By John Helmer, Moscow
@bears_with
Football is the most popular sport Russians like to play and like to watch. Ice hockey comes second.
The connexion between football and ice hockey, apples and tomatoes is that Gennady Timchenko (lead image left) is the sanctioned oligarch who is now moving into domestic production of apples to substitute for imports; he has been a player, sponsor, financier and director of ice hockey clubs, associations, and stadiums in Russia and Finland. Yevgeny Giner (right) has been the long established owner of the Moscow football club CSKA, a financial director at the Russian Football Union, and stadium builder; he is now taking a position in tomatoes.
Why apples, why tomatoes, why now in Russia?
The reason is the war – and the way in which the US and NATO campaign to destroy the Russian economy is rebuilding it in directions and in sectors which the pre-war oligarchs had no wish, no incentive to consider.
By curtailing their freedom to export cash, capital, and assets outside Russia, the sanctions have forced the oligarchs to look for the right combination of investment factors in the domestic Russian market. Apples and tomatoes qualify for them because of the large and growing size of consumer demand; the relatively low level of domestic competition for market entry; and the determining role of the state in raising protection from imports, allocating low-cost land for production; and handing out budget cash to pay for borrowing, seed, fertilizer, and other purchases, machine leasing, tax relief, subsidized storage and transport to the point of sale – and price fixing. Traditional oligarch methods for consolidating assets, raiding and bankrupting small producers, and court corruption can flourish under the war emergency regulations administered by state planning committee apparatchiki. They have taken over where the state anti-monopoly and environment regulators left off.
And so, by striking at Putin’s cronies, as the US Treasury and the Office for Foreign Asset Control (OFAC) call them, with their long-arm prohibitions, freezes, and threats of confiscation, the warfighters are revolutionizing the domestic economy.
Think of this revolution as an apple a day to keep the oligarchs in play.
The Russian business press treads carefully in the way it reports this. For example, this is how Kommersant, the Moscow business daily, reported Timchenko’s management of his apple business.
“French investors, who owned through Swiss Procuri SA together with Gennady Timchenko’s Volga Group and its large apple producer Alma Holding, have withdrawn from the company’s capital. Their 54% share has gone to the ex-president of the International Ice Hockey Federation René Fasel. The transaction may have been required due to restrictions for foreign investors to operate a business in the Russian Federation. Fasel, the owner of 54% of Alma Holding, the parent company of a large apple producer, where 46% belongs to the Volga Group structure of Gennady Timchenko, has become a citizen of the Russian Federation.”
Fasel’s citizenship was announced officially a year ago, on January 17, 2022. The change in the shareholding of the Alma group was gazetted in Moscow earlier this month, triggering press interest.
“The Alma Holding was founded in 2007,” according to Kommersant which identified its offshore French nominees acting for Timchenko. “The Alma Production company controlled by Alma Holding manages about 400 hectares of apple orchards in the Krasnodar Territory. In 2019, more than 13,000 tonnes of fruits were harvested here, but in 2020, due to adverse weather conditions, just 8,500 tons, it follows from the reports. By 2023, Alma Production plans to double the volume of the harvest, according to its website.”
According to the Alma Holding’s website presentation, nine apple varieties are produced – three of them Russian. For a full list of the Russian apple varieties and their seasonal maturation cycles, read this.
According to the Kommersant report, “Fasel is mentioned in the media as the former president of the International Ice Hockey Federation (IIHF), who held this position in 1994-2021. According to TASS, Mr. Fasel was born in Switzerland, where he played for the Fribourg-Gotteron hockey club, and then became a hockey referee. In 2015, as reported by TASS, René Fasel was the chief referee of the gala match of the Night Hockey League, when Russian President Vladimir Putin and Gennady Timchenko also played.”
