The egos of three Russian tycoons take a hit as they are barred from Davos

Hello! Our top story this week is an explainer on why being excluded from Davos is a big personal blow for three Russian tycoons — despite their protestations to the contrary. And in more oligarch news, we look at the arrest in Monaco of colourful Russian billionaire Dmitry Rybolovlev. You can also read about the a regulatory push in Russia’s emerging driverless car market and the sexual harassment scandal rocking the independent media industry. 

The egos of three Russian tycoons take a hit as they are barred from Davos

Oleg Deripaska at WEF, 2011. Photo credit: Wikimedia Commons

What happened

In this week’s big disappointment, it was revealed Russian billionaires Oleg Deripaska and Viktor Vekselberg, as well as Andrey Kostin, the head of VTB, Russia’s second largest state bank, will not be attending the World Economic Forum in Davos. People close to the businessmen persuade the journalists they didn’t really want to go anyway, but that is almost certainly untrue. Davos is the business event of the year and being banned is a big reputational blow.  

• Although there is no official explanation for the Russian businessmen not receiving an invitation, the reason is obvious: U.S. sanctions. The Financial Times attributes the decision to unofficial pressure from Washington. In fact, a source close to one of three men told The Bell that they all knew they wouldn’t be able to attend back in April when they were named on the latest U.S. sanctions list. Davos organizers told them then that they couldn’t accept payment for participation because of the risk of secondary U.S. sanctions. A Russian businessman who attends Davos every year told The Bell that he discussed the situation with Klaus Schwab, the founder and head of the World Economic Forum, who said that the lawyers told him he can’t invite sanctioned Russians.
• Deripaska, Vekselberg and Kostin are trying to be nonchalant. A person close to Deripaska said the billionaire wasn’t planning on going to Davos because he had “stepped away from management of the business”. But the reality is that this is a major blow — all three have attended Davos most years for at least 20 years. “It is unpleasant for those who now cannot attend, first and foremost because you feel like an outcast,” a source told The Bell. For Deripaska, the loss is particularly painful because of his bumpy history with Davos. In 2001, the World Economic Forum refused to invite him because of a pending lawsuit filed by former business partners. Since this was resolved 2007, the billionaire hasn’t missed the elite gathering once. Moreover, each year he throws lavish parties featuring Russian cossack choirs and gives wide-ranging interviews.
• For Russia, the World Economic Forum is traditionally more than just a business conference. In the 1990s, it was the platform for Russia to show off its democracy and market reforms to the world, while in the early 2000s it provided an opportunity to introduce President Vladimir Putin to international investors. In 1996, it was at Davos that Russian tycoons devised a plan to get President Boris Yeltsin re-elected in the face of a challenge from the Communists — and the success of this plan turned them all into influential billionaires. Since the Ukraine crisis of 2014, however, the Russian delegation has included fewer and fewer senior officials with each passing year.

Why the world should care

You would think that — for businessmen who lost billions as a result of sanctions — not being invited to Davos wouldn’t be a big deal. But sometimes it is the little things that hurt and losses that can’t be measured in monetary terms are also painful.

The saga of Russia’s art-collecting oligarch and his new corruption woes in Monaco

What happened

Dmitry Rybolovlev is one of a select few Russian businessmen who were able to successfully sell their primary businesses in Russia and start afresh abroad. This week, Rybolovlev was detained in Monaco and now faces criminal charges in a corruption probe. Just a few years ago, Rybolovlev’s life in the tiny principality of Monaco appeared respectable and serene — apart from a nasty divorce and court battles with his art dealer. Rybolovlev has always been a very private person. A member of The Bell’s team was given an interview by Rybolovlev several years ago — making him the last journalist in Russia to have spoken to the billionaire in depth. Below, we take a brief look at this fascinating Russian oligarch. If you want to read more, you can find a feature-length version of this article on our website.

