Bidzina Ivanishvili

Ivanishvili’s Business Interests in Russia: What thou givest away is thine

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Georgian Dream political coalition leader Bidzina Ivanishvili has been busy ridding himself of his Russian assets as he had promised voters after his emergence on the Georgian political scene.

In an interview with Forbes magazine’s Russian edition in mid-May, Ivanishvili explained once again his motive for selling off his Russian holdings: He does not want anyone to think that he is beholden to Russia either politically or financially. Moreover, he asserts that liquidating his Russian assets is a necessary precondition for his political coalition to sort out Georgia-Russia relations in the future.

“To negotiate with Russia, as my team intends to do after coming to power, would be very difficult if I had assets there [in Russia]. Those assets would be a stumbling block in negotiations,” Ivanishvili said. “The most difficult thing is to explain all this to Russians, not to Georgians, because my business in Russia would be a burden for everyone and would give rise to doubts that there are other motives behind the processes.”

Ivanishvili last year announced his intention to divest himself of Russian assets. In an interview with Reuters in November 2011, he surmised that “no one will spare me there [in Russia] and I will probably have to sell everything at minimal prices.”

As it turns out, Bidzina Ivanishvili is the only Russian oligarch who having left Russia has ever managed to sell his assets not “at minimal prices” but at market and even higher prices.

Within a short span in May, Ivanishvili concluded several large Russian transactions, one after another, netting him USD 1.4 billion. In rapid succession, Ivanishvili sold off a bank, a drug store chain and massive developer assets. Not surprisingly, Ivanishvili was content with the deals. By his estimation, he received “a normal price” for his assets considering the existing economic crisis and the limited time-span in which they were liquidated.

In one deal valued at USD 983-million, Ivanishvili’s Unicor management company sold developer assets in Moscow, including an elite residential neighborhood, Garden Quarters, under construction on an area of eleven hectares; a construction site of the Luxe Hotel compound on Tverskaya Street; a multifunctional Summit complex that opened last year also on Tverskaya Street, as well as the Kauchuk rubber plant in Ochakovo with an area of 8.8 hectares.

The Russian daily Kommersant reported expert estimates of the market value of Ivanishvili’s developer assets at somewhere around USD 1 billion – almost the price at which those assets were actually sold. The buyer is the BIN Group owned by a billionaire of Ingush origin, Mikhail Gutseriyev, and his nephew Mikhail Shishkhanov.

The Rossiyskiy Kredit [Russian Credit] bank was sold by Ivanishvili in May for USD 352 million to a group of investors comprised of major Russian bankers George Gens, Anatoly Motilev, Boris Khait, Boris Pastukhov, Victor Lukianov and Vladimir Faerovich.

Rossiyskiy Kredit had been one of the largest banks in Russia until 1998, when it was temporarily put under management of the state after defaulting and failing to pay its depositors in full. Even though the dispute with creditors was later settled, the bank was never able to regain its earlier position. The Kommersant reported that the once-leading Rossiyskiy Kredit brand is no longer considered by experts to be among the top twenty Russian banks today because of its significantly decreased value.

The RBC business daily Russian newspaper quotes Uralsib Capital analyst Leonid Slipchenko, who contends that the price paid for the bank by purchasers is “extremely advantageous” for the seller. According to Slipchenko, “the price of the transaction is much higher than the price at which second-tier banks are usually sold today.”

An analyst for the financial company Solid, Yelena Ushikova, told the Kommersant that the bank’s capital amounts are USD 290 million. Yet, Ivanishvili was somehow able to sell the bank at about a twenty-one percent premium.

Existing market conditions should not have given the owner of a “bank of such a level” any expectation of gaining an additional premium in selling it, according to yet another Russian analyst, Ivan Andriyevskiy.

Also in May, the drugstore chain Doktor Stoletov was sold by Ivanishvili for USD 60 million to the Imperia-Pharma company. Before its

purchase, Imperia-Pharma had been operated only on state orders. Russian sources report that Valentina Matviyenko, the current Chairman of the Federation Council of the Russian Federation (Senate) and former governor of Saint Petersburg, and her son Sergei Matviyenko are behind the company.

