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by John Helmer, Moscow 

Alexei Kudrin (lead image) — the state finance factotum President Vladimir Putin promoted for his entire federal government career until in the war against the Ukraine and the US the president couldn’t protect him any longer —  has lost his half-billion dollar payoff.

Kudrin’s long-held ambition to succeed Putin in the Kremlin with US backing ends with the oligarchs and state bankers about to take over Yandex and cutting Kudrin’s stake in the deal by at least two percent and several hundred million dollars. This last cut is not only the deepest for Kudrin: the oligarchs and bankers are making public this week that Putin is not protecting Kudrin any longer.

Yandex, the dominant Russian internet company once controlled by the Israeli exile, Arkady  Volozh,  is now undergoing a process of state takeover to protect it from Volozh’s allies in the US and NATO, and to reprivatize it in the hands of the state bankers VTB and the Russian Direct Investment Fund and a group of oligarchs; they are rivalling each other, led by Vladimir Potanin of Norilsk Nickel and Vagit Alekperov of LUKoil.  Follow the inserted links to the back stories of each – Yandex,  Volozh, and Potanin.  

Left: President Putin and Arkady Volozh; right, Putin with Vladimir Potanin.

Volozh has lost control of Yandex because of his attacks on the Russian war against the US and NATO on the Ukrainian battlefield, because he fled to Israel,  and because he is a cyber security risk to Russia. Notwithstanding, Putin has been conciliatory and protective.   “He lives in Israel, and I can imagine that, to live a good and prosperous life there and have good relations with authorities, he has to make certain statements. He had been silent for a long time before he decided to make a statement. God grant him health and may he live well there. Frankly speaking, we are not particularly bothered by what he said. But in general, if a person grew up on this soil, got an education and became successful, he should have some respect for the country that gave him everything. I am not referring to Volozh – he is a gifted person who created a really good company and handpicked a team – I am not referring to him, but in general. Yes, one can imagine that a person does not agree with what the current authorities are doing. Do they have the right to express their views?  By all means. But there are quite a few fine points here.”

“We can side with our geopolitical adversaries and play along with them, thus damaging our country’s interests, or we can act otherwise. There are many nuances here. People decide for themselves who they are. Do they have a sense of national identity? Or do they prefer to mimic and feel like someone else, not a Russian person born in the Soviet Union? A person makes their own choices.”  

At the same time as Putin was saying this, he had agreed to a scheme for breaking up Yandex  into its Russian asset and foreign asset holdings, neutralizing Volozh’s power in Russia. To prevent the scheme from turning into a renationalisation by the state, Putin appointed Kudrin as his overseer. Kudrin’s payment for this was to be so large that Moscow sources suspected it was intended to become a political fund to finance Kudrin’s bid for the succession to Putin after his re-election in March of this year. Depending on the value of the final transactions, that might have been as large as $1.5 billion or as little as $375 million.

At peak, when it was listed in New York, the Yandex group had a market capitalization of almost $30 billion; Volozh’s worth, reported by Forbes US, peaked at $2.3 billion. After delisting on the New York Stock Exchange and trading freeze on Nasdaq  as the special military operation began, Yandex’s share value has dropped to $6.9 billion on the Moscow Stock Exchange this week.  At this price, Kudrin stands to earn no more than $104 million – a premium  retirement pension collectable in roubles, but a tupik politically (deadend).  

Moscow sources understand this; no Russian media are reporting it – until this week.

Source: https://companiesmarketcap.com/


Source: https://markets.ft.com/

The headline story, published on Wednesday by Moscow business papers Forbes Russia  and Vedomosti, is that “potential investors of Yandex demand to reduce the 5% size of the option package of Alexei Kudrin, the company’s corporate development adviser. Businessmen Vladimir Potanin and Vagit Alekperov are among the likely opponents of the previous agreement, Forbes writes, citing sources. ‘5% was the upper limit of the Yandex stake that Kudrin could receive under the initial agreement…Now the upper limit is 2% to 3%,’ a source close to Yandex told the publication. He added that Potanin and Alekperov ‘insist on a reduction to 1.5%.’ “

“According to the initial conditions, Kudrin was supposed to receive options for 5% of Yandex shares for joining the company and helping to separate its Russian and international businesses. Arkady Volozh, one of the founders of Yandex, made such a proposal to the former head of the Accounting Chamber in 2022. But the deal was not concluded in this format. Now, as the Forbes interlocutor says, the large investors in the Russian business of Yandex are demanding to renegotiate the terms of the agreement with Kudrin. They want the calculation of the option package for the ex-head of the joint venture to be based on the achievement of appropriate results. On December 27, the MKAO Yandex was included in the register of participants of the special administrative region (SAR) of Oktyabrsky Island in the Kaliningrad region…On the same day, Yandex shares on the Moscow Stock Exchange rose by 3.64% to a daily high of 2508 roubles amid speculation that Potanin, president of Interros Holding and MMC Norilsk Nickel, could enter the capital of the parent company Yandex N.V. Together with him, several participants in the pool of potential investors of Yandex acquired a share in the Dutch corporation. Forbes writes about this with reference to sources. Transactions with shares of the Dutch Yandex N.V. are currently taking place on the over-the-counter market, since trading in the issuer’s securities on Nasdaq has been suspended since February 28, 2022. According to Forbes, Potanin began buying up shares of the corporation back in the summer;  foreign companies participated in the transactions.”