• Rybolovlev sold his fertilizer company Uralkali in 2010. The company is one of just a few firms in the world producing potash and was far more profitable than even the Russian oil business. However, in the years leading up to the sale, Rybolovlev got into a fight with the powerful Igor Sechin, then deputy prime minister. When billionaire Suleiman Kerimov, offered Rybolovlev $10 billion for the company, he agreed to sell and quickly left Russia.
• When Rybolovlev moved to Monaco, he began to spend like crazy. He has a fondness for luxury real estate and bought properties including Donald Trump’s home, whole islands from descendants of Aristotle Onassis, Will Smith’s Hawaiian villa and the most expensive apartment in Manhattan. Lawyers working on behalf of his soon to be ex-wife, Yelena, followed his every step and got the courts to freeze everything they could.
• Rybolovlev made his home in the French city-state of Monaco and was quickly rubbing shoulders with royalty. In particular, Prince Albert II of Monaco, with whom he watched a football game together less than three weeks ago. In 2011, Rybolovlev bought Monaco football club for €1 and a promise to invest a minimum of $100 million in the then-second division team. Rybolovlev didn’t pour billions into his team like Roman Abramovich at Chelsea. Instead, he spent no more than $700 million, according to a person in his circle, and ran it like a business, an approach that paid off spectacularly. In 2017, the club won the French championship and made a profit.
• Rybolovlev moved his family to Switzerland in the mid-1990s because of security concerns. At the time neither he nor his wife spoke any foreign languages and their guide to this new world was the wife of a dentist they knew, Tatiana Rappo. She introduced the couple to art dealer Yves Bouvier. Over 10 years, with Bouvier’s help, Rybolovlev spent about $2 billion buying almost 40 paintings. But Rybolovlev became convinced he had overpaid Bouvier by approximately $1 billion, 10% of which went to Rappo. And now it seems that Rybolovlev’s attempts to put Bouvier in jail may end up with Rybolovlev himself serving a prison sentence.
• The current corruption scandal centers on allegations that Rybolovlev tried to influence Monaco officials over the Bouvier case. We have learned about gifts to the head of the Monaco police and personal helicopter rides for ministers — occurrences that, in Russia at least, would be normal business practice. A source close to Rybolovlev said the businessman made no returns on these so-called investments, but text messages on the phone of Rybolovlev’s lawyer, Tatiana Bersheda, raise doubts. She was in close contact with the local police and warned them about Bouvier’s movements before the art dealer was arrested.  

Why the world should care

The purchase of Trump’s home generated lots of U.S. media attention on Rybolovlev as reporters looked for signs of the Kremlin trying to reach the future U.S. president. In our view, Rybolovlev has been busy with his own battles — involving his ex-wife and Bouvier — and played absolutely no role in such  high level political games. But this doesn’t necessarily make the story of the post-Soviet billionaire any less revealing, or less colourful.

New legislation set to regulate Russia’s burgeoning driverless car market

What happened

Driverless cars are not just the realm of Waymo and Uber: Russia also has several serious self-driving car projects. And in a significant development this week, the government unveiled the first draft of new legislation to regulate the sector.

• There are a handful of large Russia companies working on driverless cars, several already at a very advanced stage. The first of these is Internet giant Yandex (Google’s main competitor in the Russian-speaking online space), which has been developing driverless cars since 2016. In February, a Yandex car built on the basis of a Toyota Prius drove around Moscow, but this wasn’t pre-approved with the government. Now, Yandex is officially testing four driverless vehicles in Skolkovo and Innopolis (these are innovation clusters outside of Moscow and the Volga city of Kazan). Residents in these clusters can order driverless taxis through the Yandex.Taxi app or via a chat bot. Another player is Kamaz, the company that has produced trucks and tractors since Soviet times. Kamaz has developed a driverless minibus, Shuttle, which seats up to 12 people and will be ready to go into production in the next 2-3 years.
• The draft legislation developed by the government includes strict rules: a driver who can take control if necessary must always be at the wheel of a driverless car, the car’s dimensions and time limits for its trips should be pre-agreed with the authorities and testing will be permitted only in two locations (in Moscow and Tatarstan, a wealthy republic 500 miles east of the capital). In the last stipulation, Russia is following global best practice — at the beginning of 2018 the U.S. wanted to expand driverless car tests beyond an Arizona site but this was scuppered by a serious accident involving a driverless Uber.
• The main complaints about the draft legislation are that smaller firms are excluded: the equity capital of a company developing a driverless vehicle is required to be no less than $1.7 billion and each vehicle must be insured for almost $200,000. This will cut out dozens of smaller startups. And even a relatively large player in the market, like bus producer Volgabus, which has designed the driverless Matreshka for 8-12 passengers, will have to increase its equity capital tenfold if it wants to move forward.

