THE BELL WEEKLY: Historic prisoner swap highlights rifts in Russian society

Hello. This week we look at the controversy surrounding the historic prisoner exchange between Russia and the West. We also bring you a snapshot of our investigation into Russia’s “Hairspray King” — a little-known billionaire and major winner from the exodus of Western firms.

Opposition leaders, newly freed, stoke controversy with first public comments

The biggest prisoner swap between Russia and the West since Soviet times has freed two of Russia’s leading liberal politicians — figures with genuine ambitions to lead the opposition in exile. Tet far from garnering sympathy for the more than two years they spent in Putin’s prison system, their first public appearances generated a storm of criticism from Ukraine and in some corners of the Russian opposition.

• One topic has dominated talk among both regime loyalists and its fiercest critics this week: the largest prisoner exchange in more than three decades between Russia and the West. Russian state propaganda has reveled in footage of President Vladimir Putin welcoming convicted FSB murderer Vadim Krasikov back home after almost five years in prison in Germany, while dozens of Russian emigres went to Cologne in Germany to greet the political prisoners freed from Russia. 
• The two key political figures who were released in the exchange were Vladimir Kara-Murza and Ilya Yashin. Kara-Murza is a former journalist and long-time associate of opposition leader Boris Nemtsov. After Nemtsov was assassinated, he started working for exiled former oligarch Mikhail Khodorkovsky. In the early 2010s Kara-Murza became the leading Russian lobbyist for the Magnitsky Act, the first piece of US legislation used to impose sanctions on Russian officials. After its passage, he devoted his efforts to advocating for more sanctions against Russian officials in both the US and the EU. He was almost killed by two poisonings in 2015 and 2017, and left with serious nerve damage as a result. The Bellingcat investigative media outlet has backed his claims they were carried out by the FSB, including some agents that were linked to the 2020 poisoning of Alexei Navalny. After Russia invaded Ukraine, Kara-Murza did not leave the country. He was arrested and sentenced to 25 years for treason and other charges, partly due to his intensive lobbying for Moscow to be hit with sanctions.
• Yashin is an independent politician who started out in the youth wing of the liberal Yabloko party alongside Navalny. The two have always been regarded as friends and colleagues, although Yashin never held a formal role in Navalny’s organizations. Like Kara-Murza, Yashin joined Nemtsov’s “People’s Freedom Party” in the 2000s and in the 2010s he was Nemtsov’s deputy. In 2017 he was elected as a Moscow city deputy. After the war broke out, Yashin refused to flee. He was arrested in June 2022 and later sentenced to 8.5 years in jail for spreading “false information” about the Russian military in YouTube reports of Russian war crimes in the Ukrainian town of Bucha.
• The day after their release, Kara-Murza, Yashin and a third freed opposition figure, Andrei Pivovarov, a former director of Khodorkovsky’s Open Russia movement, gave a press conference in Bonn as well as several interviews to Russian independent media outlets — all pledging to continue their political activity, as best they could, from exile.
• In the press conference, Kara-Murza recalled his involvement in lobbying for some of the first sanctions against Russia in the 2010s. He said that the main principle back then was to ensure sanctions were targeted against Putin’s regime and not ordinary Russians. But now, Kara-Murza said, the West was moving away from that idea and that sanctions were hitting broader Russian society — something he criticized. He promised to work to ensure that sanctions were limited to Putin’s regime alone. It’s easy to understand why this was a message he wanted to deliver. People in Russia, including opposition supporters and anti-war activists, are unhappy that they are hampered by sanctions. Any politician who actively and unconditionally approves of sanctions has no chance of garnering support inside Russia. In this sense, Kara-Murza is already vulnerable: he is known as a lobbyist for sanctions, something Putin’s propaganda will target. However Kara-Murza’s comments — and their endorsement by Pivavarov — attracted instant and predictable criticism from more radical Russian emigres, from Ukrainian officials, and from their European counterparts.
• Ilya Yashin ran into an even greater controversy with comments he gave in an interview to Dozhd TV. When asked how to break the deadlock in Ukraine, he said that both sides urgently need to get around the negotiating table to stop the fighting. In Ukraine, this was seen as a call to surrender territory occupied by Russia (according to polls, 44% of Ukrainians also support the start of peace negotiations, but the topic is taboo at the highest levels in Kyiv). Yashin’s words also drew fierce criticism from his fellow emigrants. The politician took to YouTube the next day to clarify what he meant and outline his anti-war position, saying that “under no circumstances should any part of Ukraine be surrendered to Putin.”

