Tue. Jul 5th, 2022


Of all Russia’s richest men, Mikhail Fridman and Petr Aven are perhaps the best integrated in the west.

After a $ 14bn windfall in 2013 from selling their stake in oil major TNK-BP to state-run giant Rosneft, they built a London-based business empire with holdings from Spain’s Dia supermarket chain and German energy group Wintershall Dea to UK health food retailer Holland & Barrett.

But on Wednesday they stepped down from their LetterOne investment company and had their stakes “frozen” following the EU imposition of sanctions against them in the wake of Russia’s invasion of Ukraine.

After failing to shake their image as close associates of Russian President Vladimir Putin, the billionaires say they are “shocked” as they contemplate a possible forced return to Russia from their adoptive home.

“It looks like our attempt to build business outside of Russia was actually useless, just because of the simple fact that we are originally from there,” Fridman lamented this week.

Fridman, who owns a £ 65mn home in north London, told the Financial Times he spent about half his time in the UK and less than a third in Russia.

Aven, who houses his extensive modern art collection in his Surrey mansion, announced plans to open a museum in Latvia the week before the war.

Those plans now lie in ruins after the EU described him as “one of Vladimir Putin’s closest oligarchs”. Latvia’s government wants to revoke Aven’s citizenship, while an air strike on Tuesday hit the site of the 1941 Babiy Yar massacre of Jews – where Fridman, a Jew who grew up in western Ukraine, is funding a new memorial.

Holland & Barrett and other parts of the LetterOne business empire are set to avoid sanctions given the two men combined own less than half the company, according to two people familiar with the matter.

LetterOne, which has not itself been placed on the EU sanctions list, has strong links to the British establishment. Its non-executive chair is Lord Mervyn Davies, a former Labor minister, while Lord John Browne, former BP chief executive, stepped down last year as executive chair of the company’s energy arm.

Neither Fridman nor Aven are among those placed under US or UK sanctions this week.

“We do not estimate a position for the company to worry,” Fridman said. “That would seem senseless. It’s thousands of employees. . . hundreds of thousands of customers. ”

An Alfa-Bank branch in Moscow
Fridman and Aven co-own Alfa-Bank, Russia’s largest privately held lender, which is now under western debt financing curbs © Andrey Rudakov / Bloomberg

Fridman has described the events in Ukraine as a “tragedy” but said any direct criticism of Putin would “have very clear implications” for his Russian assets and their tens of thousands of employees.

Despite the billionaires’ departure from the group, the sanctions threaten LetterOne’s reputation as an investor in the UK and EU, particularly in sensitive, strategic assets that it has been focusing on in telecoms and energy.

Fridman told the FT late last year that he was looking for new investments in the UK, having struck a deal last summer to spend up to £ 1bn on the rollout of fiber broadband, with a focus on renewable energy and recycling.

LetterOne was also planning to invest further in Holland & Barrett to create a new business model centered on services alongside products, he said.

“It seems to me we’ve done a lot of good things,” Fridman said. “We do not need to hide anything, because we are trying to do business in the west. The answer is no – we should go back to Russia. “

Fridman and Aven are two of only three members of the semibankirshchina – the seven bankers who funded Boris Yeltsin’s re-election as president in 1996 – still active in Russian business.

They co-own Alfa-Bank, Russia’s largest privately held bank, which is now under western debt financing restrictions, the country’s largest supermarket chain, X5, and mobile carrier Veon.

They have ascribed their longevity to a determination to stay out of politics – even if they are no strangers to bruising battles in boardrooms and the courts.

But when they shifted their attention west after selling their stake in oil major TNK-BP to state-run Rosneft in 2013, politics followed them. Russia annexed Crimea and fueled a separatist conflict in the Donbas the following year, prompting the US and EU to impose their first sanctions against the Russian elite.

Fridman and Aven initially proved skilful at distancing themselves from Putin’s inner circle and building reputations in the west.

Asked if the US was considering sanctions against Fridman in 2015, Victoria Nuland, a top US state department official, told a congressional hearing that the oligarch “runs one of the few remaining private companies in Russia, and, as such, has had his own strong views as a private citizen about appropriate Russian-European relations ”.

But pressure on their business grew, with the UK forcing Fridman to sell gasfields in the North Sea in 2015 over fears production could suffer if further sanctions were imposed on Russia.

Things got worse after Donald Trump’s US election win in 2016, which sparked a years-long hunt in Washington for Russians who could have helped him to power.

A Holland & Barrett store
LetterOne had been planning to invest further in Holland & Barrett to create a new business model centered on services alongside products © Stanislav Halcin / Alamy

Fridman and Aven found themselves embroiled in accusations in a now-infamous dossier written by former UK spy Christopher Steele that they had delivered illicit cash to Putin in the 1990s, as well as separate claims they secretly communicated with Trump’s campaign through a computer server.

They took legal action over the document and won their case in London’s High Court, where the presiding judge found Steele’s company Orbis had failed to provide evidence for its claims about them, some of which were “inaccurate or misleading”. A later FBI investigation also raised “significant questions about the credibility” of the Steele dossier and concluded the server story was untrue.

However, the damage was done. By 2017, Fridman and his partners dropped a bid for oilfields in west Texas over concerns U.S. regulators would block the deal.

The next year, when Fridman and Aven were hosted at a dinner with officials and think-tankers in Washington, anti-Putin activists protested outside and published an open letter denouncing the event.

In 2019, FBI special counsel Robert Mueller’s report on Russian interference in the 2016 US election revealed Aven had told prosecutors he had reached out to the Trump campaign on Putin’s suggestion – albeit unsuccessfully.

According to the report, Aven said he was one of about 50 oligarchs who met with Putin regularly and took “implicit directives” from him.

Fridman said the accusations in the EU designation were “groundless” and likened them to official anti-Semitism in the Soviet Union.

“My parents always told me because you are a Jew, you cannot be in that position or that position. Now I am facing the same situation in the west, ”Fridman said. “Because you are Russian, you can not do business here. Why? Is it fair? ”

Andrei Movchan, a non-resident scholar in the Economic Policy Program at the Carnegie Moscow Center, said that “pushing people like Fridman into the arms of Mr Putin by sanctioning them is not a good idea”.

It would be more beneficial to “strip Russia from its oligarchs”, he added. “Being closer to the Kremlin, these people will not be able to change Putin’s policies; being with the west, they would spare Putin their wealth and business abilities. ”



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