Investigation 13 May 2020

A newspaper for an oil baron

A joint investigation published this week by journalists from The Bell, Meduza, Forbes and Vedomosti revealed how state-owned oil giant Rosneft calls the shots at Vedomosti, the country’s leading business newspaper. Amid a change of ownership earlier this year, there were persistent rumors about Rosneft’s influence at Vedomosti, but the investigation showed how a complex debt chain links the business daily’s editorial decisions directly to the office of the powerful head of Rosneft, Igor Sechin. The revelations offer proof that the recent series of censorship scandals at Vedomosti may be the new normal.

Disclaimer: one of the journalists from The Bell who looked into the ties between Vedomosti and Rosneft previously worked at Vedomosti, as did several of the journalists from the other publications involved (including one who was the former editor-in-chief of Vedomosti).

How Vedomosti lost its foreign shareholders

For most of its existence since 1999, Vedomosti was 100 percent owned by foreign investors — Pearson (the publisher of the Financial Times), Dow Jones (the U.S. publisher of The Wall Street Journal) and Finnish publishing giant Sanoma. But in 2015, all three sold their stakes. For Sanoma it was a strategic move, but the FT and Dow Jones sold because Russia passed a law banning foreigners from owning more than 20 percent of media companies.

All three shareholders were bought out by media manager Demyan Kudryavtsev, an internet entrepreneur who went on to become the right-hand man of tycoon Boris Berezovsky, who committed suicice in his U.K. mansion in 2013. Between 2006 and 2012, Kudryavtsev ran the publishing house which oversaw Kommersant newspaper, which Berezovsky later sold to billionaire Alisher Usmanov.

Demyan Kudryavtsev, former Boris Berezovsky’s aide who grew to become a media tycoon. Photo credit: RBC/TASS

Kudryavtsev and his friends partners, Vladimir Voronov and Martin Pompadour, spent about €10 million ($11 million) on Vedomosti, which included a discount for the publication’s debts to its former foreign shareholders. Business News Media, which publishes Vedomosti, still has an outstanding debt to its shareholders of about 800 million roubles ($11 million), comparable to the newspaper’s entire annual revenue. The company would be unable to pay back this debt from cash flow alone.

The FT, Dow Jones and Sanoma owned Business News Media via Cypriot company Delovoi Standard and, after the sale, the sole shareholder became Kudryavtsev’s wife, Yana Mozel-Kudryavtseva. A month later, Business News Media was passed to a Russian company in line with the new law limiting foreign ownership of media assets. This company was Arkan Investment, also controlled by Mozel-Kudryavtseva. However, the transfer to Arkan Investment appears not just to have been a formality: as part of the deal Business News Media was valued at €24.2 million, two and a half times the price Kudryavtsev paid to acquire Vedomosti just a few months earlier.

It is unclear what happened to the money that made up the difference between the two prices. A source close to the sale of Vedomosti said the higher price was the result of Business News Media becoming more valuable as it no longer had to make licensing payments to the FT, Dow Jones and Sanoma. Kudryavtsev declined to comment on whether he made a profit from the transfer of Vedomosti to Akran Investments.

Follow the money… to Rosneft

Kudryavtsev has always maintained he bought Vedomosti with his own money and that of his partners, Pompadour and Voronov. However, several sources dispute this. One source told Forbes and Vedomosti that Arkan Investment borrowed 1.8 billion roubles (€26 million at an exchange rate of 2015) from state-owned Gazprombank to buy Vedomosti in 2015. Another source told The Bell that Kudryavtsev’s friend, billionaire Dmitry Bosov, helped him negotiate the loan (in an apparently unconnected development, Bosov committed suicide earlier in May 2020). Kudryavtsev has said (Rus) previously that he borrowed less than $1 million from Bosov. One businessman who spoke to The Bell alleged Bosov helped finance the purchase, another said he himself gave Kudryavtsev a small loan to buy Vedomosti, and that he knew Kudryavtsev had borrowed money from up to five other sources.

Billionaire Dmitry Bosov helped Kudryavtsev negotiate the loan from state owned Gazprombank. Photo credit: TASS

But the acquisition of Vedomosti didn’t just require money: political approval from the Kremlin was also necessary. And Bosov also helped Kudryavtsev obtain the sign-off from the right officials, according to a source close to the newspaper’s sale.

Bosov was on good terms with the influential head of Rosneft, Igor Sechin, and convinced him of the merits of controlling Vedomosti, two of Bosov’s acquaintances told The Bell. Bosov and Kudryavtsev had been planning to “dress up” the newspaper and sell it ahead of the 2018 presidential election, one source said.

