When he devised Russia’s infamous “loans for shares” programme in the 1990s, Vladimir Potanin leveraged his political influence and banking clout to snap up valuable state industrial assets on the cheap.
Now, as western sanctions over the invasion of Ukraine hobble fellow oligarchs, Potanin is tapping his fortune to buy stakes in major Russian banks being sold by western groups fleeing the country and those on the wrong side of President Vladimir Putin.
Unlike 30 years ago, say analysts, Potanin is bringing assets back under the Kremlin’s purview — and they say he has been able to do so because of his outsized importance to global metal markets helping keep him off important sanctions lists.
Potanin’s Interros group agreed to acquire top-10 lender Rosbank after its French owner Société Générale, which bought the business from Potanin in 2008, sought a quick exit from Russia. He also bought United Card Services, the Russian subsidiary of US group Global Payments.
And when eccentric Russian billionaire Oleg Tinkov parted with his 35 per cent stake in highly rated fintech TCS, in what he called a Kremlin-enforced “fire sale”, Potanin was on hand to take advantage.
On paper, the deals appear excellent value: Tinkov complained that Potanin had paid only 3 per cent of what he believed his TCS stake was really worth, while SocGen was so eager to leave it took a €3.1bn hit.
But the key factor behind them, analysts say, was as much Potanin’s eye for a bargain as his fealty to the Kremlin.
“Potanin is a man of loyalty. Like other Russian oligarchs, he is the manager of the assets, and he understands that well,” said Andrei Movchan, a former investment banker and fellow at the Carnegie Endowment.
One of the last oligarchs standing
On the evening after Vladimir Putin ordered the invasion of Ukraine in February, Potanin was one of about 40 businessmen summoned to the Kremlin for an audience with Russia’s president.
Some lamented the collapse of their empires, according to people present. Their attendance was later used as justification for western sanctions against several of them.
One of the few original oligarchs still welcome in Moscow, Potanin — who has played ice hockey with Putin, owns two superyachts and is embroiled in one of the UK’s biggest ever divorce cases — remains comparatively unscathed, although he is under Australian and Canadian sanctions and has stepped down from museum and think-tank boards.
Norilsk Nickel, the Siberian miner that makes up the bulk of his $33.6bn fortune, according to Bloomberg data, has a market capitalisation of Rbs3.3tn, or close to $50bn, having been buoyed by relatively high nickel and palladium prices. The stock, however, is thinly traded and although it has recovered some of the losses made since the war broke out, it is still down 20 per cent from a year ago.
The company’s crucial role on global metals markets — and the US Treasury’s painful memory of the market turmoil sparked by placing aluminium producer Rusal under sanctions in 2018 — has probably spared Potanin, said Sergei Aleksashenko, a former senior Russian central banker.
“He never really created problems for anyone in the west,” said Aleksashenko.
Norilsk produces 15 per cent of the world’s high-grade nickel used in batteries, according to Goldman Sachs, and 40 per cent of its palladium, according to Renaissance Capital. Hitting it with sanctions could make the markets for both metals collapse, hitting supplies needed for cars and microchips, and force the US to grant the company an exception, Aleksashenko added.
Now, as foreign companies and tycoons that oppose the Kremlin risk seeing their businesses nationalised, Potanin is one of the few non-sanctioned oligarchs who can take assets off their hands.
“The Kremlin had a geopolitically problematic asset [in Tinkoff] and Potanin had a solution,” said Tatiana Stanovaya, founder of political analysis firm R.Politik.
Potanin’s acquisitions reverse a decades-long trend of oligarchs abandoning their banks, as top state lenders squeezed out competition and a central bank clean-up saw hundreds of private banks lose licences.
The deals make Potanin a major player after largely exiting the sector almost 15 years ago. Rosbank and Tinkoff, TCS’s main asset, had combined assets of almost Rbs3tn in February.
“It’s an art what he’s done. SocGen lost millions of dollars in leaving Russia — the millions Potanin has gained,” said a senior Russian banker.
Neither Interros nor Potanin has commented on the deals and they declined to comment or be interviewed for this article. Rosbank and TCS declined to comment on their terms.
