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Russia: New business elite emerges in shadow of war

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Who benefited from the mass exit of multinationals

Ρωσλα: Νεα επιχειρηματικor ελλ&tau

Alexander Govor was one of the first to “get into the game” when foreign companies started leaving, buying the Russian McDonald's in May 2022. Photo. Reuters


A new business elite is emerging in Russia, taking advantage of the vacuum left by major Western companies that abruptly left in the wake of the war in Ukraine. Fast food giant McDonald's, packaging group Ball Corp. and chemical company Henkel AG are among the companies that sold businesses worth at least $21 billion in 2022 and the first half of this year, according to an estimate by research firm AK&M.

The new tycoons do not come from the ranks of the country's wealthiest and most are unknown abroad, but they have taken advantage of the situation and acquired assets at discounted prices after the mass exodus of multinationals as the war reshuffled Russia's business world. . All have been in business for decades, in some cases in the businesses they bought and in others alongside famous billionaires. However, unlike most members of the so-called “old guard”, they have not been sanctioned by the US or the EU. They are the young beneficiaries of the latest wave of asset redistribution. The previous oligarchs built their wealth from resources and banks more than three decades ago, after the collapse of the Soviet Union. They have been largely replaced by a group that hoarded during the Putin days.

So who are their successors? Ivan Tavrin, the former head of a Russian mobile phone company and former partner of billionaire Alisher Usmanov, recently spent more than $2 billion to acquire Prosus NV's local online classifieds service Avito. He has also acquired other assets, making him the biggest wartime dealmaker so far.

Next on the list is Alexei Chagall with the Arnest Group, which marketed perfumes and cosmetics before taking over the assets of Ball drinks packaging in September last year. It then acquired Heineken NV's Russian operations, including seven breweries, for €1 this summer. His wife Elena was the general manager of Arnest, before serving in the Russian Upper House as a member of the ruling party.

Alexander Govor was one of the first to “get in the game” when foreign companies began to leave, buying McDonald's Russian business in May 2022 and the packaging plants in September. While he was a partner in the fast-food chain, buying the entire chain of 850 Russian restaurants was a big step up from when he operated just 25. His fortune comes from his stake in the Yuzhkuzbassugol coal mining company. He left in 2007 after two deadly mine explosions, selling his stake in Evraz, the steel company part-owned by billionaire Roman Abramovich.

Of course, there are oligarchs known in the West who also managed to benefit from the exit of international companies. Vladimir Potanin, Russia's richest man, before US and UK sanctions, bought Rosbank PJSC from Societe Generale SA. Billionaire Andrei Komarov – who has not been sanctioned – bought three Russian factories from global packaging company Amcor Plc for about 370 million euros. While there were also asset seizures that rewarded people close to power. This summer the government took control of the local subsidiaries of Danone and Carlsberg and put Putin allies at the helm.

State restrictions on anyone wanting to sell Russian businesses benefit new buyers even more. In 2022, the Kremlin banned foreign investors from selling Russian assets without the approval of a special government committee and ordered that assets be sold at a discount of at least 50 percent of market value, as the nation sought to discourage foreign companies from fleeing the country. Under rules introduced earlier this year, businesses seeking to sell their Russian assets now face a mandatory contribution to the budget, even if they do so for a nominal fee or for free.

Source: www.kathimerini.com.cy

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