THE BELL WEEKLY: A wild deal for Russia’s largest online retailer

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Hello! This week we look at a curious merger deal involving Russia’s largest online retailer, a coordinated terror attack in Dagestan and how Russia’s “alternative” Olympics has descended into a laughing stock.

Wildberries set for new Putin-approved shareholders

A very strange deal is in the works involving Russia’s largest online marketplace, Wildberries. The company, which sees around 2.5 trillion rubles’ ($27.5 billion) worth of business a year, is set to merge with the Russ group, Russia’s leader in outdoor advertising. The merger has Putin’s personal seal of approval. Curiously, the announcement of the deal seems to present Wildberries and Russ as equal partners, even though Wildberries is many times bigger than its new ally. Russ, however, seems to have some influential shareholders.

  • Wildberries announced the merger with Russ in a low-key press release, published unusually late in the evening after 8:00 pm Moscow time. There is nothing in the release about the terms of the deal, nor what the shareholder breakdown of the new unified company will be. But Russia’s business media, citing sources close to the deal, reportedthat Wildberries founder Tatyana Bakalchuk will become the director general of the new outfit, while her Russ counterpart Robert Mirzoyan will be chief managing director — a structure typical of that used in transactions between equals.
  • We also know we’re talking about an equal partnership because of a joint letter sent from Bakalchuk and Mirzoyan to President Vladimir Putin, which became public the day after the proposed merger was announced. The letter urges the president to support the deal and outlines the company’s incredibly ambitious plans, with a clear geopolitical angle. The pair want nothing less than to create “the largest digital banking network and payment system to make settlements in rubles around the world, bypassing SWIFT,” covering 5.8 billion people, the entire population of the “global south.” They said it would add 1.5 percentage points a year to Russia’s GDP growth and be a “serious rival to global companies like Amazon, Alphabet, Alibaba, and SoftBank.” Putin immediately forwarded the letter to the deputy head of the presidential administration Maxim Oreshkin with a clear instruction: “support.” 
  • We can leave aside the obvious fantasy of building a global payment system in rubles and successfully overtaking the likes of both Jeff Bezos and Jack Ma. Nothing stops companies from chasing unrealistic dreams. But there is another big question: why does Wildberries need to team up with Russ to deliver it? After all, if it takes billboards to beat Bezos, they can be hired as needed without an elaborate merger and a joint plea to the president.
  • In terms of size, Wildberries is at least 10-20 times bigger than Russ: in 2023, the marketplace’s revenues were 538.7 billion rubles ($2.7 billion), with net profit of 18.9 billion rubles ($200 billion), and turnover clearing 2.5 trillion rubles ($27.5 billion) — or more than 5% of of Russia’s total retail trade. Russ looks like a minnow in comparison, with revenue of 27.9 billion rubles ($300 million) and net profit of 4.9 billion rubles ($55 million).
  • However, Russ does bring influential shareholders to the table. In the early 2000s, it was owned by Rupert Murdoch’s News Corp and was known as News Outdoor. But in 2008, Murdoch decided to get rid of his Russian businesses. “The more successful we are, the more likely it is that it will be stolen from us. Better to sell it now,” the billionaire said upon exiting. News Outdoor was purchased by a consortium of investors led by VTB Bank. In 2019, VTB sold the company to its current owners, represented by Mirzoyan. This wasn’t his only acquisition. From 2016-2023, Mirzoyan and his partners bought up four leading Russian companies in the outdoor advertising sector, and now enjoy almost a complete monopoly in the sector.
  • Nobody in the market believes that Mirzoyan is an independent player. In 2019, RBC reported that the businessman was buying up assets for billionaire Suleyman Kerimov (12th on the Forbes Russia list of billionaires with an estimated fortune of $10.7 billion). At the same time, mysterious co-owners periodically emerged as the owners of a 30% stake in the holding company that manages Mirzoyan’s business. Up until 2019 it was Soviet footballer Guram Adzhoyev — who was in charge of the Ministry of Emergency Situations sports club in the 2000s, where the likes of Sergei Shoigu, Sergei Lavrov and other officials and businessmen worked out. Adzhoyev also worked in companies belonging to Putin’s friend Arkady Rotenberg and was one of the founders of the Night Hockey League in which Putin himself played. In 2019, Adzhoyev was replaced by Duma deputy Bekkhan Barakhoyev, another obvious figurehead representing the interests of an influential behind-the-scenes figure, and in 2022, the 30% stake went to a structure of Sergei Kotlyarenko, known as the manager of former deputy PM Igor Shuvalov’s personal assets.

Why the world should care

There are many dimensions to the redistribution of assets that has been triggered by Russia’s war on Ukraine and the ensuing Western sanctions. On the one hand, some businessmen close to the authorities are acquiring assets of foreign companies for kopeks. On the other, the state is confiscating assets from some who became rich in the 1990s in order to reward a new generation for its loyalty. But something else is at play as well. Business figures whose main assets are their connections and ability to resolve issues with officials are being given even more opportunities to take over “new” businesses that are either being created or forced into mergers. In the case of Wildberries, Russia’s largest marketplace, this is what appears to be taking place.

Will Ukraine be blamed for the latest Russian terror attack?

A shock attack in Russia’s southern Dagestan region, the largest there in many years, killed at least 15 police officers. It is the third terrorist attack carried out by Islamist groups in Russia this year, and officials have already tried to draw some connections to Ukraine, despite an obvious lack of evidence.

