Vladimir Potanin pictured in Sochi, Russia in 2010. The oligarch splashed over $2 billion to construct a ski resort for the Sochi 2014 Olympic Winter Video games (Photograph by Sasha Mordovets/Getty Pictures).
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Vladimir Potanin continues to be negotiating enterprise offers as his fellow oligarchs stumble, elevating questions on whether or not this metals magnate is simply too massive to sanction.
Private sanctions have hit the pocketbooks and portfolios of many Russian oligarchs, because the U.S., the EU and the U.Okay. go after their palatial houses, personal jets and audacious yachts.
One one that has not but been sanctioned by these powers (however was sanctioned by Canada final week) is Vladimir Potanin, a metals tycoon and certainly one of Russia’s authentic oligarchs. His firm, MMC Norilsk Nickel PJSC (often known as “Nornickel”), the world’s greatest producer of refined nickel and palladium, is benefitting from hovering commodities costs amid the wartime provide crunch.
Now, amid the upheaval of struggle, Potanin is transferring to broaden his enterprise empire. The French financial institution Société Générale introduced yesterday it was promoting Rosbank, a Russia-based banking group, again to Interros, Potanin’s funding conglomerate. Société Générale paid an estimated $four.three billion to Interros between 2006 and 2014 to amass a close to 100% stake within the Russian financial institution and its subsidiaries.
Transaction phrases weren’t disclosed, however Société Générale stated that Interros would repay the Russian unit’s excellent loans and that the French financial institution would write off $three.three billion.
A spokesperson for Société Générale advised Forbes over electronic mail: “With this settlement, concluded after a number of weeks of intensive work, the Group would exit in an efficient and orderly method from Russia, taking into consideration its workers and shoppers. Interros Capital is likely one of the largest personal funding firms in Russia and is aware of the financial institution, which might facilitate enterprise continuity.”
Primarily based on the out there info up to now, the deal was a “incredible” one for Potanin, says Jerome Legras, head of analysis at Paris-based funding agency Axiom Different Investments, and former deputy head of construction capital finance at Société Générale.
“The enterprise goes to be disrupted in fact due to the economic system crashing and the whole lot, however he’s getting a financial institution for near zero, so in fact it’s deal for him,” says Legras. “From the quantity of the writedown they [Société Générale] say they took, and from the quantity of capital within the firm and what was stated in regards to the subordinated debt, it is fairly clear this was a nominal worth.”
“By way of pure fairness, I believe the worth was just about zero,” provides Legras.
Rosbank serves greater than 5 million particular person shoppers and practically 100,000 company and small enterprise shoppers in Russia. Its shares have risen practically 80% since opening for buying and selling Monday morning; the corporate closed on Tuesday buying and selling at a $2.four billion valuation.
Société Générale’s shares additionally jumped on Monday, by 7%, as buyers breathed a sigh of aid: the French financial institution had warned on March three about the potential of Russia seizing Rosbank, after threatening rhetoric from the Kremlin in response to Western sanctions. On March 11, Potanin spoke out in opposition to the seizure of Russian property owned by international companies. “We should always not attempt to ‘slam the door’ however endeavor to protect Russia’s financial place in these markets which we spent so lengthy cultivating,” stated Potanin on the messaging app Telegram. Any authorities seizure of property, he warned, “would take us again 100 years to 1917. And the implications – a world insecurity in Russia from buyers – we might really feel for a lot of a long time.”
Whether or not Potanin’s missive had any impact on President Vladimir Putin is unknown (the Kremlin has not approved seizure of foreign-owned property), however what is evident is that his takeover of Rosbank is the newest in a collection of wins for the 61-year-old metals tycoon, who has fared noticeably higher than a lot of his fellow oligarchs throughout the Russia-Ukraine struggle. Potanin is now Russia’s wealthiest oligarch, with an estimated fortune of practically $26 billion (as of April 12).
“We’re seeing Potanin not solely because the dealmaker but additionally because the consummate political insider in Russia,” says Stanislav Markus, a professor of worldwide enterprise on the College of South Carolina who has studied Russia’s oligarchy. “He has navigated the Byzantine world of Kremlin politics because the 1990s whereas among the different ‘authentic’ oligarchs had been marginalized (or, at occasions, ruined) within the transition of energy from Yeltsin to Putin and, later, as Putin doled out juicy state contracts to his private pals. The SocGen acquisition couldn’t have proceeded with out Potanin’s stable grasp of political realities in Russia.”
