Russia’s new richest person

The Bell

Hello! This week our top story is about Russia’s new richest person, Suleiman Kerimov, whose 2009 gold mining investment has paid off spectacularly during the pandemic. We also look at Russia’s withdrawal from a tax treaty with Cyprus that will mean major changes for business, and we have the latest on the situation Belarus where the political temperature is rising rapidly ahead of presidential elections this weekend.   

How did Suleiman Kerimov amass a $25 bln fortune?

Tycoon Suleiman Kerimov was named this week by Forbes magazine as Russia’s richest person despite media reports that he was out-of-favor. Kerimov pushed metals billionaire Vladimir Potanin into second place Wednesday as a sharp rise in the price of gold saw estimates of his wealth surpass $24.7 billion. The Dagestani-born billionaire has an impressive triumph-over-adversity biography: he suffered severe burns in a car accident in 2006, almost lost everything in 2008, and was sanctioned by the U.S. in 2018. 

  • Kerimov’s entry into the world of big money was in 1999 with the purchase of oil trader Nafta Moskva, a successor company to Soyuznefteksport that exported oil for the Soviet Union. When Nafta Moskva was bought by Kerimov — for $50 — it was on the verge of bankruptcy, but Kerimov used its assets as collateral to raise loans. 
  • Later the same year, Kerimov entered politics as a deputy from the Liberal Democratic party, which is nominally part of the opposition but ultimately loyal to the Kremlin. Since 2008 he has been a senator in Russia’s upper house of parliament, representing the largely Muslim republic of Dagestan in the North Caucasus. 
  • In 2004, Nafta Moskva began buying big stakes in blue chip companies, particularly state-owned gas giant Gazprom and state-owned bank Sberbank, at first with Kerimov’s own money, then using loans. The ability to raise loans on favorable terms has been Kerimov’s super power. Not only was this based on his knowledge of the financial markets and bluffing ability, but also ties to influential officials, according to Forbes. In particular, he was known to be close to former deputy prime minister Igor Shuvalov.
  • Kerimov was not content with a Russian financial empire, and in 2006 he began looking abroad. He was helped by the former head of U.S. investment bank Merrill Lynch’s Russian office, Allen Vine, who was the de facto head of Kerimov’s foreign activities. But all of this was put on hold in November 2006 when Kerimov wrapped his Ferrari around a lamppost while driving through the French city of Nice with glamorous Russian TV presenter Tina Kandelaki. He suffered severe burns and was in hospital for months. When he returned to work, he wore skin-color gloves to hide the scars. 
  • By the beginning of 2008, Kerimov had sold almost all his Russian assets and, after paying off his debts, had about $20 billion in cash. He used this to begin buying shares in foreign companies, including BP, Boeing, and Deutsche Bank. He became the largest shareholder in U.S. financial giant Morgan Stanley. When the financial crisis of that year hit, Kerimov doubled down, continuing to buy in the hope of a rebound.
  • He almost lost everything. According to Forbes, all he had left at one point was his houses, car and private jet. Forced to regroup, Kerimov concentrated on Russia, and gradually began to rebuild his fortune. He bought the heavily-indebted construction company PIK, and, in 2009, almost 40 percent of Russia’s largest gold-mining company, Polyus Gold. Kerimov got the loan for the Polyus Gold deal from state-owned bank VTB, and it was this investment that would prove eye-wateringly profitable 11 years later. 
  • Since the beginning of the pandemic, Kerimov’s fortune has increased by $14.7 billion to make him the richest person in Russia. His $24.7 billion fortune is almost entirely based on the 77 percent holding in Polyus Gold that he owns via his son, Said Kerimov.  
  • His success has not been hindered by U.S. sanctions (imposed in 2018 despite Kerimov not being particularly close to Putin), or being a suspect in a French money laundering investigation that was later dropped.   

Why the world should care 

For many years, Kerimov was one of Russia’s most secret billionaires. But his biography is an electric story that reads like an affirmation of the saying ‘never give up’. Either way, it deserves to be more widely known given his new status as Russia’s richest person. 


