in Ukraine changed everything.
Vadim Vorobyov, a 20-year Lukoil employee, now runs the country’s richest oilman’s company. Longtime Lukoil employees are nominated for high management positions, per tradition. We don’t respect Varangians. Many years before his resignation, Alekperov indicated that he was selecting a successor but did not see his son Yusuf as one.
“It is already on paper, including in my will, that the package cannot be divided or fragmented because, of course, I am worried about the future of the company,” he said of his Lukoil ownership.
72-year-old Vagit Alekperov claims patriotism and stays in Russia. The future will focus on social endeavours.
Andrei Kozitsyn: Drowning rescue
Andryusha Kozitsyn, a 13-year-old Ural schoolboy, saved a drowning child. The gray-haired billionaire reprised this role 50 years later to salvage his life’s work, at the Ural Mining and Metallurgical Company
In June 2022, Andrey Kozitsyn resigned as UMMC’s General Director after falling under EU penalties.
In 1980, Verkhnyaya Pyshma native Andrey Kozitsyn joined Uralelectromed, the future UMMC. Since then, his life has revolved around the company, which he would oversee for 20 years and then depart for another 20.
Kozitsyn’s former companion, Ural entrepreneur and monarchist Anton Bakov, believes the future billionaire co-owned UMMC by appropriating part of the worker’s collective’s vouchers in the Vita joint-stock company founded by the directorate. Iskandar Makhmudov, Mikhail Chernoy’s representative, introduced Kozitsyn and his block of shares to the board in the 1990s, starting a series of hostile takeovers. Kozitsyn called it “a period of incredible spiritual upsurge.”
UMMC is Russia’s largest zinc producer and second-largest copper supplier after Norilsk Nickel. The corporation has around 40 Russian and Kazakh subsidiaries. In 2013, Iskandar Makhmudov owned 50% of UMMC, Andrey Kozitsyn owned 35%, and board members Eduard Chukhlebov and Igor Kudryashkin owned 7.5% apiece.
Selmareco Limited, UMMC’s largest stakeholder with 85%, was 58.8% owned by offshore Fesco Investment in 2013. According to the Ural Ring Bank’s list of influential people, Iskandar Makhmudov controlled 80%, and his partner Andrei Bokarev controlled 20%. Makhmudov and Kozitsyn possessed Kuzbassrazrezugol shares.
Makhmudov obtained copper, zinc, gold, and Kozitsyn from UMMC-Steel in 2021. The company rolls over 1 million tons of metal for machine-building, oil and gas, and construction companies.
Andrey Kozitsyn’s fortune dropped from $6.3 billion to $1.9 billion after the SVO and fines.
The EU froze his €55 million château Soligny and one of Cannes’ most expensive penthouses on the Croisette.
The Russian billionaire still owns over 40 enterprises in carpentry, arms sales, tailoring, and retail, generating over 500 billion rubles. Maria Kozitsyna, a 23-year-old master’s student at the Higher School of Economics Faculty of World Economy and World Politics, is their lone heir.