PROFILE: Mikhail Fridman – the teflon oligarch new to Londongrad

PROFILE: Mikhail Fridman – the teflon oligarch new to Londongrad
A workaholic, Fridman surprised many with his recent involvement in the Alfa Future People music festival. / Photo by Todd Prince
By Jason Corcoran in Moscow April 11, 2016

His oligarch peers from the 1990s have been incarcerated, exiled or had their assets seized, but Mikhail Fridman lives a charmed life, retaining much of his wealth without falling foul of the Kremlin. Now the Alfa Group founder has moved to London and is seemingly defying an edict to repatriate Russian wealth by splurging billions on foreign assets.

In a rare interview with the foreign press, Fridman told the Financial Times over lunch on April 1 that he is on a mission to improve the image of his country’s business elite. “It’s our moral duty to become a global player, to prove a Russian can transform into an international businessman,” he said.

But a straw poll of Moscow analysts uniformly guffawed upon hearing of Fridman’s elevation to a figurehead for good Russian corporate governance on the global stage. “Fridman is no Mary Poppins,” a leading Moscow-based strategist tells bne IntelliNews. “He’s clearly moved to London to run his fast-growing overseas portfolio.”

Fridman, whose $15bn fortune makes him Russia’s second-richest man, has been living in London for at least a year now and says he plans to spend 50% of his time there. With the exception of Chelsea Football Club owner Roman Abramovich, all of the UK’s prominent Russian exiles are firmly in the Kremlin’s bad books. 

Mikhail Khodorkovsky, the former Yukos owner, resides in London after spending 10 years in jail on what many considered to be trumped-up charges of tax evasion and theft. Boris Berezovsky, a former mentor-turned-critic of President Vladimir Putin, was found dead three years ago in suspicious circumstances in his Berkshire home. Banker Andrei Borodin calls the UK home now after being granted asylum upon fleeing Russia. Sergei Pugachev, once known as Putin’s personal banker, made London his home up until a year ago when he fled for France. Yevgeny Chichvarkin, the Russian entrepreneur and Putin critic, also lives in London, while Vladimir Ashurkov, a former Alfa Bank executive who works for opposition leader Alexei Navalny, was granted UK asylum in 2015 after fleeing Russia.

Not so for Fridman, though that of course could change. According to the Russian edition of Forbes magazine, after selling his Russian oil business Fridman decided to relocate his holding company to London, and together with Alexey Kuzmichev, one of his key lieutenants, they became British tax residents last year even after Putin had requested that investors pay Russian taxes on profits they receive on holding companies registered abroad

Perhaps moving to London’s Mayfair district can be civilising, but the reputation of Fridman and his Alfa Group over the past two decades is one tarnished by nasty and protracted corporate spats.

His battle with BP for control of their joint venture TNK-BP, for example, was ugly and played out in the full glare of the media. The oil producer, which was hugely profitable, was the subject of unprecedented corporate pressure in the form of police and FSB raids and tax and immigration inspections – all contrived, BP asserted, by Fridman and his partners as part of a plan to take control.

Tensions came to a boiling point in 2008 after it was reported that BP had been holding secret talks with state gas monopoly Gazprom about buying out Fridman and his partners. Staff at TNK-BP’s offices on Old Arbat soon got used to raids and inspections and the foreign personnel were stripped of their visas and work permits.

TNK-BP’s British boss at the time, Bob Dudley, was constantly hounded. According to a report by The Times newspaper, Dudley regularly swept his office for bugs and took phone calls on his balcony to avoid being recorded. Dudley eventually fled Russia in July 2008 after what he described as a campaign of “sustained harassment.”

Alfa’s telecommunications unit was involved in a lengthy legal battle with Norway's Telenor over control of mobile phone giant VimpelCom, which began in 2005 and dragged on for seven years. Cases linked to the corporate tussle — which ended in a compromise agreement — were heard in US and Russian courts. Telenor announced on April 1 that it plans to sell its 33% stake.

VimpelCom, in which Alfa has a 56% stake, has also been embroiled in a corruption investigation in Uzbekistan. In February, the company agreed to pay a $795mn to settle US and Dutch claims that it had bribed officials to win contracts in the former Soviet republic.

