Prominent Russians: Vladimir Potanin
One of the founding fathers of Russia’s oligarchy, author of the idea of mortgaging auctions for the crown jewels of Russian industry in the mid-1990s, former first vice-premier of Russia, one of the richest men in the world prior to the global financial crisis, president of Interros Holding… Vladimir Potanin is today an exemplary philanthropist, who has turned away from his "robber baron" tactics to become a force for good in the world.
Question: What is the most precious thing that you have bought with your big money?
Answer: You may laugh, but it’s independence. (Vladimir Potanin in an interview to his alma mater magazine, 04.04.2007)
The future businessman was born in Moscow in 1961, the year the Soviet Union sent its first man into space. Vladimir’ s father Oleg worked for the Russian Ministry of Foreign Trade and traveled a lot – trips to New Zealand, Australia and other countries were part of his career. His mother Tamara, a doctor by education, followed her husband everywhere. So did little Volodya (or Vova – both diminutives of Vladimir). Despite spending a lot of time with his grandparents, Vladimir has always said he inherited his “wit and buoyancy” from his parents.
School years: two loves in life
Young Volodya went to school for the first time in Turkey. There were only 26 pupils at the embassy school so the boy received an almost private education. Upon his return to Moscow for two consequent years at school he primarily relied on the knowledge he had gained in Turkey.
The rest of his childhood was spent in an elite Moscow area, inhabited primarily by foreign trade workers and diplomats. Potanin got so attached to the neighborhood that when he grew up he built an elite tower block not far from where he used to live. That house was one of the capital's first experimental blocks of executive flats – with a restaurant, sauna, gym, billiards room, cafeteria, swimming pool, hair salon, winter garden and even a guarded ski run next to the house. However, Potanin is now rumored to prefer his out-of-town residence to living in the city. Curiously, both buildings – his childhood home and its “grown-up” version - host branches of different banks: Potanin’s spirit seems to attract money.
However, it was soccer that seemed to attract young Volodya most. Winter or summer, he and his friends played for two hours each Sunday. Potanin was always an instigator who put together the team and played forward. Outside the game, those who played with him remember him as thoughtful and dignified.
“I had an appetite for leadership from childhood. I liked to be first. I liked to win competitions, for example soccer games. I would get upset if we lost. I liked to score a goal myself. That’s all true. Despite all that I never wanted to be the strongest of the weakest. For example, if I saw that someone ran faster than me, jumped further or was better at soccer, I needed to hang out with that particular person.”
Potanin has carried his love for soccer with him throughout his life. He even introduced “Soccer Sundays” at his UNEXIM Bank and later added “Soccer Wednesdays” at his other company, Interros.
Young Potanin was a good pupil but not a nerd, according to his teachers. One of his qualities that was obvious even back then was his purposefulness. He was a leader and an activist but at the same time he did not make a show of himself. He also had a good sense of humor – laughter in the class meant either Volodya or his friend Misha had made a joke. The two tablemates also performed together – Vova sang while Misha played guitar. The two stayed friends for many years after school.
Family as an investment
Potanin may not have been very popular with the girls, but he was never deprived of female attention. He never wanted many girls around. He saw one girl for a long time before, in the 10th grade, he became close to Natasha Varlamova . She sat two desks closer to the front of the classroom and was a nice and quiet girl from a “decent family.” They kept their relationship discreet. Potanin never showed his feelings in public. However, they were one of the first couples to get married at the institute by the end of their studies.
They’ve been together ever since and have three children. Their eldest daughter (born in 1984) followed in her father’s footsteps and graduated from his alma mater. However she is known primarily for her achievements in aquabike (jet ski). A three-time world aquabike champion and multiple Russian champion, Anastasia has suffered three brain concussions. However that didn’t stop her younger brother Ivan (born in 1989) from joining in at the age of seven and also winning multiple championship titles in Russia. He says it was their father who got on the jet ski first and they simply got into it. Living out of town near the Istrinsky water reservoir helped the matter. However, the youngest son (born in 1998) fell out of the family tradition; he’s most fascinated with hockey.
In one of his interviews in 2007 Potanin said about his family:
“When we were just married, there was a family celebration where my father made a speech. He said: ‘I see that my son is building his family, investing a lot of energy and thought into that.’ Those were very wise words. You have to commit to your family – I’m sorry for employing a business term – to invest in it. I mean you have to build a family, almost as if it was a kind of business.”
Nowadays the whole family likes to occasionally race down the ski slopes in the Alpine ski resort of Courchevel and the head of the family is usually on the slopes much earlier than the rest of the holidaymakers. Rumor also has it that the family plays Monopoly all year round to stay in good business shape.
Vladimir hasn’t neglected his connection with his brother Yaroslav, eight years his younger, either. For Potanin his family became a base for fulfilling his ambitions.
“When at the institute while I was still courting my future wife Natalia, her parents once asked me ‘What do you want to become, what plans do you have for life, can we entrust you with our daughter?’ I said I studied at MGIMO and planned to become the minister of foreign trade. So my ambitions were quite high already back then. As we say in Russia, bad is the soldier that doesn’t want to be a general.”
