An escape of the banking supervision official sheds light on shady financial practices

The Bell

Hello! This week our main story is The Bell scoop on the link between a senior government official, FSB and billions stolen from the Russian financial system. We also explain why  “Russia’s Amazon” is under threat (Sberbank and Yandex have been developing an e-commerce platform but now they are to part ways) and set out how Russia-Georgia relations have gone from very sour to nearly peaceful in just a few days. And we have some good news for the fans of HBO’s Chernobyl as a bonus!

An escape of the banking supervision official sheds light on shady financial practices

This week’s biggest news, if not this year’s — is the resignation and flight from Russia of Valery Miroshnikov, the first deputy head of the Deposit Insurance Agency (DIA). It is a state agency responsible for the liquidation and financial rehabilitation of Russian banks. During Miroshnikov’s tenure at the agency $500 bln was taken out of the banking system and the DIA received $15.8 bln of Central Bank subsidies. It is no coincidence that the fate of this seemingly inconspicuous official as Miroshikov became the center of media attention: as The Bell and Proekt discovered (Rus), he was one of the links between the banking sector and the FSB. Thanks to Miroshnikov’s story, it emerged how officials with ties to the security services made billions on the dark hole through which the money fled out of Russia.

  • The story emerged in April 2019 when a colonel of the FSB’s “banking” division, Kirill Cherkalin, and two of his colleagues were arrested on fraud charges. Cherkalin was also accused of receiving bribes of $820 thousands in exchange for “favors”. Miroshnikov fled (rus) Russia immediately after Cherkalin’s arrest (allegedly to seek medical treatment). Two and a half months later the DIA announced his resignation. As The Bell and Proekt reported, the real reason for his departure was his involvement with Cherkalin, and Miroshnikov is now part of the case against Cherkalin, “Kommersant” claims.
  • Miroshnikov and Cherkalin were close friends and “discussed which bankruptcy trustees they should nominate in which banks”, a source told The Bell and Proekt. Two bank owners spoke of how Cherkalin and Miroshnikov demanded bribes, if the banks were to keep their license. A third source recalled how “people close to the DIA” asked for $200 million to put the brakes on a criminal case involving money transfers abroad.
  • Sergey Pugachev, a billionaire former owner of Mezhprombank and a once close ally of Putin, spoke with The Bell (rus) on record. He revealed how DIA employees “representing Miroshnikov” attempted to extort $350 million from him, threatening to either kill the banker or “deliver his son’s finger to his yacht”. Following the threats Pugachev filed a lawsuit against Miroshnikow in France in 2013. The following year, through an intermediary, he passed Putin a letter that described those threats. Pugachev claims that it was hand-delivered to Putin. The Bell has copies of these documents.

Why the world should care

Since 2004 DIA has liquidated 319 banks, with 366 more closures in process – which is an enormous scale of activity. All this time, “FSB generals” continually interfered (rus) with the process. What we learned this week about the ties between Miroshnikov, Cherkalin and his colleagues is only the tip of the iceberg. It is likely that more details appear soon of how the “deep state” functions in Russia – in the financial sector at least. And the sector itself can expect tectonic shifts.

After two years of building “Russia’s Amazon” Sberbank and Yandex are in talks to part ways

The fate of “Beru” (“I take” in Russian), a fledgling “Russia’s Amazon”, is under threat, The Bell learned (rus). Two years ago, Sberbank (Russia’s largest bank and a practical monopolist) and Yandex (‘Russia’s Google’), agreed to build the country’s largest e-commerce platform together. But their cooperation didn’t work out, and Sberbank and Yandex are now discussing “divorce terms”, five sources told The Bell.

  • Divorce discussions began one year ago but Sberbank and Yandex have not yet been able to reach an agreement. One of the reasons for the break-up is cited as Sberbank’s frustration that the joint marketplace “Beru” didn’t meet its KPIs in the first year. But it isn’t just Sberbank that is upset: Yandex is concerned with the bank’s attempts to gain more control over “Beru’s operations. According to a source, Yandex also claims thatSberbank wanted to process all payments for “Beru” in spite of other banks offering better terms.  Both sides refused to comment on the situation but did not deny that the divorce talks are underway.
  • Although Sberbank’s attempts to team up with Yandex appear to have failed it hasn’t given up on the e-commerce market. The bank is now considering acquiring a major online retailer, three sources told The Bell. All of them claimed the primary target to be Ozon (the closest Russia has to Amazon), while another source mentioned Avito (Russia’s eBay)
  • Ozon’s largest shareholders are Michael Calvey’s Baring Vostok fund (Calvey’s house arrest was this week extended until October) and AFK Sistema, which is owned by an oligarch and Kremlin List figure, Vladimir Yevtushenkov. A source close to the latter said that Yevtushenkov was not interested in selling. Avito is owned by a South African fund, Naspers, which is also unlikely to want to sell right now as it has just finished consolidating its assets, a source told The Bell.