Russia targets offshore tax dodges  

Officials in Moscow this week began withdrawing from a long-standing double taxation treaty with Cyprus. The process means that the Mediterranean island looks set to be the first of several popular offshore tax havens to be targeted by Moscow: Malta, Luxembourg and the Netherlands are next on the list, with other nations likely to follow. 

What’s happening? 

We first heard the idea of tackling offshore tax avoidance back in March during President Vladimir Putin’s first public speech about the coronavirus situation. He proposed a 15 percent tax rate on dividends and interest payments made from Russia to companies in offshore zones (at present, the rate is zero, or next to nothing). If payments were not forthcoming, the proposed next step was to scrap existing double taxation treaties. 

After Putin’s speech, Russia’s Ministry of Finance began negotiations with Cyprus. This week, officials admitted they had reached an impasse, and Russia began exiting its existing tax agreement. Next on the ministry’s hitlist are Malta, Luxembourg and the Netherlands. 

Why does it matter? 

Cyprus is renowned as one of the most popular foreign destinations for Russian money. According to the Ministry of Finance, more than $19 billion was sent there in 2018, and, the following year, the figure was $25.9 billion. In total, that’s more than has been allocated by Russian officials to support individuals and businesses during the pandemic. 

  • Tearing up these agreements will make life very difficult for wealthy Russian investors and large companies alike. There are many Russian companies that structure their businesses so they pay dividends or interest offshore and reduce their tax bills. 
  • A simple example: a business trades in Russia but is legally registered in Cyprus. When it is time to pay dividends, the money goes to the Cypriot company and is taxed at about 5 percent. If the same dividends were paid in Russia, they would be taxed at 15 percent.
  • This all means that, when the double taxation agreement ends, dividends will be taxed higher and twice – in Russia and in Cyprus. Individuals will also be liable for two tax bills. 
  • The head company of Tinkoff Bank, Russia’s 16th largest bank, and the largest shareholder of NLMK, the world’s biggest steel company, are among the Russian businesses registered in Cyprus. In recent years, they have been joined by Russian IT start-ups. 
  • Yandex – the so-called ‘Russian Google’ – and X5 Retail Group, the country’s largest retailer, are both registered in the Netherlands. 


Russia is not the only country trying to curb murky tax avoidance schemes. It’s not a simple process, however, and legislators must identify and target businesses that go offshore to avoid taxation without harming organizations that have a legitimate reason to operate offshore. 

In the last two years, Cyprus itself has sought to cut the number of Russian investors amid concerns about suspicious money flows incurring U.S. sanctions. The Cypriot authorities tightened up financial accounting rules and revoked citizenships granted through its ‘golden passport’ investment scheme. Baltic States – especially Latvia – are taking similar measures.

Why the world should care  

Labyrinthine tax avoidance schemes involving Russian firms still use Cyprus and other offshore destinations, according to tax lawyers. But this is getting ever more difficult. In some cases, companies might have to re-register, while individuals are likely to start looking further afield, including to Singapore or Hong Kong. Will these tectonic shifts mean we start to see Russian funds flowing back home, or flooding into other offshore zones? 


Why the Belarusian presidential elections matter for Russia 

The most unpredictable presidential election in Belarus in 25 years will take place Sunday. In recent days, thousands have turned out to opposition rallies despite threats by the authorities to use force. Incumbent President Alexander Lukashenko has also gone all-out to secure victory, even attacking Putin in a two-hour interview with a Ukrainian YouTube journalist. 

Who is likely to win? 

There are only two candidates with a chance: former housewife Svetlana Tikhanovskaya and Lukashenko. All Lukashenko’s other opponents have been excluded from the race: blogger Sergei Tikhanovsky and banker Viktor Babariko are under arrest, while ex-ambassador Valery Tsepkalo fled to Russia. The campaign teams of Babariko and Tsepkalo — both represented by women — have thrown their support behind Svetlana Tikhanovskaya (the wife of imprisoned Sergei Tikhanovsky). Her programme is simple: release the jailed candidates and hold fair and free elections. There are three other candidates in the race, but their chances are minimal.  