A person involved in negotiations for SocGen said the lender had other offers but chose Potanin because he was familiar with the business and could offer a quick deal.
“We wanted to find a way to exit in the most orderly way while preserving our 12,000 staff,” they said. “Potanin . . . says he wants to preserve the bank and its culture.”
In the right place at the right time
Born into a politically connected family, Potanin followed his father into a privileged but unremarkable career at the Soviet trade ministry until 1990, by which point Mikhail Gorbachev’s introduction of private enterprise had allowed the first future oligarchs to begin their trading careers.
Potanin quit in 1990 to set up Interros with $10,000 cobbled together from mostly state-run trade organisations. Two years later, a struggling state lender told its customers to move their money to Potanin’s Uneximbank — earning it $300mn, an enormous sum for the time.
He quickly established himself as a major financial player by servicing the state. Uneximbank, whose clients included the customs agency, the finance ministry, Russia’s state arms exporter and the huge Siberian miner Norilsk Nickel, increased its assets from $322mn to $2.1bn in 1994 alone.
“Those who had appetite for risks and understanding and skills of course had an advantage,” Potanin told the Financial Times in an interview in 2018.
In 1995, Potanin devised the “loans for shares” scheme to back Boris Yeltsin, Russia’s first president, ahead of an election in which the Communists were feared to be on the verge of regaining power.
Under the scheme, a coterie of bankers lent the cash-strapped Kremlin $1.8bn with stakes in the crown jewels of Soviet industry as collateral, fully aware that the loans would never be repaid.
The Kremlin then sold off the assets to the bankers at rigged auctions. Potanin acquired 38 per cent of Norilsk Nickel, which reported $3.3bn in revenue that year, for just $170.1mn. Yeltsin secured an unlikely victory, largely because of the oligarchs’ support, and appointed Potanin as deputy prime minister in 1996.
He lasted only seven months in government but retained his political savvy and eye for a good deal: he sold 10 per cent of oil company Sidanco to BP for $571mn in 1997, despite having paid the state just $130mn for 51 per cent a year earlier.
When Uneximbank collapsed amid the financial crisis that led to Russia’s default in 1998, Potanin bought what became Rosbank and turned it into the country’s largest retail bank.
Putin’s ascent to the Kremlin in 2000 spelt the end of the oligarchs’ influence: the state redirected its largesse and warned them to stay out of politics. But Potanin quickly adapted. After accompanying Putin on a skiing trip during a state visit to Austria, he built a ski resort near Sochi and then lobbied the Kremlin to bid for the Winter Olympics, ultimately costing him $2.5bn of his own money.
“Potanin learned the rules of the game under the Putin regime very well,” said Stanovaya.
Toeing the line with the Kremlin has allowed Potanin to remain steward of Norilsk, where he remains the main shareholder and chief executive, analysts say.
The company has become one of the world’s most profitable under his management, but despite tentative efforts to clean up its act it is one of the world’s worst sulphur dioxide emitters and turned two Siberian rivers crimson in an oil spill in 2020.
The disaster earned Potanin two public dressings-down from Putin, who then criticised oligarchs for pocketing dividends while ignoring their social and environmental responsibilities in comments seen as a thinly veiled swipe at Potanin,
But Norilsk escaped with a $2.1bn fine, a record for Russia but a sum the cash-rich company had no trouble paying off.
The party line
Although Putin made no threats against oligarchs who refused to back the war effort at the meeting at the Kremlin in February, the message was loud and clear.
The few businessmen who did criticise the invasion did so vaguely, saying that war was bad but not mentioning Putin or, in several cases, the countries fighting it.
Potanin emerged only in March to say that Russia should do its best to hold on to its positions on international markets and not nationalise foreign businesses.
The exception was Tinkov, who told the FT that he feared for his life after writing that “everything . . . in the country is shit and mired in nepotism and servility”.
And in a post on Instagram after the sale, Tinkov took aim at the oligarchs still supporting Putin. “I don’t know how long I have left to live, but I don’t want to die a jerk, coward, and loser with these billions, like 90 per cent of all the oligarchs in Russia,” he wrote. “You cowards, you have one life and you need to live it like a man.”