Left: Putin and Timchenko in their game to celebrate Putin’s birthday, Sochi, October 7, 2015. Right, Fasel presents Putin with his game jersey. Source: https://www.insidethegames.biz/ (November 2022)
“According to Kommersant’s source in investment circles and Kommersant’s interlocutor in the agricultural market, Fasel may own a share in the interests of the owners of Procuri SA. In the spring of 2022, Kommersant’s sources said that French investors began looking for buyers for their share in Alma Holding due to the crisis resulting from the military actions of the Russian Federation in Ukraine and the expansion of western sanctions against Gennady Timchenko. As one of the interlocutors of Kommersant notes, it has not been possible to agree on the sale of the asset until now, and, apparently, they decided to transfer the share to a third party. René Fasel did not respond to Kommersant’s questions sent by e-mail…Volga Group does not comment on the changes. It was not possible to contact Procuri SA…”
“Senior Partner of the Pen & Paper legal firm Anton Imennov says that foreign structures from ‘unfriendly’ jurisdictions generally have difficulties with business management in the Russian Federation. ‘Unfriendly’ LLC participants receive distributed profits only in a type C account, the withdrawal of funds from which is difficult, and they cannot attract loans in foreign currency, he points out. In addition, Mr. Imennov notes, the EU last October introduced a norm into legislation which allows the imposition of sanctions against persons who help those who have fallen under restrictions to reduce the effect of measures. Ingvarr Managing Partner Igor Mazilin says that the transfer of ownership of a stake in a business to a Russian partner relieves the headache of a foreign investor and simplifies the work of the Russian business. It may be easier for a fully Russian agricultural enterprise to receive state support measures today, says Ekaterina Makeeva, partner of the A-Pro law firm.”
“According to Andrey Neduzhko, CEO of the Steppe Agro Holding, Russian horticulture retains significant growth potential due to increasing domestic apple production and import substitution. Russia remains the largest importer of apples, according to data from the USDA. They predict that this season the Russian Federation can produce 1.54 million tons of apples, and import 550,000 tonnes.”
USDA REPORT ON RUSSIA’S SOURCES OF APPLE IMPORTS, JUNE 2022
In its June 2022 report, the Foreign Agricultural Service (FAS) of the US Department of Agriculture published this table of Russian apple imports and their country sources, led by Moldova, Serbia and then Turkey, and the consolidated “Other” category. The report claimed: “Russia imports are projected to drop 40 percent to 480,000 tons. Shipments from most suppliers have been lower throughout the year, including Southern Hemisphere countries at the start of the marketing year, more than offsetting gains from top supplier Moldova.” Six months later, however, the US agency revised its import estimate upwards by 21%. “Russia is raised 100,700 tons to 580,700 on higher‐than‐expected shipments from Moldova and Turkey”. Industry reports vary in their estimates of the leading apple importers by volume and value – Russia has been either number one, or number two, after Germany.
The discretion required to print these lines, and the understanding to read between them, reflects more than the wartime rule against giving aid to the enemy.
In peacetime Timchenko has demonstrated his readiness to use the local and foreign courts to deter investigation of his business operations. Here’s the archive on Timchenko’s investments in crab fishing, wine, ports, shipping, oil and coal trading, The last time Timchenko issued an ultimatum to the domestic press was in 2009, when his lawyers claimed they were enforcing Timchenko’s right to protect “information about commercial and other legally protected secrets, in the absence of the explicitly expressed consent of the person in whose interest the conditions of secrecy operate (art. 1 part 1 and part 3 and art. 46 part 1 of the Law on mass media taken with art. 47 part 1 item 5) and art. 40 part 1 of the Law on mass media; art 4 part 4 and art. 3 part 1 item 2 of the Law on commercial secrets2; art. 23 part 1 of the Russian Constitution and item 1 of the List of information of confidential character.”
Andrei Neduzhko, the source cited in the Kommersant report, represents the Steppe Agro Holding group. Kommersant avoids explaining that he and his group are a competitor for Timchenko’s Alma Holding in the Russian apple market. Steppe Agro is owned by the first of the pre-war oligarchs to invest in apples, Vladimir Yevtushenkov. He is not sanctioned by OFAC but his British PR agent, Lord Peter Mandelson, has resigned from his employment in 2017 after the London press attacked his Russian associations. Follow Yevtushenkov’s apple business here.
Neduzhko was one of several leaders of the Russian apple business to be asked these general questions:
— what are the estimated or projected rates of return which the investors now moving into Russian fruit and vegetable production aim at over the next five years?
— what is the value of new investment they think will be spent in the next five years on domestic production and import substitution, especially for tomatoes/paste and green vegetables and potatoes?