Why the world should care

Everything that is happening is part of an inevitable process: Russia’s anti-war opposition in exile is splitting into two ever more entrenched camps. The radicals, who wish to completely disassociate from Russia in all its forms, and a more moderate faction that wishes to continue trying to talk with and engage with Russians inside the country.

Russia’s billionaire Hairspray King

Before 2022, the name Alexei Sagal meant little to anyone in Russia outside the domestic cosmetics industry and residents of his native Stavropol Territory in the south of the country. That has changed completely since Russia invaded Ukraine as Sagal swooped to take control of Heineken’s Russian businesses. That deal proved to be just the start, with Bloomberg estimating his wealth at $1 billion at the end of last year. In the latest installment in our series about the Russian businessmen scooping up assets left by foreign companies leaving the country, we look at how government loans turned the “Hairspray King” into a billionaire.

• Alexei Sagal was born in 1968 and went into business in 1990 as a wholesale trader — a typical career move for an entrepreneur in the dying years of the Soviet Union and early 1990s. His hometown of Nevinnomyssk (pop. 100,000) in southern Russia was a major center of the chemical industry under the planned economy. Sagal started by trading products from the local Arnest chemical works, the Soviet Union’s biggest producer of hairspray and insect repellent. In the late 1990s he worked with the director to fend off bandits and raiders, eventually becoming the controlling shareholder.
• This could be the story of any privatized enterprise: a “red director” appointed during the Soviet times, helped by an ambitious young businessman, steering an industrial enterprise into Russia’s new market economy. But Arnest’s story wasn’t so straightforward. By coincidence, Pioneer Investments, one of the leading foreign investment houses of the time, was among its shareholders. Pioneer was trying to strike it rich in developing markets. Through that connection, Arnest secured a World Bank grant — under a global program to protect the ozone layer — to buy state-of-the-art new, more climate-friendly equipment. In 1998, 25.1% of Arnest’s shares were sold to another international institute — the European Bank of Reconstruction and Development (EBRD), which introduced strong corporate governance at the outfit and helped to reduce costs. In the late 90s, few Russian companies could boast of such a turnaround and respected investors. 
• Arnest had put itself in a position to make products for leading Western brands trying to enter the fast-growing Russian market in the early 2000s. The plant started churning out products for Schwarzkopf & Henkel, L’Oreal, Procter & Gamble, Unilever and Colgate-Palmolive, among many others. Sagal wanted to make his company a contract manufacturer on a global scale. To enter European markets, he bought factories in Scotland and Italy and agreed to build a facility in Hungary. The war would crush those ambitions and his European assets had to be sold off.
• Asked about his business approach in a rare interview in 2019, he said: “It’s addictive. It’s hard to stop. When you’re on an express train, it’s hard to get off. You have to put the brakes on before you can. Maybe you can jump out of the window, but that’s going to hurt.” Russia’s invasion of Ukraine initially threatened to force him out of the window at full speed — almost destroying his 25-year-old businesses — but like all of the Russians to have struck it rich over the last two and a half years, he found a way, going on to pick up $1 billion of assets, with the help of the government and state-backed lender VTB.
• The war did hurt his business, which depended entirely on western companies, initially — but it did not kill it. The challenge he faced was replacing the supply of Western materials. Meanwhile, Western contract manufacturers in his sector have not gone anywhere. Most, such as Britain’s Unilever, show no intention of leaving Russia. Others, such as Beiersdorf (which owns the Nivea brand), Colgate-Palmolive and L’Oréal promised to reduce their work in Russia but in 2023 all increased their Russian profits.
• With his Western connections, Sagal emerged as a logical buyer for other companies that were leaving Russia. In 2022-2023 the businessman acquired the Russian subsidiaries of America’s aluminum can producer Ball Corporation, the Heineken brewery and Oriflame cosmetics. Thanks to rules established by the government, he secured all of them on the cheap. The Bell discovered the deals were also financed by the sanctioned state bank VTB, which loaned 65 billion rubles (about $700 million at the current exchange rate) to Sagal’s structures. Sagal also has a powerful patron and backer in the shape of Denis Manturov, the deputy prime minister who oversees trade, industry and the exit of Western companies from the country. It turns out Manturov has a joint business with the Sagal family.
• You can read the full investigation into Sagal on The Bell’s website (in Russian).

Why the world should care

Vladimir Putin has pitched Russian veterans who served in Ukraine as the country’s “new elite”. But if anybody has a right to that title, it is not Russia’s soldiers, but its businessmen being gifted prime Western assets at knock-down prices and showered with state support. Unlike the oligarchs of the 1990s, this new class of business leader owes its wealth and status entirely to the current regime.