Robert LaFranco and Alex Sazonov Moscow and London
ALISHER Usmanov, Russia’s richest person, moved control of most of his $20 billion (R179bn) fortune last year to a holding company based in the British Virgin Islands, 9 000km away from Moscow.
The company, USM Holdings, controls the billionaire’s most valuable asset, Metalloinvest Holding, Russia’s largest iron ore producer. It is run through two subsidiaries, USM Steel & Mining Group and USM Investments, both based in Cyprus, Metalloinvest’s annual report shows.
“Offshores are the main tool for Russian businessmen to protect their assets from state authorities, rivals and all kinds of raiders,” John Tiner & Partners attorney Valery Tutykhin said. The Geneva-based law firm specialises in wealth management.
All of Russia’s 20 richest people control a portion of their fortune through holding companies registered outside their home country. They have a combined net worth of more than $227bn, according to the Bloomberg Billionaires index,
The billionaires, most of whom built their fortunes during the violent and unpredictable post-communist economic environment, use the entities to manage, preserve and conceal their wealth, a tactic which has drawn the ire of Russian President Vladimir Putin.
Viktor Vekselberg holds the majority of his $14.8bn fortune through Renova Holdings in the Bahamas. Among its assets is a 7 percent stake in United Rusal, the world’s largest aluminum producer.
Vladimir Lisin controls his 85 percent stake in publicly traded Novolipetsk Steel, Russia’s most valuable steel maker, through a Cyprus-based holding company, Fletcher Group Holdings.
Mikhail Fridman controls his banking, retail and telecoms assets through Moscow-based Alfa Group, which is in turn owned by Gibraltar-based CTF Holdings.
Putin has vowed to bring some of the money home. Last year, he took control of the Federal Financial Monitoring Service, an executive body aimed at combating money laundering. The State Duma, Russia’s lower house of parliament, introduced a series of amendments to existing laws, tightening control over companies’ financial transactions.
During his campaign for a third term last year, Putin said he was considering a one-time tax on entrepreneurs who acquired state assets at “unfair” prices in the 1990s.
In a speech to the nation in December, Putin criticised the country’s legal system and the elements that led to accusations of wrongdoing, vowing to eliminate the factors that had turned “economic disputes into score-settling”.
Putin said the following week that he “hoped” the billionaires who sold their 50 percent stake in TNK-BP, Russia’s third-largest oil company, for $28bn, would reinvest the proceeds in their home country.
“Russia was and always will be the basic platform for investment,” billionaires Vekselberg, Fridman, Len Blavatnik and German Khan, said in a joint statement released six days after Putin’s comments.
A fifth partner, Alexey Kuzmichev, was not part of the announcement. “In Russia, in particular, they plan to invest most of the proceeds from selling their shares in TNK-BP.”
So far, there has been little money flowing back to Russia.
Fridman and his partners at Alfa Group said on March 18 that they would create a global investment company to pursue energy and telecoms assets. Two weeks later, through Altimo, a unit of Alfa based in the British Virgin Islands, Fridman offered to buy out minority investors in Orascom Telecom Holding in Cairo for as much as $1.8bn.
“The formation of a single holding company enables us to optimise business processes, enhance the efficiency of managing subsidiary companies, and provide more opportunities to access international capital markets,” Usmanov said in February
. – Bloomberg