Aven a laugh

The key to Fridman keeping on side of the Kremlin has been his suave partner Petr Aven, who joined Alfa in 1991 after serving as Russia's foreign minister.

Aven regularly meets with Putin at the President’s Novo-Ogarevo residence and was even conferred with a state award for corporate citizenship personally by Putin in May last year. Berezovsky, who was once known as the Godfather of Kremlin, admitted that it was Aven who introduced him to Putin. 

A former Alfa executive tells bne IntelliNews that Fridman and his partners were allowed to keep the $14bn proceeds of their sale of TNK-BP offshore. “Abramovich was allowed to keep his proceeds from the sale of SibAl and Sibneft, and Fridman/Alfa were allowed to too,” said the former Alfa executive. “This is probably driven by their personal relations with Putin.”

Fridman is incredibly loyal to his partners and senior cadre who have worked with him for a long time. Even those who have left Alfa companies still speak well of him. “Fridman is an unbelievably smart guy and also quite down-to-earth compared to other oligarchs,” a former senior executive at an Alfa Group company who now works for a rival conglomerate, tells bne IntelliNews. “I was stumbling out of a store with a bottle of vodka on my way to a party. Fridman recognised me and told his driver to stop the car so he could get out and have a chat and ask me about my family.”

All of Alfa’s businesses are kept in silos, deal with one another at arm’s length and sometimes even compete with one another. Employees at Alfa Capital had MTS as their mobile provider even though Fridman holds the largest stake in its rival VimpelCom, an employee tells bne IntelliNews.

Despite their education and refinement, Fridman’s senior cadre come across as sharks in sharp Italian suits. In April 2013, the Irish government hired Alfa’s “special situations and recovery vehicle” unit A1 to help find and seize assets in the former Soviet Union that belonged to Sean Quinn, a bankrupt billionaire who was once Ireland’s richest man.

The then-Irish ambassador, Philip McDonagh, and the government representatives looked like lambs being brought to the slaughter at the press briefing in the Interfax building on Moscow’s Tverskaya. Fridman’s A1 chiefs Mikhail Khabarov and Dmitry Vozianov laughed heartily when this journalist asked the ambassador if the Irish government had selected “the nice gentlemen from Alfa” through a competitive beauty parade.

The pointed irony is that there are few private banks or institutions in Russia and the CIS that can do the complex and murky corporate work that A1 does. Alfa managed to wiggle out of the agreement with the Irish goverment after the recession proved that nobody wanted to buy commercial real estate.

Shiny, happy Alfa people

A confessed workaholic, Fridman surprised many with his recent involvement in organising and taking part in an electronic music festival. The event, Alfa Future People, has become an annual fixture for around 40,000 ravers on the river Volga. Fridman, 52, has even been sighted dancing and mingling with the mostly twenty-something crowds. “He was wandering around the festival without much security and nobody bothered him nor recognised him,” photographer Todd Prince told bne IntelliNews after photographing the oligarch at last summer’s event.

Fridman is a regular on the London party and arts scene, but he still travels back to Russia where he retains significant holdings in the retailer X5, VimpelCom as well as Alfa Bank, Russia’s largest privately-held lender.

LetterOne, his Mayfair-based investment holding, has been busy ploughing the TNK-BP proceeds into overseas energy, telecom and technology assets like ride-sharing app Uber. The fund spent $1.6bn on E.ON’s oil and gas assets in the North Sea only after the UK government forced it to sell its North Sea fields in the country because of the risk of facing Russian sanctions.

Nobody connected to Alfa or LetterOne has been sanctioned by the US or the EU, and sitting down for lunch with the FT may help keep Fridman off any new list.

Asked about the difference between life in Moscow and London in a November interview, Fridman made a tacit admission that he owes his success in Russia to connections to power, which doesn’t apply in the UK. “They are different worlds,” Fridman told Snob magazine. “Here [Moscow], the most important factor of your success is the ability to build relationships with the government. Well, at least these relations should be favourable or the government should not interfere. The power structure in Russia is huge – you're confronted with it everywhere.”