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The first sign of Vedomosti’s ties to Rosneft appeared in 2017. Shares of Arkan Investment, the holding company which owned Vedosmoti, were pledged as collateral to Konstanta, a company that documents show was founded in April 2017. Two months after being set-up, Konstanta received a loan of 1.85 billion roubles from the Russian Regional Development Bank (RRDB), which is owned by Rosneft, and Konstanta’s shares were also pledged as a collateral for its loan.

In effect, this meant that RRDB controlled Vedomosti via a chain of debts linking Konstanta, Arkan Investment, and Business News Media. None of these companies was capable of paying back its debts.

The Konstanta transactions preceded a series of problems Kudryavtsev had with the Russian authorities that culminated in February 2017 when he was stripped (Rus) of his Russian citizenship.

Where did middle company Konstanta come from? A source close to the sale of Vedomosti referred to Konstanta as “a company close to Bosov”, but an acquaintance of Bosov denied this. A spokesman for the late Bosov declined to comment.

How Vedomosti got its current shareholders

Bosov and Sechin fell out in 2018, and Bosov himself tried to get involved in the negotiations to sell Vedomosti, according to two of Bosov’s friends. But potential buyers were worried about Sechin’s position and quickly lost interest, an acquaintance recalled.

If Kudryavtsev and Bosov were looking for buyers, so was Rosneft’s outspoken press secretary Mikhail Leontiev. The former TV presenter never hid Rosneft’s relationship with Vedomosti’s owners, according to two of his close acquaintances. A few years ago, Leontiev apparently even complained about working with Kudryavtsev, and said a decision to replace him was overdue. In addition, The Bell spoke with a businessman who said he was last year offered the option of becoming Vedomosti’s nominal owner and had discussions with a “high up person” from Sechin’s inner circle.

Igor Sechin’s (left) press secretary Mikhail Leontiev (right) never hid Rosneft’s relationship with Vedomosti’s owners from his close acquaintances. Photo credit: TASS

The debt situation was revealed to potential buyers of Vedomosti, according to a source who spoke to Forbes. They were apparently told that Arkan Investment’s debt was taken over by Konstanta, which, in turn, took out a €28 million loan from the Rosneft-controlled RRDB.

The current sale of Vedomosti cannot go ahead without sorting out the debt situation, a source close to negotiations told Meduza and The Bell. Arkan Investment’s general director, Alexander Karpov, and the head of Business News Media, Gleb Prozorov, denied Business News Media’s shares were ever used as collateral, but lawyers said there were different ways to record the liability.

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In the summer of 2019, Kommersant reported Kudryavtsev was in talks with financier Aleksei Golubovich about selling Vedomosti. The talks obviously dragged on for months because it was almost a year down the line when Golubovich and publisher Konstantin Zyatkov revealed they had struck a deal to become Vedomsti’s new owners.

Journalist Andrei Shmarov was named acting editor-in-chief of Vedomosti a week later. Sources have said Rosneft’s Leontiev repeatedly claimed he was involved in the appointment — the two men worked together at news magazine Ekspert.

Once at Vedomosti, Shmarov immediately angered the newspaper’s journalists and was implicated in two censorship incidents in Rosneft’s favor. “This is all garbage, leave me alone,” Leontiev told The Bell when asked if he had taken part in talks over the sale of Vedomosti or the appointment of Shmarov. “I have known Andryusha [Shmarov] for a long time, but I haven’t spoken to him in ages,” Leontiev said. “He is a super-professional economic journalist… what does this have to do with me?”

Kudryavtsev denied Rosneft has any influence over Vedomosti: “After two court cases involving Vedomosti and that famous corporation [Rosneft], being stripped of my citizenship and now apparently being pushed out out of the country, to suspect me of conspiring with those people is simply ridiculous,” he said.

What will happen next?

Neither Vedomosti’s buyers or sellers have been able to contain the bitter editorial conflict that shows no sign of ending. Vedomosti journalists are demanding (Rus) Shmarov’s resignation. But this appears unlikely to happen. Golubovich and Zyatkov don’t want to go back to the Kremlin to seek approval for another editor-in-chief because of all the humiliation it would entail, sources told Vedomosti and Meduza. And nor are Golubovich and Zyatkov likely to back out of the deal, according to a media manager with ties to the Kremlin who spoke to The Bell — it would be too difficult to find new buyers all over again.

Why the world should care

The fierceness of the battle for control of Vedomosti is a reflection of its symbolic importance to Russia’s independent media. For more than two decades, Vedomosti was not only the country’s most important business daily, but a beacon of independent and impartial journalism, read by both regime critics and Kremlin officials. The destruction of that independence will make it much harder to understand what is really going on in Russia.

Irina Malkova, Peter Mironenko. Journalists from Meduza, Vedomosti and Forbes Russia also contributed to this report.

Translated by Tanja Maier, edited by Howard Amos