THE BELL WEEKLY: Yandex’s $5-billion break-up

The Bell

Hello. This week we cover Yandex’s deal to spin-off its Russian assets — and its new, more loyal owners. We also look at how the Kremlin is preparing to ban Boris Nadezhdin from running in the presidential election and unpack a major bribery scandal.

Yandex gets a new set of owners

The two-year saga surrounding the sale of Yandex’s Russian assets is nearing its end. Russia’s leading internet company announced Monday that it is dividing its business in two. Founder Arkady Volozh, who lives in Israel and has condemned Russia’s invasion of Ukraine, will keep hold of a small portion of the company’s promising international assets, while the main money-making parts of Yandex will stay in Russia, with new Russian owners. On Monday the company named who those new shareholders will be. Most are known only to industry specialists, but there is little doubt that they are just a front for the real beneficiaries of the deal — including Putin’s friend Yury Kovalchuk.

  • The deal to take Yandex’s Russian operations away from the control of founder Arkady Volozh and its foreign shareholders — under discussion since the war broke out — is finally close to completion. On Monday, the company announced plans for the split, including who will be acquiring a controlling stake in the Russian carve-out. The Bell was the first outlet to find out the details and report on the announcement ahead of time.
  • The group’s Russian operations will be bought by a consortium led by a fund of senior managers (that could grow to as many as 50 individuals). Alongside them are four key financial investors: oil company Lukoil, venture investor Alexander Chachava, former Gazprom top manager Alexander Ryazanov, and Pavel Prass, general director of registrar company Infinitum, a figure known only to a narrow field of insiders.
  • None of the named individuals are under Western sanctions — essential to ensuring that the foreign investors and directors of Yandex can legally approve the deal. Two sources told The Bell they believe at least some of the publicly identified buyers are acting as intermediaries for others who are staying behind the scenes.
  • Over the past year, sources for The Bell and Meduza identified several contenders that were lining up to take over Yandex’s Russian business. They included Interros founder Vladimir Potanin, Lukoil co-founder Vagit Alekperov, and Kismet Capital Group founder Ivan Tavrin. State lender VTB was also named a potential player (to structure the deal), as were Faberlic founder and Duma deputy Alexei Nechayev, Gazfond (Gazprom’s pension fund) and Kirill Dmitriyev, head of the Russian Direct Investment Fund. Over the past few months, Potanin became one of the lead negotiators, two sources told The Bell, with his companies actively acquiring Yandex shares on the open market.
  • Some of these investors may have been representing the interests of Yury Kovalchuk, one of Putin’s billionaire buddies, two sources said. However, all of them are under sanctions of some form, so they can not openly be involved in the deal. One of the buyers, Pavel Prass, is a longtime associate of Kovalchuk. Another, Alexander Chachava, co-invested in tech startups with Vladimir Kiriyenko, son of top Kremlin official Sergei Kiriyenko and CEO of VK, the second largest Russian internet company. 
  • The deal announcement comes in at 475 billion rubles (about $5.2 billion at current rates) after applying the mandatory 50% discount on Yandex’s market valuation imposed by the Russian government on all foreign investors leaving the market. At least half of that will be paid in cash — in Chinese yuan for deals outside of Russia. That money will go to Yandex’s current shareholders — company founder Arkady Volozh and a number of other major foreign investors that hold shares through the stock market.
  • The statement did not mention the role of Alexei Kudrin. The former deputy PM and friend of Putin joined the company in 2022 as part of an agreement that was expected to see him become a co-owner of the future business and serve as Yandex’s link to the Kremlin. But circumstances have changed since that approach was floated. While the deal was being negotiated, Kudrin lost his leading role in the talks and also found himself hit with U.S. sanctions. Forbes reported that instead of his promised 5% stake in the company, he might be left with no more than 1.5%.

Why the world should care

At the moment it's not easy to see whose interests are being represented by the new Yandex ownership structure. But there is little doubt that the final agreement will cement the Kremlin's control over the entire online landscape in Russia. Groups linked to Yury Kovalchuk already hold a large stake in Russia's second largest internet company, VK, and now Kovalchuk is gaining influence over the market leader.

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Authorities prepare to stop Boris Nadezhdin running for president

On Feb. 7, the Central Electoral Commission will rule on whether to allow Boris Nadezhdin, the only anti-war candidate in the mix, to run in March’s presidential election. Their decision is already becoming clear as the body claimed to have found significant flaws in the signatures backing Nadezhdin’s campaign. Even if he is barred from running, Nadezhdin has already had a significant political effect.

