Hello! This week we explain how Russia wants to expand its presence in Africa after a major summit between Putin and African leaders. We also look at the recent appointment of a hawkish ex-TV host to Russia’s Human Rights Council, how the wife of Yuri Kovalchuk, a close personal friend of Putin’s, has amassed a fortune of $600 million and the intriguing case of oil company Surgutneftegaz, which has seen a mysterious share price rise of 31 percent this week.
Russia showcases its growing footprint in Africa
Russia’s influence in Africa reached a new level with the Russia-Africa summit in the Black Sea city Sochi this week where leaders from 43 African countries met Russian President Vladimir Putin. Officially, Russia is investing tens of billions of dollars in African countries. Unofficially, tycoons like Yevgeny Prigozhin and Konstantin Malofeev are spearheading an under-the-radar drive for Kremlin influence.
- The Sochi summit was the culmination of several years of a rejuvenated Kremlin policy in Africa. We have written before about this but, simply put, Russia has been ramping up its presence as fast as it can since 2016. However, this takes two forms: official and unofficial. While Putin and Prime Minister Dmitry Medvedev sign deals on military and economic cooperation (in 2018 there were such agreements with Guinea, Niger, Chad, Nigeria, Sudan, Gabon and the Central African Republic), Russia’s unofficial interests are represented by Prigozhin and Malofeev.
- Prigozhin is believed to control mercenary company Wagner, which is active in countries that have suffered military conflicts. They have been spotted in the Central African Republic, Sudan and Libya. PR specialists hired by Prigozhin are also trying to help selected African politicians come to power. As Proekt reported (Rus), consultants working for Prigozhin have taken part in elections in 20 African countries. In exchange for their help, Prigozhin’s companies receive access to valuable natural resources deposits.
- Unfortunately, Prigozhin was not listed among the speakers at the summit, and journalists did not spot him at the two-day event. But one of the headline speakers was financier Malofeev, who has recently joined Prigozhin to lead the Kremlin’s informal campaign in Africa (he played a similar role during the conflict in eastern Ukraine in 2014). Last month, Malofeev announced (Rus) plans to create an agency for attracting investment to African countries and is seeking to raise $2.5 billion.
- The Sochi summit itself was proof of Russia’s intentions: the $70 million gathering was in the top 3 most expensive international events hosted by Russia in the last decade. During the summit, $12.5 billion of new contracts were signed and Putin announced that Russia will write-off $20 billion of African debt. This is a traditional Soviet tactic: Russian exporters are financed by Russian state banks, and then their debts are written off by the Russian state. Since 2000, Russia has written off about $130 billion of debts owed by developing countries.
Why the world should care
Putin’s foreign policy goal is to secure a level of influence for modern Russia in Africa that was once enjoyed by the Soviet Union. And, for now, Russia is ready and willing to spend money to achieve this.
Shares in a major oil company jump 31% — and no-one knows why
The market capitalization of energy giant Surgutneftegaz, Russia’s fourth largest oil producer, grew $6.4 billion in three days of wild trading this week. The company’s share price took off Wednesday morning and by Friday afternoon had climbed 31 percent, pushing the value of a share to 48 rubles ($0.75) and surpassing previous historical highs set in 2006. The odd thing? No-one appeared able to explain the reason for such growth.
- Russian media outlets published a series of articles with quotes from baffled analysts and experts. RBK wrote (Rus) that “all the analysts contacted by them” said there had been no corporate news that would explain the rise. And Kommersant newspaper featured (Rus) brokerage company head Timur Nigmatullin saying “there are only speculative expectations”.
- One popular theory is that the buying frenzy is linked to rumors about Surgutneftegaz’s enormous $51.6 billion cash pile, which has been accumulated over decades, being plowed into higher-yield vehicles. A previous share price surge (39 percent in three days) at the beginning of September came after the company set-up a subsidiary called Rion that looked like it might be used to invest the money. Another theory is that a merger with privately-owned LUKoil, the country’s second biggest oil company, is in the offing.
- The lack of clarity over Surgutneftegaz’s share price movement dovetails with the secrecy of the company itself. While it is believed Surgutneftegaz is majority controlled by management, its ownership structure is designed to be dizzyingly complicated, and the real beneficiaries are unclear. It is run by U.S.-sanctioned Vladimir Bogdanov, a Soviet-era manager who has been in his current position since 1984 and shuns a modern oil executive lifestyle: he lives in the Siberian city of Surgut and rejects all offers of foreign tie-ups for the company.
- The share spike has been met with official silence. Neither the Central Bank, nor Sugutneftegaz itself, has publicly commented. In September, Bogdanov told journalists that volatility was due to “speculative trading”.
Why the world should care
If the share price doesn’t retreat, the gains mean Surgutneftegaz has this week vaulted two places in the list of Russia’s top ten most valuable companies by capitalization, reaching 7th place (above oil giants Tatneft and Gazpromneft). The story is also an abject lesson in the opaqueness of Russia’s capital markets.
