Oligarch Vladimir Potanin on money, power and Putin - Financial Times

April 13, 2018

Oligarch Vladimir Potanin on money, power and Putin
One of Russia’s first post-Soviet tycoons on the art of survival in Moscow

Henry Foy
Any respectable evil mastermind needs a lair. A castle to revel in victories, a fortress to scheme anew. Or, in Vladimir Potanin’s case, a place to ski and play ice-hockey, and dream of redemption and a world where he is no longer cast as corporate Russia’s original villain.

In the saga of Russia’s metamorphosis from state-controlled socialism to capitalism, the heavy-set tycoon is seen by many as the high priest of oligarchy who paved the way for today’s society of a few hundred super-wealthy haves and tens of millions of have-nots: a democracy in name only, with the rich pulling the strings and the rest wondering what might have been.

An hour’s drive west of Moscow, in a private country club that he built in a wooded valley, I find a man resigned to this bleak caricature but striving to rewrite his own history. “I hide myself away here,” he says as we stroll down a tree-lined path to the granite-and-timber restaurant. “From everybody.”

Potanin’s imposing physicality is tempered by his relaxed demeanour. He is dressed in jeans and a casual blazer over a navy shirt and tie. Our convers­ation is never too far from laughter. But the smiles mask one of corporate Russia’s sharper minds. In 1995, four years after the collapse of the Soviet Union, the civil servant turned entrepreneur instigated the controversial “loans for shares” scheme in which President Boris Yeltsin handed over stakes in some of Russia’s most valuable natural resource assets for bank loans to plug the country’s debts and for financial support for his faltering re-election campaign.

Yeltsin held on to the Kremlin, the indebted state got cash and a year later Potanin’s cabal of seven Moscow businessmen who had issued the loans re-sold the shares to themselves for bargain prices in rigged auctions. Potanin’s prize was a 38 per cent stake in metals and mining colossus Norilsk Nickel for just $170.1m. When we met, that stake was worth $11.2bn — although since the imposition of new US sanctions against Russia and this week’s market turmoil, it has shrunk to $9.4bn.

In the complicated journey that led to today’s Russia of oligarchs, inequality and graft, many citizens perceive “loans for shares” as the original sin: state plunder that forever tainted its future. Potanin has built a $15.6bn fortune — the sixth-largest in Russia and 83rd in the world — but it carries a stain. Many Russians will never forgive him. And yet he is also one of Russia’s great corporate survivors. Of the seven original oligarchs, he is one of only two still welcome in Moscow. There are very few who amassed wealth and influence before Vladimir Putin rose to power and who still possess both.

“I have been involved from the very beginning. It has been a very interesting life,” he says. “Yes, I am a survivor, as you can see. And you want to ask me why.”

First we must order. We are sitting by the window in a completely empty restaurant with the elderly maître d’ poised in the corner. Potanin recommends the dorada, which I choose, with a trio of fish tartares to start. He follows suit, and the francophone who holidays in Antibes picks a bottle of white burgundy.

Born in 1961 into the nomenklatura, Potanin studied to follow his father into the USSR’s trade ministry, with the prospect of glamorous overseas postings. But after seven years in the state trade agency, he quit in 1990 to take advantage of Mikhail Gorbachev’s relaxation of the rules on private enterprises. Setting up Interros that year, with $10,000 of borrowed capital, he began competing with his ex-employer.

“The problem with Soviet people is our country was like a cell. We were cut off,” he explains. “And then we became suddenly open . . . Those who had appetite for risks and understanding and skills of course had an advantage.”

Five years later, in a move that would shape Russia’s future, he convinced the Kremlin to back his “loans for shares” scheme, selecting some of the country’s most valuable natural resources assets as collateral for loans that both the bankers and the politicians knew would not be paid back. As the tartares arrive, I ask how he feels to be immortalised as the scheme’s mastermind.

“It is the biggest PR tragedy of my career,” he says. “Of course, the privatisation process has to be transparent. And in our case it was not. My plan was different. I wanted to privatise the companies with banks and qualified people, raise their value, and then sell them.

“The choice was not between being fair and open or creating oligarchs. It was whether to leave these companies in the hands of [former Soviet] red directors and forget efficiency forever, or sell them in any way possible.”

