Russian sanction-targeted oligarch Fridman and his assets – NV profile
Sanction-ridden Russian oligarch Mikhail Fridman is known in Ukraine as a co-owner of Alfa Bank and Kyivstar mobile operator. But those are only a small part of his business empire. What else does one of Russia’s richest people own and why did the Kremlin’s aggression against Ukraine affect his business?
Ukraine’s SBU security service has declared Russian oligarch Fridman wanted, as reported on the Interior Ministry’s website. He is charged with financing an attempted coup d’état. The penalty provides for up to eight years of imprisonment with confiscation of property.
Read also: Ukraine’s largest mobile operator succumbs to major hacker attack
Fridman is one of Russia’s richest people, whose fortune U.S. business magazine Forbes estimates at $11.8 billion. Over the past 35 years, he and his partners have built one of the most powerful business groups in the former Soviet Union with assets in the banking sector, retail, telecom, and energy. In addition to purely business projects, there are also those that coincide with the Kremlin’s geopolitical interests. But 2022 has become an annus horribilis for him due to the Russian invasion of Ukraine.
NV Business has collected 14 facts from the entrepreneur’s life who made his fortune in Russia and Ukraine but ultimately caught the ire of the UK justice system.
Born in Ukraine
Mikhail Fridman was born in the Ukrainian city of Lviv into a family of engineers. He studied well, liked physics and mathematics the most, won academic competitions. At the same time, he studied at a music school and then played in the school orchestra.
“I faced a serious dilemma in Year 10: which way to take, maybe become a musician,” Fridman recalled in an interview with NV.
“But then I chose physics over music. Although I end up doing neither physics nor music.”
Studied with Surkov and Solovyov
Fridman twice tried to enter Moscow Institute of Physics and Technology but failed due to “his last name,” according to the businessman himself (he was alluding to Soviet Union’s informal antisemitic policies). In the end, he enrolled at Moscow’s National University of Science and Technology (MISiS) in its non-ferrous metals department.
Read also: UK steps up sanctions against Russia, targeting key industries and oligarchs
The university became a forge of personnel for what would become Alfa Group. It was there that Fridman met future business partners German Khan and Alexey Kuzmichev. But there were also other acquaintances. Vladislav Surkov, Russian dictator Vladimir Putin’s future aide, studied one year ahead of Fridman. Their paths crossed again in the 1990s. In 1997, Surkov became the first deputy chairman of the board of directors of the Russian Alfa-Bank.
Putin’s propagandist Vladimir Solovyov was another fellow student at the MISiS.
Fridman graduated from the university with honors in 1986. He had no desire to return to Ukraine. To stay in Moscow, he got a job at Metallurgical Plant Electrostal JSC just outside Moscow.
Alfa Group
Fridman started doing business while still at university. The first venture of the future billionaire was reselling theater tickets together with other MISiS students. In addition, they founded a music club at one of the Moscow dormitories. But the real money came later. In 1988, together with his fellow students, Fridman founded the Courier and Alfa-Photo cooperatives. A researcher at the Institute of Chemical Physics, Mikhail Alfimov, was invited to the latter as a scientific supervisor, Russian Forbes wrote. The company was named after him. A year later, they founded another company, the Swiss Alfa-Eco joint venture, as well as Alfa-Bank in 1991. Fridman, German Khan, Andrei Kosogov and Alexey Kuzmichev became the Alfa Group’s key founders. Petr Aven, the former Russian Minister of Foreign Economic Relations, joined them in 1994.
First, but not everywhere
In all the projects it was involved in, the group became, if not the leader, but a prominent player. Alfa-Bank is the largest private bank in Russia, which is among the top five in terms of assets, and among top 10 in Ukraine and Belarus. However, the businessman will probably have to kiss goodbye to this particular asset. In July 2023, the board of the National Bank of Ukraine decided to withdraw Sense Bank (the December 2022 rebrand of Alfa Bank Ukraine) from the market and appealed to the Cabinet to nationalize the enterprise.
Read also: What happens to Sense Bank after nationalization – interview with supervisory board head
IDS Borjomi is Georgia’s well-known mineral water producer. IDS Ukraine, which owns the Morshynska, Myrhorodska, Staryi Myrhorod and other miner water brands is the Ukrainian market leader.
X5 is Russia’s largest retailer in terms of turnover, according to Russian news agency Interfax. An interesting detail: the group wanted to enter Ukrainian market in 2004. Former Ukrainian Interior Minister Arsen Avakov’s Fifth Element company opened stores under its brand, but the Ukrainian expansion didn’t take place. All 23 stores closed in 2007.
In addition, X5 developed another chain of its stores in Ukraine called Perekrestok. By 2014, it established 10 supermarkets and one Perekrestok Express store in Kyiv and Kyiv Oblast. However, in March 2014, when Russia annexed Ukraine’s Crimea, the stores were sold to the Ukrainian Varus supermarket chain owned by Ruslan Shostak and Valeriy Kiptyk.