Source: https://johnhelmer.net/

The Forbes Russia report,  bylined Vladislav Noviy, makes several disclosures from inside Yandex which have not been revealed before. Volozh, according to a source identified as “close to Yandex”, expected Kudrin to lobby Putin to agree to his terms for restructuring Yandex. This way Volozh believed he could manage to retain the underlying intellectual property of Yandex’s Russia operations, and also keep a sizeable shareholding in the reorganized Russian company. But Kudrin failed, so Volozh reacted with the start of his attacks on Russia.

“ ‘When an agreement was reached between Volozh and Kudrin, it was meant that the [Yandex] deal would take shape before the end of 2022, and with licenses [for intellectual property] for Volozh, among other conditions,’ explains a source close to Yandex. This was Kudrin’s commitment and assignment.  But [the deal] didn’t work out then…Initially, the deal on the division of Yandex N.V. assets was planned to be completed in late 2022-early 2023, two sources familiar with Yandex managers heard. According to one of them, when the process of preparing the Yandex N.V. deal was launched in early summer of 2022, it was assumed that it would be closed by the end of 2022. According to this interlocutor, the dialogue with Kudrin about the transition to Yandex was initiated by the board of directors of Yandex N.V.; the board also negotiated with the head of the Accounting Chamber about possible conditions. By this time, Arkady Volozh had left the board of directors, according to a Forbes source.”

This means that Volozh and Kudrin were negotiating their private lobbying deal with Putin several months before Kudrin officially left his Accounting Chamber post on November 30.

Source: https://www.reuters.com/

Yandex had officially announced Volozh’s resignation from all his positions in the group on June 3, 2022, following the imposition of European Union (EU) sanctions against him. The official reason, according to the EU notice at the time, was that “Yandex is Russia’s most popular search engine…responsible for promoting state media and narratives in its search results, and de-ranking and removing content critical of the Kremlin, such as content related to Russia’s war of aggression against Ukraine.”   

It is now evident from inside Yandex that Volozh was telling his associates he  would have Kremlin backing for a scheme to evade the EU sanctions, keeping control of Yandex for himself and paying Kudrin a premium for arranging it. It has turned out, however, that Volozh and Kudrin miscalculated.

Volozh publishes a one-page website in Hebrew and English. He describes himself on the site as “a Kazakhstan-born, Israeli tech entrepreneur, computer scientist, investor, and philanthropist.”  

A month and a year later, on July 20, 2023, the US Treasury sanctioned Kudrin for his involvement in the Yandex reorganisation.  At that point, according to Forbes’s source “close to Yandex”,  Volozh “lost faith in the possibility of completing the deal on acceptable terms, and therefore made an anti-war statement.”   

“Russia’s invasion of Ukraine is barbaric, and I am categorically against it,” Volozh’s statement declared. “I am horrified about the fate of people in Ukraine – many of them my personal friends and relatives – whose houses are being bombed every day. Although I moved to Israel in 2014, I have to take my share of responsibility for the country’s actions.”  

The Forbes source implies that Volozh’s anger at being sanctioned in 2022 was eclipsed by the refusal of the Russian security chiefs, then Putin, to accept the sanctions-evasion scheme he had devised to keep the assets of the company, plus indirect shareholding control.  In Volozh’s attack on Russia, he claimed his focus since the start of the war had been on supporting Russian engineers wanting to leave the country. “These people are now out, and in a position to start something new, continuing to drive technological innovation. They will be a tremendous asset to the countries in which they land.”    Except for Putin, this was understood in Moscow as sabotage in a time of war — treason.

“After the publication of this statement,” Forbes reported this week, “ ‘the licenses of Volozh were canceled’ as part of the Yandex N.V. deal, explains an interlocutor close to Yandex. Another consequence of Volozh’s statement was the concern that potential investors from Russia had about partnering with the Dutch Yandex N.V. within the framework of Russian business…If before that, the sale of a controlling stake in the Russian business of Yandex N.V. was discussed to investors, then after Volozh’s speech, the holding had plans to sell 100% of Russian assets.”

“Now, according to an interlocutor close to Yandex, billionaires Vladimir Potanin, Vagit Alekperov and other potential investors in Yandex’s Russian business ‘do not want to share the loot with Kudrin.  Kudrin had not negotiated with them, but with Volozh. And the percentages [of Yandex shares] will all go to him at the expense of the investors, in fact, out of their pocket,’ an interlocutor close to the company retells the position of potential investors. ‘If a company is worth $30 billion — and it will be worth that much in two to four years, then 5% of that is $1.5 billion, and 2% is $600 million. Investors are fighting for this money,’ he explains.”

In the meantime, Forbes reports that Kudrin has been paid cash for lobbying the Kremlin. His “motivational package includes a monetary component. According to a source close to Yandex, from the moment he was appointed to the position of corporate development adviser, he could earn up to $5.5-6.5 million, of which he could receive a significant part as signing bonus when leaving the civil service and joining Yandex, and up to $2 million for a year of work in the companies.”   

In what country and in what bank Kudrin has been depositing these US dollar proceeds has not  been revealed by the newspaper. Israel and an Israeli bank are suspected by Moscow sources.

By last November, the Russian state bankers and oligarch bidders for Yandex  recognized that Kudrin had no practical role to play since the terms of the takeover would be decided by Putin, and the oligarchs preferred to deal with him direct; they told Kudrin so. Putin concurred. If they also believed it had been Putin’s idea, and Kudrin’s plan, to use part of the Yandex payoff to finance his run to succeed Putin in the Kremlin, they also told Putin that was no go.  

Forbes reports Kudrin and Volozh as refusing to comment; Potanin and Alekperov were reported as refusing to answer requests from the publication. Over twenty years Kudrin has never responded to questions from this website.

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