Friday, Aug 29, 2003
Mikhail Fridman, head of the powerful Russian group Alfa, has done more than most of his rivals to establish corporate partnerships with the west. But he makes clear that operating in his country remains a highly distinctive business.
Sitting in his Moscow office, Mr Fridman - Russia's third-richest man, with an estimated wealth of Dollars 4.3bn (Pounds 2.7bn) according to Forbes Magazine - defends the privacy of his group and his reluctance to adopt full public disclosure of ownership.
"The rules of business are quite different to western standards," he says. "I don't want to lie and play this game. To say one can be completely clean and transparent is not realistic."
Mr Fridman is a veteran Russian oligarch, one of the original seven who bankrolled former president Boris Yeltsin's election in 1996 in return for participation in cut-price "loans for shares" privatisations. Since then some of his peers have lost their businesses and gone into self-imposed exile. Mr Fridman has bridged the transition to the new regime of President Vladimir Putin more smoothly than most, and has gone further in restructuring and selling interests in his businesses.
Mr Fridman makes no bones about the way he and his counterparts made their money. "Of course we benefited from events in the country over the past 10 years. Of course we understand that the distribution of state property was not very objective. But we used our chance, and people are angry about it," he says.
The centrepiece of his empire is the oil group TNK, which recently combined its assets with BP to create a Dollars 14bn joint venture, a flagship deal blessed and praised by Mr Putin as a sign of Russia's openness to foreign investment. Sceptics say the deal is a form of insurance policy for Mr Fridman in Russia's still politically un-stable environment.
"Fridman has created a transnational company which is now outside the Kremlin's jurisdiction," says Igor Bunin, a Russian political analyst. Mr Fridman rejects this argument, insisting that business - not politics - was his only consideration.
The deal, approved this week by the Russian anti-monopoly ministry, poses significant challenges for both sides. Russia's poor environmental standards constitute one of them. Mixing Anglo-Saxon corporate culture, epitomised by BP, with Russian practices is another. Behind the affable public face of Mr Fridman, observers talk of associates, including German Khan, another important Alfa shareholder described by many as one of the country's most ruthless businessmen.
Alfa itself has been criticised for its aggressive approach, illustrated last December when it joined with Sibneft to bid for the state oil group Slavneft, depriving the government of the extra revenue that a more competitive auction might have generated.
Buying TNK at privatisation, for more than Dollars 800m, forced Alfa to raise substantial debt, helping to pioneer links between Russian companies and foreign banks. Its need to join forces at TNK with Access/Renova, another powerful Russian business group, also gave it an early taste of co-operating with those outside its own tight circle, rare in a country where a strong majority shareholder is the norm.
Its business strategy is different from those of other groups. While his peers focused on one core asset - usually oil or metals - Mr Fridman diversified, moving into growing sectors of the economy and playing the role of a venture capital fund. His talent, observers and competitors say, lies in spotting trends.
Alfa also stands out for riding the recent turbulence in Russia's own political landscape. With the transition from Mr Yeltsin to Mr Putin, many observers still see it as among the most influential lobbyists in parliament and the Kremlin, where a number of its former employees work.
In the years since Mr Putin ordered the oligarchs to keep out of politics, Mr Fridman has been cautious and discreet, observing the new rules of the game.
"Of course we lobby our interests in parliament; but we don't get involved in politics," he says. When a chairman of a commercial TV channel 25 per cent owned by Alfa asked Mr Fridman's permission to hire an outspoken Russian journalist, Mr Fridman replied: "Only if you can guarantee that there will be no telephone calls from the Kremlin." Read our coverage of Russia five years after the financial crisis at www.ft.com/russia
By MIKHAIL FRIDMAN, ANDREW JACK and ARKADY OSTROVSKY
Copyright The Financial Times Ltd 2003. Privacy policy.