His career took him even higher – to the top – when he served in the government as first vice-premier. However his action field was not politics but business. In 2009 the Forbes magazine list of billionaires estimated his fortune at $2.1 bln, although the crisis saw his fortune shrink. In 2010 Potanin surprised everyone by announcing that he would leave all his money to charity rather than his family.
“Children must come out of their parents’ shadow, live independently and realize themselves as citizens.”
So how did Vladimir Potanin realize himself as a citizen and become the world’s 25th wealthiest man with $19.3 bln in 2008, according to the Forbes list?
Building up a network: education and first steps in business
In 1978 Potanin entered the then highly prestigious Moscow State Institute of International Relations known as MGIMO – an elite university that groomed students for the Ministry of Foreign Affairs. He studied economics together with the grandson of Leonid Brezhnev, the then Soviet leader, and many future prominent figures. Potanin was a good student – just like in his school years: self-sufficient and easy going. Although an activist, he wasn’t arrogant, according to his fellow students’ memories. And he always found time for leisure – be it his favorite pastime soccer, a game of chess or even a student drinking session.
“I’ve always wanted to be the best in my profession. And I’ve always wanted to compete, to fight,” Potanin says.
Upon graduation from MGIMO in 1983 with a degree in international economics Vladimir followed in his father’s footsteps and went to work for an organization within the Ministry of Foreign Trade of the Soviet Union. He spent seven years there – meeting people and building a network that would prove crucial later in life.
By the time Gorbachev’s perestroika entered its final phase, Vladimir Potanin had one advantage: unlike many others in Russia, he had already gotten a taste of what was going on in the West, thanks to his childhood travels and the job he was doing. He was also fluent in English and French.
After the state monopoly on foreign commerce was abolished in 1990 Vladimir Potanin took advantage of the new regulations and founded (and headed) Interros, a foreign trade association. According to mass media reports, he used his connections with former ministry employees well.
Roughly at the same time Vladimir Potanin met a man who would become his business partner for many years – Mikhail Prokhorov. They were dubbed “P2P” (Potanin & Prokhorov) and their responsibilities were clearly divided: Prokhorov was responsible for the technological and economic side of things while Potanin, a natural born diplomat, was the strategist and tactician. He knew how to use his elite connections to find potential clients for the banks he planned to open.
The two P’s met at the International Bank for Economic Cooperation which soon went bankrupt and floated into Potanin’s hands. With the capital he had accumulated from Interros, he and his new partner started the joint-stock commercial bank International Company for Finance and Investments (MFK) to which all the operations of the former Bank for Economic Cooperation were transferred.
In 1993 Potanin and Prokhorov launched another business – the United Export Import Bank (UNEXIM BANK), for a time Russia’s largest private bank, to which many state enterprises transferred their accounts. Vladimir Potanin was president of both banks.
The P2P conglomerate saw active growth during the so-called “loans for shares” program (1995), in which the Russian government traded ownership in state industries for loans: Russia’s largest state enterprises were often sold for laughable money. Vladimir Potanin became notoriously known as the man behind this controversial program administered through auctions.
In 1995 Potanin’s structures won all the auctions they participated in. He acquired control of more than 20 formerly state-owned enterprises for a fraction of their real market price (practically for free), including the Sidanko oil company and the mining company Norilsk Nickel.
In an interview to the Italian journalist Giulietto Chiesa in 1998 Potanin said his goal was “finding an efficient owner for the enterprises and attracting funds into the treasury.” He admitted though that only “the first task was solved.”
Building a business on this scale had its difficulties. However Potanin’s talent as a strategist and diplomat helped him survive many storms – be they political or criminal.
Business and politics
In 1996 Vladimir Potanin was among seven bankers who controlled more than 50% of the Russian economy. Their influence over the government led to the appearance of the term “Semibankirschina” – or the “reign of the seven bankers.” They helped catastrophically unpopular President Boris Yeltsin be re-elected in 1996. As a consequence, Potanin was appointed by Yeltsin to hold Russia's number-two position, first deputy prime minister.
He served in the government from 14 August 1996 to 17 March 1997, supervising economic issues, coordinating the work of various ministries and departments and heading about 20 federal and governmental commissions. He was also Russia’s manager at the International Bank for Reconstruction and Development and the Multilateral Investment Guarantee Agency.
Within seven months at the post, Potanin had ensured stable profits to his business for several years ahead. Rumor has it that Potanin used his high position to lobby decisions beneficial to his own business empire, leaving many other tycoons unhappy. He left the government, in his own words, “with a feeling the job had been left incomplete as I managed to do so little, I only started to enjoy it, but had to pack already…” (Interview to Itogi magazine, 22.02.2010)
However, ever since then he’s claimed to have no political ambitions: “It simply doesn’t turn me on.” (Same interview to Itogi magazine, 22.02.2010)
In May 1997 he became the irreplaceable president of UNEXIM BANK.