Putin clears human rights body of few remaining ‘liberals’
The Russian authorities are slowly but surely tightening the screws after opposition protests over the summer. This week, Putin caused dismay when he selected ex-journalist Valery Fadeev to head his human rights council. Fadeev has publicly supported harsh measures against those who participated in the recent protests, and provoked an outcry 10 years ago when he suggested that Russia’s opposition should emigrate.
- The Presidential Council on the Development of Civil Society and Human Rights is in many respects a toothless institution, with few real responsibilities. It is unable to influence the outcome of highly politicized cases (for example the recent jailing of seven demonstrators linked to this summer’s protests). But in more minor human rights violations (or where the federal authorities are not involved), it has some power to draw attention to the situation (any documents with the stamp of the Presidential Administration carry weight among law enforcement officers).
- This week, Putin fired lawyer Mikhail Fedotov, 70, as head of the council, a position he has held for nine years. Many opposition figures have, over the years, accused Fedotov of being too conciliatory, and criticized the Council for operating within limits set by the Kremlin. But Fedotov was, more or less, an acceptable figure — unlike Fadeev.
- Former journalist Fadeev was a founder of the once-influential magazine Expert, which tried to fashion itself as a conservative business publication but ended up going bankrupt. In the mid 2000s, Fadeev was close to Kremlin political strategist Vladislav Surkov, who used the journalist to boost a liberal wing of the ruling United Russia party. For his cooperation, Fadeev was made presenter of a prominent Sunday political TV show on state-owned Channel One.
- There is little left of Fadeev’s liberalism. As early as 2009 he earned notoriety for telling opposition politician Gennady Gudkov he should leave the country during an on-air discussion of electoral fraud. And, in an interview this week after being named to his new post, Fadeev said (Rus) he believes the sort of unsanctioned protests held in Moscow this summer are “unacceptable”.
- As well as appointing Fadeev, Putin also removed several of the council’s most opposition-minded members. These included lawyer Pavel Chikov, who has defended some of this summer’s protestors in court, and political scientist Yekaterina Shulman. Other members of the council, like former constitutional court judge Tamara Morshakova, resigned of their own accord, convinced that the council faces a dark future under Fadeev.
Why the world should care
Ahead of parliamentary elections in 2021 and presidential elections in 2024, the Kremlin is clearing away the few remaining opposition-minded ‘liberals’ left in public office. Ironically, it is ex-council member Shulman who talks a lot about ‘sleeping institutions’ — inactive government bodies that will begin operating for real only when political change take place. The Kremlin is doing everything it can to ensure these institutions don’t wake up.
Wife of Putin friend Kovalchuk named Russia’s 3rd wealthiest woman
Tatiana Kovalchuk, the wife of one of Putin’s billionaire friends, has become Russia’s third wealthiest woman with an estimated fortune of $600 million. Tatiana is married to Yuri Kovalchuk, the owner of St. Petersburg-based Bank Rossiya.
- Little is known about Tatiana Kovalchuk’s life, but she has never publicly been involved in business. She was added to Forbes’ list of the most wealthy women in Russia this week after the merger of insurance company Sogaz (in which Kovalchuk and his wife jointly own 16%) and an insurance company owned by state-owned VTB bank. Sogaz was valued at almost $10 billion for the purposes of the deal, an estimate that some analysts say is inflated threefold.
- When Russia annexed Crimea in 2014, Yury Kovalchuk was one of the first Russians to be hit with U.S. sanctions in his capacity as a member of Putin’s inner circle. It is known that Kovalchuk invested in the construction of a 40 billion ruble medical complex in St. Petersburg linked to Putin’s supposed elder daughter, Maria Voronstova.
- Tatiana Kovalchuk is not the only female relative of one of Putin’s friends to make the Forbes ranking. The daughter of billionaire Arkady Rotenberg, Liliya, came in 6th place with an estimated fortune of $500 million.
- The leader of the ranking remains unchanged: Russia’s richest woman is the wife of former Moscow Mayor Yuri Luzhkov, Yelena Baturina, who has a net worth of $1.2 billion. In second place is the founder of internet retailer Wildberries, Tatiana Bakalchuk, whose wealth is estimated at $1 billion. Unlike Baturina and Kovalchuk, Bakalchuk earned her money entirely on her own merits.
Why the world should care
The Forbes list of the richest Russian women illustrates that gender parity is a long way off. The total value of Russia’s 10 richest women ($6 billion) is 30 times less than that of the 10 richest men ($178 billion). In fact, even if Baturina counted as a self-made billionaire, 6 of the 10 women on the list received their wealth directly from their husbands or fathers.
Peter Mironenko, Howard Amos
An insider view, in 5 minutes