Why the world should care

Russia may appear to be a commodity-driven economy, but, as any other cliche, this is superficial. Driverless car technology is alive and well in Russia. Given the poor quality of the Russian cars, though, it’s not surprising that an Internet company is leading the driverless car race — and is far ahead of the state-owned car manufacturers.

Russia’s second #metoo moment lays bare the fractures of ‘liberal’ society

Disclaimer: Meduza is one of The Bell’s competitors. While some employees at the two outlets are friends, the author of this analysis is not directly acquainted with anyone referenced.

What happened

Russian society is muddling through its second sexual harassment scandal of the #metoo era: this time in its small — but influential — independent media industry. The accused is the editor-in-chief of Meduza, Russia’s largest independent news operation and a passionate advocate for women’s rights. After a series of unfortunate attempts to manage the situation, the editor eventually resigned. The incident was a gift for Russia’s state propaganda machine, but also triggered a heated debate over the media’s moral authority.

• According to Meduza’s own account, the situation unfolded as follows. At the company’s annual corporate party on October 20, editor-in-chief Ivan Kolpakov “became intoxicated and groped the buttocks of an employee’s wife”, telling her: “You’re the only one at this party I can harass and get away with it.” Kolpakov says he doesn’t remember the incident, but the husband of the woman involved (according to sources he was Meduza’s head web developer) reported the incident two days later and demanded action be taken. As a result, Kolpakov was suspended and Meduza, realising they couldn’t stop leaks to the media, made a public statement. Two weeks later, the company’s board of directors announced that Kolpakov’s suspension was sufficient punishment — and he was reinstated. But when it emerged that the husband of the woman involved, apparently unhappy with the outcome, had quit, the public pressure on Meduza became too much. This Friday, Kolpakov announced his resignation, though he denied the harassment accusations and blamed the public for “destroying” what he had built.
• The events at Meduza are the second sexual harassment scandal in Russian since the emergence of #metoo. The first saw accusations of harassment made earlier this year by female journalists against influential lawmaker Leonid Slutsky, leading to a boycott of the Russian parliament by media outlets, including Meduza. But the incidents are not very similar: society has different expectations of an editor-in-chief at a private news outlet and a parliamentary deputy; Slutsky’s behaviour was systematic, whereas in Kolpakov’s case, Meduza says there was just one incident; and Slutsky is alleged to have seriously harassed the women, while Kolpakov’s actions could be construed as a stupid joke. Nevertheless, the revelations about Kolpakov led to a wave of gloating by state-owned media and upset parts of liberal society.
• It doesn’t take a genius to realise that alcohol-fueled corporate parties with similar sexual harassment are common in Russia. But it has never before provoked such widespread discussion. The resonance of the Meduza scandal is explained by two factors: the global #metoo movement and the whiff of hypocrisy. Since its creation in 2014, Meduza has claimed the a role as moral arbiter that most other Russian media outlets abandoned years ago. Moreover, last year Meduza hired the former editor of Russia’s leading feminist publication, Wonderzine, with — as Kolpakov said at the time — the specific goal of strengthening the focus on gender equality. During the Slutsky scandal, Meduza published an editorial calling for his resignation.
• After Meduza’s board of directors announced Kolpakov’s reinstatement, it was clear he had escaped lightly because of his importance for the company and his personal relationship with Meduza founder and CEO Galina Timchenko. She described him this week as “one of the most important and dearest people” in her life and “the best editor in our country.”

Why the world should care

The complex reaction of Russia’s intelligentsia to this tussle at the country’s most popular independent media outlet reveals the extent of divisions over #metoo. We have written in the past that Russian officials can only nominally be divided into liberal and conservative camps: the Meduza scandal shows that the same is true for Russian society as a whole.

Peter Mironenko

Anastasia Stognei and Irina Malkokva contributed for this newsletter. Editing by Howard Amos.

This newsletter is supported by the Investigative Reporting Program at UC Berkeley.