Homeland connection – telecom
Telecommunications is another area where Fridman has succeeded. After winning a corporate dispute against Norway’s Telenor telecom group, the LetterOne company, which became Alfa Group’s publicly traded foreign shell, is the largest shareholder of Veon Holdings, with a 47.9% stake.
The group includes Ukraine’s largest mobile operator Kyivstar, Russian mobile operator Beeline, as well as several others in Kazakhstan, Kyrgyzstan, Uzbekistan, Pakistan, and Bangladesh.
On Nov. 24, Veon announced the sale of the Russian mobile operator to its local management. Instead, the business group is trying to preserve and expand its Ukrainian company. In August, it announced the purchase of Helsi, which is the country’s largest digital platform connecting doctors with patients.
A little-known detail: Fridman’s LetterOne also owns 19.9% of Turkish mobile operator Turkcell’s shares, which means it also co-owns lifecell mobile operator, its Ukrainian subsidiary.
Read also: Russian oligarch Fridman left London for Moscow — report
In October, Kyiv’s Shevchenkivskyi District Court seized the corporate rights of over 20 companies linked to Russian sanction-targeted oligarch Mikhail Fridman, as well as businessmen Petr Aven and Andrei Kosogov. A total of 100% of the corporate rights of Kyivstar and four affiliated companies, as well as 100% of the third-largest mobile operator lifecell, were seized as part of this case. Nine days later, the same court issued a new decision in the case, according to which it reduced the package of seized Kyivstar shares from 99.994654% to 47.85%, and those of lifecell from 100% to 19.8%. The court’s decision states that changes to the previous decision were made based on the motion submitted by the Prosecutor General’s Office due to a clerical error.
In mid-December, Kyivstar suffered from a major cyberattack, the largest since Ukraine’s independence. The company’s mobile services were completely offline for two days. Russian hackers from the Solntsepek group, a unit of Russia’s GRU, claimed responsibility for the attack.
Oil and gas jackpot
The energy industry brought Fridman really big money. The 1997 purchase together with Viktor Vekselberg and Leonid Blavatnik of 40% of the shares of the Tyumen Oil Company (TNK) became one of Alfa Group’s most successful deals. Five years later, they merged their Russian assets with UK’s BP, having established the TNK-BP joint venture.
In the next 10 years, despite high-profile corporate conflicts, it paid out $37 billion in dividends to all shareholders thanks to rising energy prices.
In 2013, the company got a new owner. The Rosneft state-owned energy company, which was managed by Igor Sechin, Putin’s long-time friend, decided to gain control over TNK-BP’s business. Fridman received generous compensation. Alfa Group got $14 billion for its 25% share in TNK-BP.
Between Merkel and Putin
In 2014, Fridman’s LetterOne completed the acquisition of the Dea mining company from the German energy giant RWE for EUR 5.1 billion ($5.6 billion). In 2019, it transferred it to the Wintershall DEA joint venture, which it established together with another German enterprise, BASF. In the deal, Fridman’s group became a junior partner with a 33.3% minority stake.
The new group has mining projects around the world. Wintershall DEA also owns or participates in several domestic German and pan-European gas pipelines, including two major Gazprom projects. First, it owns 15.5% of Nord Stream AG, the operator of the Nord Stream 1 gas pipeline. In addition, it’s one of the Nord Stream 2 gas pipeline’s financial backers.
In March 2022, after the beginning of Russia’s full-scale war against Ukraine, it decided to write off the financing of Nord Stream 2 by about EUR 1 billion ($1.09 billion). In the summer, CEO Mario Mehren told Reuters that “Gazprom, with the reductions and disruptions of supply, has destroyed the trust in Russia as a reliable supplier of energy for Europe.” However, the company has no plans to withdraw from joint projects so as not to make “a big gift for the government in Moscow,” he added.
The products of one of Gazprom’s Siberian joint ventures and Wintershall DEA can be used to produce aviation fuel components used by the Russian army in the war against Ukraine, Germany’s Der Spiegel and ZDF broadcasters subsequently reported.
Until autumn 2023, the billionaire lived in northwest London’s Hampstead area in Athlone House, a mid-19th century mansion, which he purchased in 2016 along with two hectares of land for £65 million ($82.1 million).
Settled in London
In 2019, Forbes estimated Fridman’s fortune at $15 billion and recognized him as London’s richest resident. Fridman has been a UK resident since 2015, although he holds Russian and Israeli citizenships.
Read also: Assets seized from Russian oligarchs Fridman, Aven, Kosogov includes 100% of comms company Kyivstar
“Only 20 out of 355 billionaires living in the capital of the United Kingdom are its citizens,” the publication wrote.
“The remaining 335 moved to London from 23 countries, including India, Iceland and Russia.”
Fridman’s life in the United Kingdom has become complicated. In December 2022, over 50 law enforcement officers searched his mansion in northwest London. They arrested the businessman on suspicion of money laundering, having seized “digital devices and a significant amount of cash.” Fridman was later released on bail. Only in September 2023, the National Crime Agency (NCA) stopped the investigation into the Russian billionaire’s alleged evasion of sanctions.