Chief amongst these realities: Nornickel’s international attain and market power. Whereas Canada grew to become the primary Western energy to sanction Potanin final week, the mining colossus, during which Potanin holds an over one-third stake, has not been sanctioned. It’s the world’s largest producer of palladium and refined nickel, a key ingredient in metal manufacturing. Europe, specifically, depends on Nornickel for Class 1 nickel, a purer type of the steel utilized in electrical autos and chrome steel manufacturing. Potanin’s firm offered round 27% of Europe’s nickel imports in 2021, based on pure sources consultancy Wooden Mackenzie. The corporate has distribution hubs in Hamburg and Rotterdam, and a gross sales workplace in Zug, Switzerland. It additionally operates within the U.S. with a gross sales department situated in Pittsburgh, Pennsylvania.
A wartime commodities growth has padded Nornickel’s earnings as nickel’s worth has risen greater than 100% this year. Nornickel inventory is up practically 20% from its year-low on February 24, the day Russia invaded Ukraine and the Moscow Inventory Alternate introduced it was suspending buying and selling on all markets.
If the EU had been to sanction Nornickel, “It could result in demand disruption, as a result of it’s very tough to switch misplaced [nickel] models. Europe has the best publicity.” says Nikhil Shah, head of nickel analysis at U.Okay.-based enterprise intelligence agency CRU Group. By comparability, the U.S. depends on Canada for many of its Class 1 nickel imports, however any U.S. sanctions in opposition to Nornickel would reverberate in Europe and drive up costs in all places, says Shah.
Town of Norilsk, Russia, in residence to Norickel’s mining operations (Photograph by Oleg Nikishin/Getty Pictures)
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A brief squeeze on nickel futures in early March induced the commodity’s worth to greater than double inside a day, to above $100,000 per metric ton on the London Metallic Alternate, producing fears of market instability. (Nickel presently trades round $32,000.) Final week, costs of palladium–a key ingredient in catalytic converters for vehicles–spiked after the London Platinum and Palladium Market stated it could ban metals from two Russian government-owned refiners, heightening the significance of Nornickel because the world’s largest palladium producer.
Financial and market issues have lengthy been a part of sanctioning authorities’ decision-making course of. For instance, the U.S. lifted sanctions in December 2018 on Oleg Deripaska’s metals producer Rusal and its dad or mum firm En+, lower than a yr after they had been imposed, after these sanctions had induced aluminum costs to rise. Comparable considerations might assist clarify why Potanin has not been sanctioned by main powers.
“As we discovered with Deripaska, we took this motion and international aluminum costs went by the roof,” says Richard Nephew. “You would possibly discover that one thing makes numerous sense and is completely justified, however may have important financial penalties.”
Earlier than the struggle, Potanin cultivated ties with Western monetary and cultural establishments. In 2013, he signed The Giving Pledge, based by Warren Buffett and Invoice and Melinda Gates to enlist billionaires to commit not less than half of their wealth to charity. He served on the advisory board of the New York-based Council on Overseas Relations and was a trustee of the Guggenheim Museum’s basis. He donated not less than 5.5 million to the Kennedy Heart for the Performing Arts in Washington, D.C. between 2011 and final yr, based on information from the Anti-Corruption Knowledge Collective. His charitable group, the Vladimir Potanin Basis, has additionally given to The College of Oxford. It bequeathed over 250 works of Russian artwork to the Pompidou Heart in Paris in 2016.
Potanin has apparently been cautious to maintain shut ties to Putin as nicely. He invested over $2 billion into constructing Rosa Khutor, a Sochi ski resort constructed for Russia’s 2014 Olympic Video games. He and Putin are identified to have skied and performed ice hockey collectively on a number of events.
Potanin was among the many authentic group of Russian oligarchs who constructed their fortunes within the chaotic 1990s as President Boris Yeltsin oversaw a wave of corrupt privatization offers. He and his long-time enterprise associate Mikhail Prokhorov acquired stakes in Nornickel by Yeltsin’s notorious loan-for-shares scheme, during which a small handful of businessmen lent cash to the Russian president’s 1996 reelection marketing campaign in change for management of state-owned property. (The companions cut up up in 2007, after Prokhorov was detained by French police over soliciting prostitutes. He wasn’t charged however agreed to promote his stake to fellow oligarch Oleg Deripaska’s United Co. Rusal, which nonetheless holds its Nornickel shares.)
Potanin was not solely a beneficiary of Yeltsin’s scheme, however was allegedly its key architect. “Mortgage for shares was Potanin’s brainchild,” says Markus, the College of South Carolina professor.
Nornickel and Potanin’s charitable group didn’t reply to requests for remark.