— how to solve the seed import problem for starting up new plantings?
— what do the producers estimate will be the value of state budget subsidies to the fruit, vegetable and potato industries this year and each year for the next five — what rate of growth of the subsidies?
— what are the biggest problems the new investors would like to solve in domestic policymaking and planning ahead?
They all refuse to answer.
In the Russian tomato business the story is a similar one. Kommersant has also reported this month opening an investigation of Yevgeny Giner’s tomato interests and operations.
In the global fresh tomato trade, Russia has been hanging on to its position in the top-five country importers worldwide. However, Russia is the only one to have cut its foreign imports significantly in the years from 2014 to 2021.The value was cut from $1.1 billion in 2014 to $398.5 million in 2021. During 2022 and into this year, the Russian food trade press has been reporting that the import volumes have continued to decline. Imports of tomatoes from China, the world’s leading tomato producer, fell by one and a half times. Tomato imports from Turkey, the third largest producer in the world, fell twofold. Sharp declines in tomato imports from the Balkan states and from the Caucasus have also been registered. Azerbaijan, which has been the largest volume supplier of fresh tomatoes in the Russian market, has also been hit with anti-pest phytosanitary restrictions; these are interpreted as political in the trade and at the source.
Correspondingly, the price of imported tomatoes for Russian consumers to buy has doubled, and the price of domestic tomatoes has followed them upwards. Retail data for the food market across the country indicate that by early in February a third of Russians said they were buying less tomatoes and cucumbers because of their price; 12% said they could no longer afford to buy them at all. In the first week of February, Rosstat, the government statistics agency, reported that tomatoes had jumped by 30% since December.
This is where Giner’s business calculation comes in.
UN FOOD AND AGRICULTURAL ORGANIZATION (FAO) TABLE OF TOMATO PRODUCTION, 2020
Data from the FAO. According to this report, “Russia, which used to be the largest EU export market and which is still banning the imports of fruit and vegetables from the EU, is increasingly self-sufficient.” Source: https://www.tomatonews.com/
Click on source to enlarge.
In the top-6 displayonly the Russian chart shows significant decline.
The Kommersant headline early this month was: “With tomatoes at the ready Yevgeny Giner has found an investor in a vegetable project. The beneficiary of the Agroinnovation agroholding Yevgeny Giner has found a partner for growing and processing tomatoes in the Astrakhan region. The owner of 25% of the project was the top manager of the luxury goods seller Mercury Group. Analysts note the growing interest of private investors in agricultural sectors with a focus on the domestic market and the relatively low competition.”
“Igor Kozlovsky, CEO of Auto Drive CJSC associated with Mercury Group, became the owner of 25% of the vegetable project of Giner’s Agroinnovation holding in the Astrakhan region. Changes in the membership of Agroinnovation Astrakhan LLC were made on February 1, it follows from the Unified State Register of Legal Entities. Created by Leonid Fridland and Leonid Strunin, the Mercury Group operates a chain of watch and jewelry stores, fashion boutiques and car showrooms. Among the assets are TSUM, DLT, and Barvikha Luxury Village. According to SPARK-Interfax, LLC Briar, controlled by Auto Drive, manages the Mercury Classic and Mercury Reserve companies, and owns shares in M Estate Vnukovo, M Estate Mall and other commercial real estate. Igor Kozlovsky is listed on the Mercury Auto website as one of the heads of the Bentley automobile center.”
“The Agroinnovation group of Giner, the president of the CSKA football club, manages 44,000 hectares of land, sugar factories and a dairy plant in the Kursk and Belgorod regions. It plans to grow tomatoes, potatoes, and produce tomato paste in the Astrakhan region. As the administration of the governor of the region has announced, the project — estimated to be worth Rb10.5 billion [$138 million] — can use about 30,000 hectares of land, and from that the plan is to produce about 50,000 tonnes of paste per year.”
“Tamara Reshetnikova, CEO of Growth Technologies, notes that Russia still imports a significant part of tomato paste, which is used, among other things, for the production of canned food, sauces, vegetable juices, so new [paste] projects may be in demand. According to her, there is a problem with moisture deficiency in the Astrakhan region, so, apparently, Agroinnovation plans to grow seedlings for tomatoes in greenhouses in order to harvest an early harvest.”