Potanin is animated, gesturing with his hands as he defends his scheme as a necessary step to avoid economic stagnation. There is a long pause when I interrupt to ask when he realised that he could make a fortune by manipulating the auctions and walking away with the shares for a fraction of their value.

“Yes, it made me incredibly rich,” he says, glancing out over a frozen lake. “Everybody knows I won control of 38 per cent of Norilsk in loans for shares, cheap.” The last word drips with condescension. “There is a certain unfairness in treating those deals as evil. It was more complicated than that. I cannot rewrite history. Maybe,” — he corrects himself — “OK certainly, it was my mistake, my PR disaster. I did not manage to explain all those things back then.

“When people come from a totally closed system to openness; from a planned economy to a market economy; from a powerful state to a state in difficulties, there is no place for fairness.”

In one sense, he is right. Russia’s economy in the 1990s was semi-lawless and desperate for private enterprise. Regardless of how he acquired control, his management has made Norilsk into one of the world’s most profitable miners. But it is hard to feel sorry for a billionaire, sitting in the grounds of his private country club, looking out over his ski slope, who gained his wealth in a flawed privatisation designed and run by those who benefited.

“I don’t care when people call me an oligarch,” he says, looking straight at me. “I have enough self-respect to know I do the right things.

“We lived for many centuries without private property in a paternalist state. So while everybody now wants a car, a flat, jewellery, they also think you should not own a factory. And this is wrong. Public opinion is like a natural disaster. You cannot manage it. It starts raining, and well, you get wet.”

The tartares (a little dry and flavourless) are cleared away, and I challenge Potanin on the second criticism of the oligarchs: that their wealth made them masters of Russia’s politicians. Boris Berezovsky, who also took part in loans for shares, once boasted to the FT that he, Potanin and the other five oligarchs controlled 50 per cent of the economy.

“Some people like attention and to appear bigger than they are,” Potanin responds, with a sip of his wine.

“Look,” he says, speaking very carefully. “I always felt smart enough and have good connections to bring my ideas to decision makers. But I have never felt I could push them through.”

Berezovsky’s boast came back to haunt the septet, after Putin replaced Yeltsin and cracked down on the oligarchs. The oil and media tycoon fled to London in 2000 and died in suspicious circumstances in 2013. Mikhail Khodorkovsky was imprisoned in 2003 for 10 years and now lives in exile. Three others were investigated for financial crimes and left Russia. Only Mikhail Fridman, a $14.5bn banking, retail and telecoms tycoon, has also prospered.

“Why did we survive, Fridman and myself? Maybe because we never tried to dictate to the government, to the Kremlin,” he says. He recalls a meeting where he and Fridman told Khodorkovsky, “Mikhail, the problem is you are trying to play political games. The perception is you are trying to buy power. It is unacceptable, not just for you but for all of us — we will all look dangerous.”

In 1996, Potanin served as deputy prime minister for seven months, an aborted experience that made him wary of politics. “I am a normal human being; everyone is attracted to power. But this time as deputy prime minister, while I enjoyed it, was a vaccination against power . . . I understood that you can never convert your business power into political power. If you try, you will die.”

We are interrupted by the arrival of the dorada. The fillet, poached inside layers of leek, is delicious. The man certainly knows his own menu.

Before lunch, Potanin had shown me his ice-hockey rink, where he plays at least twice a week. In dozens of cabinets filled with framed photographs of the oligarch playing with ex-pros and fellow power brokers, I spotted one of him and Putin, another ice-hockey aficionado. When I asked him who is the better player, he smiled: “I am younger.”

“To be close and to support — these are different,” he says. “I have never been that close to Putin, but it doesn’t mean I support him less than his personal friends,” he says. “You don’t need to be close to the president to be a patriot.”

Yet during Putin’s 18-year rule, a new breed of oligarchs has emerged, whose wealth depends on their loyalty.

“Putin likes controlling things. He does not like to not be in the loop,” he says. “He likes details, he likes to know how things work. But that does not mean you have to come for his approval before taking any steps.”

According to Russia’s constitution, Putin’s new six-year term will be his last. I ask Potanin if he worries that a recent spate of clashes between billionaires heralds a period of fighting for control.