Ever since, Fridman had to be frugal in the United Kingdom. In October 2023, the High Court of London rejected the lawsuit of the billionaire’s lawyers against the Office of Financial Sanctions Implementation (OFSI) after the latter had banned him from spending £30,000 ($37,911) a month on the Athlone House mansion. In addition, the UK authorities prohibited Fridman from paying for a personal driver and advised him to use public transport.
Failed Uber
LetterOne announced its intention to invest $2-3 billion in tech and IT in 2016. Their investment in Uber was the first high-profile deal. Fridman and his partners invested $200 million in the company, whose total valuation at that time reached $62.5 billion.
“As entrepreneurs with experience in retail, banking, telecom and energy, we’re confident that Uber’s talented management team has the necessary experience and knowledge to transform the company into one of the outstanding technology businesses,” Fridman said at the time.
But the investment failed to earn a return. The startup showed losses. During Uber’s initial public offering (IPO) in early 2019, the shares were valued at $45 a piece but on the first day of trading slumped by 20%. In the same year, LetterOne sold its stake for just $173 million, at a substantial loss, Russian media reported with reference to the company’s report.
Jazz and hype in Lviv
Not only profit is important for business, but also reputation. The first international Alfa Jazz Fest kicked off in Lviv on June 3, 2011. Perfect match for Lviv native Fridman who initiated the festival. Thanks to the successful organization, stellar selection of participants and the magical atmosphere of medieval Lviv, Alfa Jazz quickly turned into Ukraine’s most prestigious cultural event. Numerous businessmen and officials came to Lviv to listen to live music from top performers.
But since 2014, Lviv residents have started calling for a boycott of the festival due to Russian aggression in Crimea and Donbas and the main sponsor’s Russian ties. The organizers tried to save the situation: they removed the bank’s advertising and started inviting Ukrainian performers. But the countermeasures didn’t work. Although Alfa Group remained among the sponsors, the event rebranded as Leopolis Jazz Fest in 2018.
Away from the Kremlin
Read also: Kremlin propaganda ‘helps MI6 recruit spies’ among Russians
Fridman and his partners failed to avoid accusations of working for the Russian authorities, although there was no direct evidence. In 2017, U.S. news website BuzzFeed released the notorious “Trump dossier” linking Alfa partners to a Russian campaign to interfere in the 2016 U.S. elections. Fridman and Aven allegedly unofficially consulted Putin through the mediation of the former manager of Alfa Group Oleg Govorun who then worked at the Kremlin. In addition, Putin allegedly received money from Fridman and Aven through Govorun in the 1990s. The partners responded by suing the publication and Fusion GPS, the company that conducted the investigation. They lost the court case in the Unites States, but instead they won the case and £18,000 ($22,747) as compensation in the High Court of London.
“This is nonsense. Not only in composition, but also in form. Why do we need Govorun, if we have Aven, who knew Putin well back in 1992, when he worked as the Minister of Foreign Economic Relations, while Putin was the head of the Committee on Foreign Relations of the St. Petersburg City Hall. And I’ve never met Putin in person,” Fridman commented to Forbes Russia in 2017.
A target of sanctions
After the beginning of Russia’s full-scale war against Ukraine, Fridman, Aven and Khan were put on the sanctions lists of the United Kingdom and the European Union, which led to the freezing of their personal accounts. Ukraine imposed sanctions on Alfa Group partners in late 2022.
Fridman left all positions in the companies he owns, transferred 7.7% of the shares in the mineral water production business to the Georgian government and resigned from the management of Alfa Bank Ukraine.
Khan decided to return to Russia. In early October, Fridman moved to Israel before Hamas terrorists attacked the country, and then he was forced to flee to Moscow. His lawyers said that he intends to return to the United Kingdom, but this has become impossible due to the imposition of sanctions against the billionaire. Russian presidential spokesman Dmitry Peskov said that Fridman is a Russian citizen and “can return, live here, or leave like any citizen.” The businessman said he wants to return to Israel.
Alfa no more
As recently as last year, the Alfa Group owners seemed so powerful that they had to deny negotiations to purchase Monobank, on of Ukraine’s largest online banks. However, they almost sold their own bank this year, Forbes Ukraine reported. By now, any deal is unlikely.
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First, the courts seized the bank’s shares, which makes the sale impossible. And secondly, the deal cannot take place without the consent of the National Bank of Ukraine, which in turn is waiting for a completely different scenario and is preparing to nationalize the institution.
Meanwhile, Fridman and his partners are pursuing a policy of distancing themselves from Moscow.
“I condemn the war against Ukraine, I consider it a terrible tragedy. I’m deeply convinced of the bright future of integral, independent, democratic Ukraine, my homeland, where I was born and grew up,” the billionaire told Interfax-Ukraine news agency.
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