Russia’s melancholy oligarchs | Financial Times

The tycoons are bitter about sanctions that have left them ostracised in the west and impotent at home.

by UKCHP_Admin

As Russia’s invasion of Ukraine raged this spring, the billionaire oligarch Mikhail Fridman called Kristina Kvien, then the US’s most senior envoy to Kyiv, with a proposal.

Fridman — who grew up in Lviv, in western Ukraine, but has Russian and Israeli passports and made most of his estimated $13bn fortune in Russia — would donate part of his wealth towards repairing damage from the war.

In return, the US would help him avoid the sanctions that were being imposed on oligarchs, which western policymakers hoped would force them to break with Russian president Vladimir Putin.

After Kvien raised questions about Fridman’s proposal, the conversation quickly became heated, according to three people familiar with the matter. Fridman began shouting and swearing at Kvien and insisted that he had no power to influence Putin.

“He spoke of his love of his native Ukraine,” says one of the people. “But then he went emotional, definitely. ‘You want to take away all my money!’”

Kvien told Fridman their conversation was over and hung up the phone. Fridman wrote Kvien a text message to apologise, but received no response.

The state department said it would not comment on “diplomatic discussions”. Fridman has denied that he ever spoke to Kvien, lobbied the US to help him avoid sanctions or offered to help Ukraine’s reconstruction efforts.

Since Putin launched the invasion of Ukraine, dozens of Russian tycoons have had their western bank accounts frozen and some have been forced to give up their stakes in western companies and lost their Mediterranean mansions.

But six months later, there is little sign that the sanctions have pressured the oligarchs into starting a “palace coup” against Putin.

Instead, they have had a very different impact. Increasingly angry at western governments, Russia’s oligarchs are scrambling for ways to cling on to what remains of their wealth — including through the sorts of buyout proposals that Fridman presented.

Many of the oligarchs who once enjoyed spending time in the west are now resigned to returning to Russia. Those in Moscow have quietly accepted their diminished status in a country at war.

Through interviews with seven Russian tycoons under sanctions — as well as senior bankers, current and former senior executives at major companies, ex-officials, and friends and family — the picture that emerges is of a group of oligarchs opposed to Putin’s war and resentful that it has ruined their fortunes. However, they are also simultaneously embittered at the west, which they believe has scapegoated them for events beyond their control.

“To do a palace coup and overthrow the tsar, you need to be in the palace first. None of these people are there,” says one Russian businessman under sanctions. “How is Fridman supposed to affect the president’s decisions from the UK? And if Fridman was in his house in Moscow, he still wouldn’t have any contact with the president. How could he affect his decisions?”

At least 21 Russian businessmen are now suing the EU in an effort to overturn sanctions against them, according to filings at the European Court of Justice in Luxembourg and people familiar with the matter.

Privately, some admit that these legal actions may not be enough to win them back their assets in the west.

Yet many are set on challenging the sanctions to the end — most notably Fridman and his business partner Petr Aven, who both became notorious for waging brutal courtroom battles, ranging from the City of London to the oilfields of Siberia.

“The guys are really pissed off and frustrated,” says a senior banker, who knows the two oligarchs well. “They are energetic people and fighters but it’s a very difficult fight.”

Escaping the Kremlin’s eye

Just months after he first took office in 2000, Putin gathered the country’s most prominent oligarchs in the Kremlin’s ornate Hall of the Order of St Catherine to explain the new rules by which business would operate in his Russia. They could keep the fortunes they amassed in often murky privatisations, he told them, as long as they stayed at “arm’s length” from politics.

When he summoned a group of leading oligarchs to the same room on the day of the invasion of Ukraine in February, Aven was one of only two members of the semibankirschina — the seven bankers who funded Boris Yeltsin’s re-election as president in 1996 — still in the country. Others, who had challenged Putin, were long gone: some in exile, like former oil baron Mikhail Khodorkovsky, or dead, like Boris Berezovsky.

The televised tirade at the businessmen meekly lined up in alphabetical order was a sign of how subservient they have become during Putin’s two decades in the Kremlin.

Of all the oligarchs, Fridman and Aven had done the most to establish themselves in the west. Backed by fortunes made in Russia’s oil, banking, retail and telecoms industries, they set up private equity firm LetterOne in London in 2013, creating a new empire in Europe that includes UK health food retailer Holland & Barrett, German energy group Wintershall Dea and Spain’s Dia supermarket.

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