“Alexey Krasilnikov, Executive Director of the Union of Potato and Vegetable Producers, adds that the Astrakhan region is one of the main producers of open-ground vegetables in the Russian Federation, and the area under potatoes here has grown four to five times in recent years. According to him, the climatic conditions of the region allow growing and harvesting two potato crops, and early local potatoes in June—July can compete with imports from Egypt and Azerbaijan. According to the Ministry of Agriculture, in 2022, the harvest of tomatoes in the open ground in the Russian Federation increased by 7.7%, to 451,000 tonnes, potatoes, up by 9.1% to 7 million tonnes year on year.”
“The Astrakhan project is probably the first for Agroinnovation, where an outside investor participates. Senior analyst of Gazprombank Marat Ibragimov notes that a participant with a minority stake can be a financial partner, and this will allow the main owner, among other things, to reduce the risks associated with raising funds. According to Mr. Ibragimov, the focus of projects on meeting domestic demand, the large size of the target market and the relatively low level of competition may be especially important for local investors. So, the analyst points out, there is already high consolidation in the food retail sector, and non-food can be quite difficult for non-core players. Investment banker Ilya Shumov notes that in recent years the agro-industrial sector has been on the rise, so many non-core players, funds and private investors have shown interest in it, because they see great opportunities in this market in the current realities. Among the largest investments, the expert highlights the purchase by the structure of the owner of the AEON corporation Roman Trotsenko of the Rostagro agroholding with 240,000 hectares of land and the Rumelko dairy projects of the main owner of NLMK Vladimir Lisin.”
Kommersant reported that Kozlovsky claimed his participation in Agroinnovation Astrakhan is a personal project, and he refused to discuss more details. Giner’s Agroinnovation refused to answer the newspaper’s questions.
None of the sources who agreed to speak to Kommersant would agree to answer questions from this reporter and website.
Giner has a long history of secret offshore business operations, as well as of tax haven companies and foreign residences, which the Russian kompromat media have documented. One of Giner’s principal cashcows has been VS Energy, which until recently has been the second most lucrative producer and distributor of electricity in the Ukraine. The annual revenue of Giner’s group at the end of 2014 was over UAH 13 billion – more than $1 billion. In addition to the energy sector, Giner has also controlled a Ukrainian hotel chain, a bank, and a specialty steel plant. The last of these, Dnieprospetsstal, is reportedly owned by Giner with the Ukrainian oligarch, Igor Kolomoisky.
For a Russian summary of Giner’s business history, including the violent Luzhniki market controversies in which he was a central figure, read this.
The Luzhniki consumer goods market when Giner was one of its controllers in 1997; at the time annual turnover of the market was estimated at about $350 million. The trading operations were closed by Moscow Mayor Sergei Sobyanin in mid-2011.
Since the start of their troubles in Kiev in 2015, Giner and his partners have held out against allegations from Ukrainian prosecutors that the group had illegally privatized assets, avoided taxes, and laundered money from criminal enterprises in Russia. As of mid-2022, the Ukrainian courts have dismissed these allegations as lacking in evidence.
Berlin has been reported to be one of the Giner family addresses. This appears not to be oligarch palatial standard:
Above: source: https://biz.liga.net/
Vadim Giner, Yevgeny’s son, is reported to be a resident of Luxembourg, where one of the related Giner group companies is based (below).
While Giner’s Ukrainian businesses generate much of his income and his borrowing collateral, his sports businesses, including the Moscow football club and its stadium are major borrowers from Giner’s group, as well as from the state development bank Vnesheconombank (VEB), chaired by ex-president Dmitry Medvedev.
As the account and ownership filings of the UK-registered Bluecastle Enterprises Ltd. reveal, this entity is the principal controller of Giner’s sports assets and revenues. In 2019 Yevgeny Giner replaced his son Vadim as the nominal controller of Bluecastle, and took over himself through a network of other offshore entities registered in the UK, The Netherlands, and the Marshall Islands. Other entities reported by Bluecastle to be supplying cash to the sports businesses and either under common management or under common control include Sensei International SA of Luxembourg and the British Virgin Islands (BVI) registration, Spencerdale Ltd.