According to RBC daily reports, another potential buyer of the Doktor Stoletov pharmacy chain, the Hi Capital investment fund, refused to go forward with the purchase because “the seller demanded a very high price for that losing company.”

Yet another Ivanishvili asset offered by Unicor is an agribusiness company, Stoilenskiy Niva. In February, Ivanishvili priced that company at USD 350 million – almost twice its actual value, according to assessments of experts questioned by the Kommersant. Ivanishvili was expected to conclude a USD 250 million sale of Stoilenskiy Niva by the end of May, Reuters reported.

In early May, fugitive Russian oligarch Boris Berezovsky told Tabula that he believes the reason that Ivanishvili has had no problems running profitable businesses in Russia is because Ivanishvili “plays according to the rules set by the Russian government.” It was only after the Tabula interview with Berezovsky that Ivanishvili’s lucrative business transactions came to light.

Berezovsky himself sustained substantial financial losses after clashing with Vladimir Putin soon after Putin’s election as president in 2000. That same year, the Russian government pressured Berezovsky to cede his assets. Berezovsky and business partner Badri Patarkatsishvili were forced to sell their stakes in the ORT TV channel and the Sibneft oil company at a fraction of their value. During sale negotiations, Kremlin interests were defended by Roman Abramovich, the Russian oligarch with whom Berezovsky is now in litigation in a London court. Berezovsky is seeking compensation for his lost Russian assets.

In 2003, another Russian oligarch, Mikhail Khodorkovsky, was arrested on charges of tax evasion. Considered by international organizations to be a prisoner of conscience, Khodorkovsky is still in jail in Russia. Many of his compatriots believe Khodorkovsky was imprisoned because of his political views and for bankrolling the political opposition in Moscow. Russian oil giant Yukos, which belonged to Khodorkovsky, was divested and sold at auction to companies close to the government.

Mikhail Gutseriyev, whose BIN Group just purchased Ivanishvili’s developer assets, became a victim of “expropriation” himself in 2007. It is assumed that he “fell from grace” then because of his opposition to then President of Ingushetia Murat Zyazikov. Gutseriyev was forced at that time to sell a majority stake in the Russneft oil company to Oleg Deripaska, a businessman loyal to the Kremlin. After reportedly being coerced into dropping his business activity, Gutseriyev fled the country. He was put on the wanted list after a criminal case was initiated against him. In 2010, however, Gutseriyev regained the approval of the Russian government as well as his shares in Russneft – both under still unknown circumstances.

The Russian government in September 2008 also began putting pressure on Yevgeny Chichvarkin, the founder of the largest Russian mobile phone retailer, Yevroset. After a search of his company headquarters in connection with a smuggling and kidnapping case, Chichvarkin and his partner sold all shares in the company to billionaire Alexander Mamut. Chichvarkin later left for London and accused Russian law enforcement agencies of extortion. In response, the Prosecutor’s Office of Russia launched a criminal case against Chichvarkin and demanded that he be extradited back to Russia.

After entering Georgian politics, Bidzina Ivanishvili publicly criticized Russia for occupying Georgian territories and vowed that, if he comes to power, he will maintain Georgia’s Euro-Atlantic vector to counter Russian’s foreign policy priorities. The vivid experience of rich Russian businessmen, however, strongly indicates that if the Kremlin really viewed Ivanishvili as its opponent, he would never have been allowed to sell his assets so efficiently, let alone to companies closely linked to the Russian authority.

As Jamestown Foundation analyst Vladimir Socor wrote in March, Ivanishvili’s denial of any ties with the Russian government is called into doubt by the current status of his former business partner Vitaly Malkin as a member of Russia’s Federation Council. Until Ivanishvili’s recent sale of developer assets, Malkin retained stakes in some of those development projects. “It seems difficult to believe that such vast and profitable business activities would have been possible in Putin’s Russia without the consent of state authorities,” Socor contends.

In Socor’s view, the sale of Ivanishvili’s Russian assets serves the aim of mobilizing funds for the forthcoming parliamentary elections in Georgia while the nature of Ivanishvili’s relationship with Russian authorities remains nontransparent to the public.

This article first appeared in Tabula Georgian Issue # 102, published 28 May 2012.

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