Why the world should care

Russia is a gigantic country with a surprisingly high level of internet penetration; in this regard it is ahead of many developed countries. However, Russia’s e-commerce market is very small (Ozon’s 2018 turnover was $674 million) with only a handful of major players. This can be partially explained by the logistical challenges: the post works slowly and remote regions of the country are difficult to reach. The company which can find a solution to these problems and fill the niche will become the king of the market.

Russia-Georgia relations have gone from the threat of sanctions to hope for a truce in just a few days

This week brought a new twist in the deteriorating relations between Russia and Georgia. The reason was a peculiar speech made by a journalist Giorgi Gabunia, who cursed up a storm at Vladimir Putin on live television, which both upset Georgian viewers and increased the chances of Russia imposing sanctions on Georgia.

  • The context. At the end of June, several thousand anti-Russian protesters took to the streets after Sergey Gavrilov, Russian state Duma’s deputy, gave a speech in the Georgian parliament. Protesters were upset by Gavrilov’s visit itself (the opposition accuses him of taking part in the war against Georgia, which he denies), but especially so by the fact that during his appearance, Gavrilov was in the parliament speaker’s chair: people interpreted this to be a symbolic gesture. In the face of mass demonstrations, the leader of Georgia’s parliament resigned from his post.
  • What happened. On Sunday evening, Gabunia broke into a storm of heavy swearing and insults directed at Putin (“there is no place for you in our beautiful land” is the lightest of them) during the live broadcast on Rustavi 2, Georgia’s largest opposition TV channel, allegedly tied to the country’s former president, Mikhail Saakashvili. This resulted in a public outcry in Georgia; even Georgia’s current president Salome Zurabishvili condemned it. As a result, the channel stopped broadcasting, and Gabunia was taken off air, but not fired.
  • The threat of sanctions. The next day, there was talk in Russia’s state Duma of sanctions against Georgia. The proposal was to limit money transfers and the import of Georgian wines and mineral waters into Russia. This would be a significant blow to Georgia. Almost half of the country’s exports, approximately $200 million in 2018, are generated from these products and Russia is Georgia’s second largest trading partner after Turkey. At the same time, the ban could be practically painless for the Russian market: 12 years ago, Georgian wines were also banned, but they still made it onto the market disguised as imports from Belarus and Kazakhstan.
  • The Duma’s idea was not a surprise. At the end of June, Rospotrebnadzor (which is responsible for the quality of products sold in Russia) out of nowhere announced a worsening in the quality of imported wines. Immediately afterwards the agency asked retail chains for data on the market share of Georgian wines, which the market interpreted as preparations for a ban.
  • A path to a truce. However, the concern appears premature. Putin did not support the idea of sanctions promising “not to do anything which would worsen our relations”. “Well, someone came out, blurted out something, pretending to be someone, no one knew about him before, and now everyone is talking; in that sense, he achieved what he wanted. <…> But there are people in Georgia who are protesting against this”, Putin said. Kommersant reported (rus), citing a Ministry of Foreign Affairs source, that Russia is now prepared to seek a truce with Georgia and reinstate commercial flights between the two countries which were banned as of 8 July. The reason is apparently the Georgian government’s condemnation of  Gabunia’s “provocation”.

Why the world should care

The only reaction any viewer has had after watching Gabunia’s tirade was “what the hell is that?” And it is difficult to answer it with certainty. But it is even harder to believe that a television host simply couldn’t control his emotions. It is more probably that the rant was some kind of litmus test to measure the real level of anti-Russian sentiment in Georgia. And it would seem that the test result is acceptable for Russia.


Chernobyl is now officially open to tourists

In theory it is not difficult to enter the Chernobyl “exclusion zone” – and agencies advertised  such services can be found on every corner in Kiev city center. But in reality the visit always contains a grade of uncertainty: a tourist can enter the “zone” only through a checkpoint and it is up to the guards to grant access. This week, the ukrainian president Vladimir Zelensky decided to put an end to this practice and signed an order to open the “zone”, which he reported on his Twitter feed.The moment couldn’t be better: after the colossal success of the HBO miniseries, tourist visits to Chernobyl are up 150%.

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