There is no independent polling in Belarus. In the early stages of campaigning some media surveys gave Lukashenko just 3 percent support. His real level of support is likely higher, but its exact level remains unknown, just like his chances of winning. A leaked poll conducted in April by the Belarus Academy of Sciences showed support for Lukashenko in Minsk at about 24 percent. Asked by The Bell about Lukashenko’s popularity, Belarussian political analyst Artyom Shraibman said between 25 percent and 35 percent of the electorate would likely back him. 

How has campaigning unfolded? 

Tikhanovskaya has spent recent weeks touring the country and holding rallies attended by thousands of people, an extremely rare event in authoritarian Belarus. Lukashenko has also been campaigning: he began the week with a speech to the nation in which he pledged a tough response to “provocations”.  

Despite his violent dislike of the internet, Lukashenko gave an interview Thursday to the YouTube channel of Ukrainian journalist Dmitry Gordon. Lukashenko did not spend much time talking about the political situation in Belarus (to be fair, Gordon did not ask much about it), but rather engaged in a parody of post-Soviet Russia’s first president, Boris Yeltsin, and recounted tales about his “good friends”, by which he meant the leaders of neighboring states. 

What was most striking about the interview was Lukashenko’s overly familiar references to Putin. Among the things Lukashenko said about the Russian leader: 

  • Yeltsin regretted choosing Putin as his successor.
  • Putin is secretive and trusts no one. 
  • Putin has a lot to be worried about. “Ukraine has already been lost, may God ensure this does not happen with Belarus,” he said. “Putin is worried, but keeps making mistakes, one after the other. Why are you smothering us? We are really one nation.” 
  • Putin is a dictator. “Putin and I met and I told him: ‘I am no longer the last dictator in Europe. And he told me: ‘What are you trying to suggest – that it’s me?’” 

What’s the likely outcome? 

Forecasts are difficult. The most likely outcome, according to analyst Shraibman, is that vote rigging will give Lukashenko up to 80 percent of the vote. This will lead to protests in cities across the country, with perhaps tens of thousands of demonstrators taking to streets. Then, the authorities will use a violent crackdown to suppress dissent, and eventually the situation will calm down. But, of course, other scenarios are possible. 

Massive electoral fraud will be necessary for Lukashenko to win 80 percent of the vote, and the authorities are doing everything to keep independent observers out of polling stations. But Belarussian human rights advocates have set up an IT-platform for an independent vote and a million people are already registered (10 percent of Belarus’ population). 

What does Moscow think about all this?

Putin and Lukashenko may have grown tired of each other in recent years, but they cannot do without each other. The toppling of Lukashenko would be “a catastrophe for the Russian authorities,” according to Russian political analyst Gleb Pavlovsky. “It is unclear how they would reach a deal with other candidates. Moscow has no Plan B.” This explains why Russia continues to back Lukashenko: the reaction to the recent detention of Russian mercenaries was muted, and there has been no halt to financial help for Belarus. Nor has there been any reaction to Lukashenko’s digs, although Putin did speak to Lukashenko on the phone Friday. 

Political analysts told The Bell that Russia could be in favor of weakening Lukashenko without turfing him out of office. “They need Lukashenko, but they need him on his knees,” said analyst Yevgeny Preigerman. Nor can Belarus rid itself of Russian influence even if a new president wanted to do such a thing. Russia is Belarus’s main trading partner and Russian subsidies – both direct and hidden – are a key source of income for the Belarussian government. What is more, Russia is a major creditor for Belarus (the debt is over $7 billion). 

Why the world should care A historic political shift is underway in Belarus, similar to the victory of comedian Volodymyr Zelensky in elections in neighbouring Ukraine a year ago. And the outcome of Sunday’s elections are of crucial importance for the wider region — first and foremost, Russia. 

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