  • On Monday, a working group at the Central Electoral Commission said 15% of the signatures it checked in support of Nadezhdin's candidacy were ineligible — three times the acceptable rate. While this initial assessment is not the final verdict, which is due on Feb. 7, it clearly indicates the Kremlin's intentions. Most likely, Nadezhdin will be blocked from running against Putin in next month’s contest.
  • This is no surprise. Even if the Kremlin had initially wanted Nadezhdin to be on the ballot (perhaps with the aim of showing how little opposition there is to the war), the unexpected enthusiasm for his campaign has killed that plan. Last week two (1, 2) opinion polls suggested that Nadezhdin would take second place in the election, winning 8-10% of the votes. That’s significantly more than the Kremlin can tolerate a pro-peace candidate securing during wartime.
  • What is a surprise is how Nadezhdin — a 60-year-old politician who spent 30 years in minor roles in Russian liberal politics — has become the main topic of the 2024 presidential election. People lined up for hours to sign papers backing his nomination. Overcoming the eternal squabbling of the Russian opposition at home and in exile, high-profile figures have publicly backed him, seemingly not discouraged by his biography (he has ties to Kremlin insider Sergei Kiriyenko), nor the fact that his attempt to run was likely initially approved by the Kremlin. Opposition politicians told their supporters that backing Nadezhdin’s campaign was a way to demonstrate an anti-war position without risking being thrown in jail — and they listened.
  • Nadezhdin plans to challenge the commission’s findings and take his complaint to the Supreme Court. Of course, if the Kremlin has decided he won’t be allowed to run, none of that will change anything.
  • This is not necessarily the end of Nadezhdin’s political career. Political analyst Grigory Golosov suggested that the Kremlin might be playing a longer game: Nadezhdin has now been established as a senior opposition figure. He can be targeted with some minor pressure (for instance, named a foreign agent) and encouraged to leave the country. Abroad, he can then be a useful Kremlin-linked figurehead of the Russian opposition in exile.

Why the world should care

Boris Nadezhdin's campaign was never going to end well. But it has highlighted some important aspects: namely, the willingness of Russians to express their anti-war stance in formats deemed to be safe, and the ability of the opposition to unite when a true political need arises.

The plot to extort the biggest bribe in Russian history

Russian investigators are currently probing a case related to the biggest attempted bribe in recorded Russian history. FSB officers and officials from the Investigative Committee are said to have fabricated a murder case then tried to use it to extort 15 billion rubles ($200 million) from the alleged suspects, the owners of one of the country’s leading electronics trading companies. The brains behind the plot were the son of an old friend of Vladimir Putin and the business partner of Prime Minister Mikhail Mishustin’s son-in-law.

  • The case surrounding the biggest attempted extortion in Russian history began in 2020 when police arrested Oleg Karchev, Vladislav Mangutov and Alexei Abramov — three co-owners of Merlion, one of the leading firms in the Russian household appliance market. The Investigative Committee accused the trio of attempting to murder their former CEO Vyacheslav Simonenko, rather than pay him a $5 million bonus, and apprehended the alleged perpetrator of the hit, a veteran of the war in Donbas. He told investigators that in 2015, the head of Merlion's security staff had ordered him to launch Molotov cocktails at Simonenko's house in an attempt to kill him. 
  • The businessmen spent six months in detention and were facing up to 20 years behind bars if convicted. While in jail, the security forces used corrupt lawyers to propose a deal: they would drop the case in exchange for 15 billion rubles ($200 million at the exchange rate of the time), and a future cut worth 2% of Merlion’s turnover (about 5 billion rubles) every year. 
  • The businessmen refused to pay and the case against them soon began to crumble, forcing them to be released. The “war veteran” later admitted there was no arson attack, and that he had been paid for his false testimony. It's not clear how Merlion's owners managed to get their case reviewed while sitting in pre-trial detention — something that takes serious connections. 
  • It has now become clear from a new investigation that the businessmen fell victim to a gang of two dozen high-ranking law enforcement officials. The case did not just involve Simonenko and the “Donbas veteran,” as he became known in the media. Among those arrested in the subsequent probe included the head of the Investigative Committee in Moscow’s north west district and three FSB officers, one of whom had oversight of Moscow’s courts. A number of corrupt lawyers and former security officers were also involved.
  • Several managed to flee to Dubai, including Alexander Nesnov, the state investigator who opened the initial case based on the fabricated evidence. According to lawyers who knew him, Nesnov was typical of a new breed of patriotic yet cynical Russian security official. “In his office, a portrait of Josef Vissarionovich [Stalin] hung prominently, and below was a tin of protein supplement. He endorsed a healthy lifestyle and loved to hit the gym,” wrote Maxim Pashkov, a lawyer who knew him well.
  • The real heavyweight on the team was Sergei Romodanovsky, head of the investigative committee branch for north-west Moscow. His superpower was not his position, but his name. His father, Konstantin, served with Vladimir Putin in the 1970s and in the early 2000s was one of several FSB and former KGB officers who hung onto Putin’s coattails as he rose to power. At first, Romodanovsky was one of the main figures fighting against corruption inside the Interior Ministry (an important role for a KGB man: since Soviet times, the Interior Ministry was the biggest rival of the secret police). From 2005-2016, Romodanovsky was in charge of the Federal Migration Service, combating illegal immigration.
  • Investigators also identified two more interesting characters among the organizers of the  planned scam — father and son team Vitaly and Kirill Kachurov. Vitaly, the father, was a business partner of Prime Minister Mikhail Mishustin’s brother-in-law Alexander Udodov in the early 2000s. Udodov’s business flourished after Mishustin became head of the government. His son, Kirill, worked as an investigator before quitting to become a lawyer — a common career path for a so-called fixer, who serves as an intermediary between corrupt security forces, criminals and their victims.

Why the world should care

The war has accelerated the redistribution of resources and influence among Russia’s elite. It’s entirely possible that this process undermined the calculations of these once influential officers and their fixers, devaluing their connections and leaving them vulnerable to arrest as the fabricated case fell apart.


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