Source: https://find-and-update.company-information.service.gov.uk/
The football club, stadium and associated commercial and hotel businesses were in financial trouble by 2014-2015, before the impact of the war struck. In the UK Companies House files Giner and Bluecastle reported that in the year ending December 31, 2015, they were holding assets of about $320 million, the largest share of which was the CSKA stadium, the football field, and the concessions which included media rights for the games, a hotel and office complex. In addition, the capital value of the players on the CSKA team was estimated at $57 million at the end of 2015; this was down from $72.1 million in 2014. The company also recorded falling revenue for the year of $67.1 million; that was down from $80.8 million in 2014. Losses on the bottom line for 2015 came to almost $50 million.
This was so serious, the company auditor was obliged to report the “existence of a material uncertainty which may cast significant doubt about the Group’s ability to continue as a going concern.”
Source: https://find-and-update.company-information.service.gov.uk
To stay solvent, the auditor reported that Giner was lending Bluecastle, and thus the sports businesses, money from related-party companies; at the same time he was persuading the Russian government to bail out CSKA with a VEB line of credit totalling $280 million.
Source: https://find-and-update.company-information.service.gov.uk/
By the end of 2020, according to the last filing of accounts at Companies House, Bluecastle acknowledged its asset value had dwindled to a fraction of its earlier worth – down to $52.3 million from $378.1 million in 2019. Revenue had plummeted from $56 million to just $14 million. Broadcasting and advertising led the lossmakers, as the impact of the pandemic lockdowns for that year, were felt.
Football has enabled Giner to establish personal and business relationships with powerful presidential, government, and Moscow city officials. Their closeness, however, has not triggered US sanctions for either Giner or his principal money-making companies. However, the CSKA football and basketball club companies were sanctioned in a US Treasury action on February 22, 2022, following prompting by George Soros’s publications. The Treasury announcement indicated the reason for CSKA’s sanction was its link to VEB. By then Giner had arranged with VEB to swap his obligation to the bank for shares giving the bank control of Bluecastle, and thus of CSKA. “In April 2020 the Club issued 9,595 ordinary shares which were fully subscribed by Vnesheconombank. This diluted the Company’s [Giner’s] control over the Club from 100% to 22%.” This note appears in the small print at the end of the last page of the last financial report filed by Bluecastle in January 2022.
Since the US imposed its sanctions a few weeks later, there have been no financial reports from Bluecastle. Instead, it was issued with a compulsory strike-off notice on November 29, 2022. This threatened British government confiscation of “all property and rights” owned by the company. A month later the government withdrew its threat and the strike-off action was dropped.
In the present situation, Giner is bound to calculate that home-grown tomatoes will make a more profitable and less risky investment than offshore football. State financing remains a constant, however.
Government support for Giner’s new business includes a 10% to 15% protective duty on imported tomatoes and a duty-free volume quota for Turkish tomatoes. The level of this protection will be reduced, federal Agriculture Ministry officials warned a few days ago, unless retail price increases for tomatoes are slowed down or stopped.
Government apparatchiki are also resisting demands from the growers and their investors for an increase in budget subsidies. Last year, among the emergency wartime measures introduced, Rb445.8 billion were allocated to the development of the agro-industrial complex, and will be maintained this year. In parallel, subsidies to tomato, potato, and other vegetable growers will be increased. State bank-financed concessional loans have jumped from Rb137.9 billion five years ago to Rb1.5 trillion now.
These capital inputs are helping Russian agriculture to develop import substitution at the pace of the manufacturing industries.
For the time being, lobbying by the oligarchs, farm and grower associations has succeeded in stopping legislation to introduce new price controls on essential foodstuffs. A proposal from left deputies in the State Duma to fix a maximum profit margin of up to 15% was rejected last week by the federal ministries of Agriculture and Industry and Trade, the Federal Anti-Monopoly Service, and the leading supermarket companies. The Agriculture Ministry told the Duma by letter that permanent measures for price and profit control would “destabilize the economy, depriving producers and sellers of an incentive to work, lead to lower taxes and a shortage of goods.”
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