“Stability is really important for Russia,” he says. “What is important for Putin is how he creates a programme for future years.”

Succession? I prompt, but the wily veteran sidesteps my question. “Putin is smart enough to understand how things work, and how to make them continue working. I don’t know how he will solve this, and I am not close enough to discuss it . . . But he knows the drill and he knows that his biggest legacy would be to ensure stability and continuity.

“It is for business, too . . . I hope and I believe that he will not allow this kind of turbulence between different groups. I think he knows how to handle this.”

When I mention his inclusion on the US’s “Kremlin list” of politically connected Russians who could face sanctions, his face drops. “The Kremlin list is just a sheet of paper,” he says. “I am Russian. I am with my country, whatever happens. So lists, sanctions, whatever you guys think is necessary, do it. I stand by my country. [But] it is a pity this sentiment of co-operation between new Russia and the rest of the world has been lost.

“Look, tolerance is something Europeans are famous for,” he says. “But the speed and sharpness with which this tolerance disappeared is a bit strange . . . The world is not perfect. And if you think you are the only one who is perfect, then you are wrong.”

This sense of unfair discrimination surfaces throughout our lunch. Potanin is resigned to his oligarch caricature, but is frustrated at not being given a fair opportunity to redefine his narrative.

“When you do something in your life, the more you do, the more rumours, the more information around your activity you create. And in my case, it is always not positive, especially when we talk about the 1990s,” he sighs. “I can leave it behind. I can do nothing, say look, fine, I live the life I live, forget public opinion, and hide in this country club.”

In this context, I see our surroundings not as the lair of a corporate mastermind who outsmarted his way to a fortune, but more as the hideaway of a man who fears he will forever be castigated.

Still, Potanin is trying to rebrand himself. He gave $2.5bn of his own money to build a ski resort in Sochi for the 2014 Winter Olympics, and is Russia’s only signatory of the Giving Pledge, promising to donate at least half his wealth to charity. His foundation supports huge educational and cultural programmes in Russia, and he was awarded France’s Légion d’honneur last year after donating a collection of Soviet and Russian art to the Pompidou Centre. But Potanin’s principal attempt to forge a legacy is his work in cleaning up Norilsk, the city that gives his mining company its name.

I am a normal human being; everyone is attracted to power . . . But you can never convert business power into political power. If you try, you will die

Deep in the Arctic Circle and accessible only by plane or boat, Norilsk was formed as part of Stalin’s network of prison camps. Tens of thousands of prisoners died building the mines and factories still used today. Built with no regard for the environment, a decade ago it was named as the world’s most polluted city. Potanin is spending $2.5bn to fix that.

“I am saying out loud to the entire world that by 2023, this will be solved and Norilsk will become a normal place to live. If you cannot change the written story, you need to write new stories, to rebalance the situation. And since I have enough money, energy and skills, I can create new stories. Russian society has a very limited faith in businessmen to serve their country,” he says. “I want them to see I am paying back. But I cannot blame them for having hard feelings about guys who are rich and do not have their difficulties . . . I have chosen a certain destiny. And I am a happy man.”

The sun is setting on the snow outside, the wine bottle is empty. Potanin checks his Ulysse Nardin watch: we have talked for three hours. As I motion to the waiter, Potanin returns to forgiveness.

“Russia is unlucky with timing. Everything that happened 150, 200 years ago in other countries is happening here as we speak. You guys had your civil wars in long-ago centuries. The last murder of your king was in 1649. We killed our Nicholas II 100 years ago.

“Maybe this is why it is so difficult for the western world to understand Russia. I return to this word: tolerance. You guys finished with certain issues many centuries ago. We are living through them. Mine is a generation born in the Soviet Union, and you do not understand what that means. You are asking from us certain behaviour. But we were born in a concentration camp. Do you really expect from us behaviour of kids born in London? When you guys are teaching us, be careful, be polite.”

I wave away a bill for my food only and ask to pay for the entire meal. The incredulous waiter looks in panic at Potanin, who breaks into peals of laughter. Finally, I am allowed to pay for the billionaire’s lunch in his own restaurant.

Only on the drive back to Moscow do I realise that he had left the $150 bottle of wine off the bill. A charitable gift from the repentant oligarch.

Henry Foy is an FT correspondent in Moscow