  • On Sunday, terrorists hit Makhachkala and Derbent, two of Dagestan’s biggest cities, in a simultaneous attack on religious sites and security checkpoints (1, 2). Armed militants attacked two orthodox churches, two synagogues and police officers, with the shoot-outs lasting several hours in both cities. At least 20 people were killed in the attacks, 15 of them police. Among the civilian casualties was Archpriest Nikolai Kotelnikov, rector of an orthodox church in Derbent, who was the target of a knife and gun attack. More than two dozen were also injured and the synagogue in Derbent was severely burned in an arson attack with Molotov cocktails.
  • The attacks on the synagogues could have garnered sympathy among the local population, where anti-Jewish sentiment is running high amid the war in Gaza. In October, several hundred men stormed the airportin Makhachkala after reports that a plane had landed bringing refugees from Israel.
  • During the fighting on Sunday, police killed five militants. Contrary to stereotypes of the kind of people who carry out such attacks, they were not from poor, illiterate backgrounds. Three of them were sons and nephews of Magomed Omarov, a member of the ruling United Russia member and head of one of Dagestan’s districts. He has since been expelled from the party. Another attacker was the son of a businessman and contractor for a local energy company. 
  • On Russian Islamist Telegram channels, the attackers were linked to the Caucasian branch of the “Islamic State — Khorasan” organization, which claimed responsibility for the March attack on the Crocus City Hall concert venue in Moscow, where more than 140 people were killed. Sunday’s attack on Dagestan is already the third Islamist terror incident this year after the massacre in Moscow and the taking of hostages at a detention center in Rostov-on-Don earlier this month.
  • So far the Kremlin has offered no significant reaction to the Dagestan attack, saying only that it did not expect a new wave of violence would grip the region. There are signs that the Russian authorities could again look for evidence of a Ukrainian or NATO link, as they did in the aftermath of the Crocus City Hall massacre. Dagestan’s leader Sergei Melikov has already linked the attacks with the “special military operation” and second-tier officials are talking about suspicious parallels between a Sunday morning Ukrainian missile strike on Crimea that killed four beach-goers and the events in Dagestan later that evening.

Why the world should care

Vladimir Putin bet he could solve the problem of terrorism in the North Caucasus with billions of dollars worth of subsidies. In reality, much of the money was appropriated by corrupt local elites or, as in the case of Chechnya, handed to the feudal-like court of the ruling Kadyrov family. Predictably, this didn’t solve the problem, but merely kicked it down the road. And now the Caucasus suffers from both terrorism and corruption.

Russia’s anti-Olympics turns into Soviet-style joke

Around the world sports fans are tucking into a summer of top-quality competitions. The Euro 2024 and Copa America football tournaments are underway, to be followed by the Paris Olympics which kicks off next month. Russia is not competing in any of them, banned from both Uefa football competitions and from competing as a nation at the Olympics (though some Russian athletes will go to Paris and compete under a neutral flag.) The Russian authorities have instead tried to set up an alternative to the Olympics — the BRICS Games. It is underway now in Kazan, the capital of the Tatarstan region that will host a BRICS summit later this year. The whole thing has quickly turned into a laughing stock, embarrassing the hosts.

  • At first, Russia wanted two “alternative Olympics.” Alongside the BRICS Games, Putin had suggested staging a “Friendship Games” in Moscow and Yekaterinburg in September. That name might ring a bell — it was a deliberate channeling of a 1984 tournament that took place during the Soviet boycott of the Los Angeles Olympics and saw the USSR compete with other socialist countries. But at the last moment, the 2024 Friendship Games was canceled when it became clear that it would be impossible to bring together contestants even from friendly countries right after the Olympics. However, the BRICS Games was not so lucky to be put out of its misery — that show must go on.
  • There have been sporting competitions linked to the BRICS summit since 2017, but this is the first time any of the hosts have tried to turn it into a major event. The Russian organizers claimed that 90 countries were represented, with only a quarter of the athletes coming from Russia. Of course, this close to the Olympics, no major athletes would even think of attending. For instance, of the 100 competitors from China, not one will be in action in Paris. 
  • The organizers have also used some creative accounting when it comes to tallying up the competing countries. At the Opening Ceremony there were flag bearers from Britain and Germany, but there are no athletes from these countries competing at the game. In total, there were 22 of these “ghost” countries out of the promised 90. The only French entrant turned out to be a student at a Moscow sports school.
  • The only event that actually garnered widespread international coverage was the synchronized swimming. That’s because the contest had one entrant, a Russian, who automatically won the gold.
  • In wrestling, one bout was won by a Lithuanian fighter who didn’t even make it to the contest. His opponent, from Romania, also failed to show up and the referee, standing alone in the ring, decided to award the victory to the absent Lithuanian over the absent Romanian.
  • Despite the farce, the BRICS Games has been given major airtime on Russia’s national sports channel Match TV. It even pushed daytime Euro 2024 games off the schedule, despite the fact that the football is far more attractive even without Russia taking part. This turned out to be politically helpful at times. Early kick-offs featuring Ukraine have not been broadcast, making way for the BRICS Games. And after Match TV had to cut 11 seconds from its live broadcast of Georgia’s first game when fans started singing, “Putin is a dick”, it elected to show the BRICS Games for their second encounter..

Why the world should care

Sometimes news from Russia suggests that, far from rebuilding the USSR, officials are trying to act out Soviet-era jokes in the 21st century. Long before the BRICS games, there was the famous line: “Brezhnev and Nixon had a race. Nixon won. The Soviet papers reported that Brezhnev came second and Nixon was second last.”


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