EU to lift sanctions on Yandex founder Volozh

EU to lift sanctions on Yandex founder Volozh
Now that the founder and ex-CEO of Russia's internet giant Yandex has sold his stake in the company and fully exited Russia, sources report that he will be removed from the EU's sanction list at the next review. / bne IntelliNews
By bne IntelliNews February 22, 2024

EU countries have agreed to remove the sanctions from the founder of Russian internet major Yandex, Reuters reported citing unnamed sources familiar with the matter on February 21. Reportedly, Volozh will be one of three individuals who will be removed after March 15 when the sanctions regime is renewed.

As followed by bne IntelliNews, the lawyers of Volozh have reportedly formally requested for the EU sanctions on him to be lifted back in August 2023 and were not justified.  But their arguments are understood to have gained more traction after Volozh publicly condemned Russia’s “barbaric war” full-scale military invasion of Ukraine.

However, this did not yield any results and sanctions on Volozh remained in place when they were reviewed on September 15.

Since then, Netherlands-based Yandex NV (YNV) that holds all the non-Russian assets announced its exit from the Russian market on February 5, selling its Russian operations to a consortium led by the local management team for RUB475bn ($5.2bn). This makes the largest corporate exit from the country since Russia invaded Ukraine in February 2022.

Sources told Reuters that “legal arguments in court against Volozh were easing given the proposed full divestment” of his stake in the Russian business of Yandex Russia, which is now a separate entity. Yandex NV, the international part of the business, will soon be rebranded, sources close to the company told bne IntelliNews.

Volozh holds an 8.5% economic interest in Yandex NV through a family trust but has no voting rights in Nasdaq-listed YNV company.

As followed by bne IntelliNews, Yandex, Russia's internet giant and most valuable tech company, is undergoing a split between its foreign and domestic assets to minimise sanction risks following Russia's full-scale military invasion of Ukraine.

"One of the aims of the restructuring is to continue the development of [YNV’s] international AI-related businesses (by acquiring licences to develop these international projects from the Russian entity) and to recover some value for their international shareholders," a source close to the deal told bne IntelliNews.

The deal discussed between the company and the government is mediated by ex-Finance Minister and veteran policymaker Alexei Kudrin. After the split of Russian internet major Yandex, local investors are expected to take over 51% of the Russian entity for about $4bn (total $8bn valuation), while the minority stake of 49% will be retained by Netherlands-based YNV, RBC business portal previously said in March.

About a dozen bidders of Russia's richest oligarchs have already submitted bids for the company, but as bne IntelliNews reported, the management of Yandex Russia insisted that no one under sanctions should be admitted to the ownership structure, dramatically shortening the list of eligible oligarchs.

Volozh's family trust (45.1%) and the company's board members, managers and employees (6.6%) were the main owners of the voting shares of the pre-exit Yandex. However, the Volozh family trust no longer has any voting rights in the company. In 2022, the trust transferred its voting rights to the company's independent board members, according to a spokesperson for the family.

The state Public Interest Fund established in 2019 controls a "golden share" in the company. It is understood that the PIF’s golden share might be nixed as a result of the restructuring.

In 2022 Yandex maintained stable financial results despite the fallout from Russia's full-scale military invasion of Ukraine, on the back of market share gains in the main Search and Portal segment and internet ad revenues. The Russian entity accounts for about 95% of the revenue of the whole group, with the four main components of the international part of the business – driverless cars, cloud computing, ed-tech and AI – accounting for the remaining 5% pre-exit.

Yandex Russia’s search and portal segment continued to be the revenue leader for the company in 1Q23, when 54% year-on-year total revenue growth to RUB163bn ($2bn) was posted.

Volozh stepped down as Yandex CEO and left the board of directors in summer 2022 almost immediately after the war in Ukraine started, when he wrote a farewell message to his staff. The EU left the market guessing over Yandex’s fate after designating him in its sixth package of sanctions for Russia's invasion of Ukraine.

Prior to Russia's military invasion of Ukraine, Yandex was hailed as a global technological runner-up to Google, looking to boost the monetisation of its technologies on the one hand and leverage these technologies to support its international expansion on the other. Apart from e-commerce, its investment case previously rested on developments in transportation, fintech and foodtech, with the developed ecosystem seen as a key advantage. Yandex has been Russia’s leading developer of AI and driverless technologies, both of which will now become part of YNV.