Later in 1997 Vladimir Potanin’s companies purchased a controlling stake of the Izvestia newspaper, which served as a basis for Prof-Media, a holding created that same year. It comprised the most popular Russian tabloid Komsomolskaya Pravda and Izvestia, to be later joined by other publications and media outlets. Potanin used them to return fire at those who accused him of being too close to the government as a result of the sweet deals he received.
Russia’s economic crisis of 1998 didn’t go unnoticed in Potanin's business empire. Nevertheless he managed to set up numerous shell companies to shelter his personal assets and allegedly diverted considerable sums to his accounts outside of Russia. It was whispered at the time that he threw a party at the height of the crash for more than 100 of his closest friends in a nightclub at the French ski resort of Courchevel.
In the meantime Potanin’s track record with international investors was going from bad to worse. The international financier George Soros, who had invested $980 million in Potanin's telecom enterprise Svyazinvest just before the ruble collapsed, said later it was the worst investment he had ever made. Other losers in Potanin's empire included BP/Amoco, which that same year had invested $571 million in his oil company Sidanko, only to find the company forced into bankruptcy.
In mid-1999 his UNEXIM Bank had its state banking license revoked. The international community, including the International Monetary Fund (IMF), were putting great pressure on the government to intervene in what they believed was becoming a monetary nightmare following the 1998 economic crisis. In the eyes of the international community Russian banks (owned by the oligarchs) were too slow at restructuring and too busy trying to protect their own fortunes. As if it wasn’t enough, in 2000 Potanin’s Norilsk Nickel was put under investigation after a shady share-swap plan that was implemented to reduce the power held by foreign investors.
“Amnesty” of the new century (2000’s)
The first decade of the new century saw Vladimir Potanin going further down only to raise his head again. Today Vladimir Potanin continues to be a busy man with many top positions. He is not only President of UNEXIM BANK (since May 1997) and President and the Chairman of the Board of Directors of the Interros Company (from May 1998) but also a member of the Public Chamber of the Russian Federation and Chairman of the National Council on Corporate Governance among other positions. He’s also the recipient of numerous awards, including many from the Russian Orthodox Church. However, there were several milestones making headlines.
In June 2000 the Moscow prosecutor’s office filed a lawsuit charging Potanin with the illegal privatization of his giant metals company, Norilsk Nickel, back in 1997, which for a long time had been seen as one of the most scandalous of Russia's privatization deals. Potanin was immediately written off by the media as a “once-powerful oligarch” along with other oligarchs who were quickly falling out of favor. The prosecutor’s move led some to wonder if it was the start of a revision of the 1990s privatization itself. But the case was rejected a day later by the Moscow Arbitration Court , which said the charges were ill-prepared and needed to be restructured before they could be considered.
Interestingly, when news of the suit came, Potanin said the business environment in Russia would not improve until property rights became inviolable. He also lashed out at the presidential administration, saying it was scaring investors by falling into the trap of trying to undo the work of its predecessors.
Less than a month later then new President Vladimir Putin commented indirectly on his policy towards the oligarchs. "In Russian we have a saying regarding catching fish in muddy waters. There are fishermen who have already caught a lot of fish, and would like to keep the system as it is," Putin remarked. Soon after Putin's deputy chief of the presidential staff, Vladislav Surkov, suggested that the Kremlin would not punish these "fishermen" for their past activities and said he believed Russia should "not settle accounts." There was an opinion that going back on the results of the privatization auctions would do the country no good.
In 2002 Interros founded the Open Investments real estate group and a year later - a special company within it, responsible for building the ski resort “Rosa Khutor” (“Russia’s own Courchevel”) for the middle-class. Vladimir Potanin became one of the main lobbyists for Russia to host the 2014 Winter Olympics.
“It’s a curious story. At the end of March 2005 Vladimir Vladimirovich (Putin), whom we had approached before too, finally agreed to listen to our concept. The meeting happened in Sochi…” The few attending the meeting had a presentation prepared – however it turned out none of the “big bosses” dared to use the computer for a demonstration. Potanin’s daughter Anastasia happened to be there as well – Potanin claims if it hadn’t been for her the whole thing would have failed. “So there we were - my daughter was operating the computer, and we were putting forward our case (to the President). I believe that particular presentation (arguing) in favor of the Olympics became a turning point. Vladimir Vladimirovich (Putin) was persuaded by our fighting stance while we took up certain obligations.” (Interview to Itogi magazine 22.02.2010).
Some say those obligations will undoubtedly bring Potanin big dividends now that Russia has been chosen to host the Winter Olympics in 2014. The company is said to have invested some $1.5 billion in Olympic village infrastructure. It also hired a top designer - Bernhard Russi, the 1972 Olympic champion downhill skier - to work on the ski runs. In August 2007 Potanin received the Order of Merit for the Motherland, 4th Degree for active participation in the successful promotion of the Sochi bid for the 22nd Winter Olympic Games.
Divorce of the partners
In 2007 Russia’s business community was shocked: the everlasting and unbreakable tandem Potanin/Prokhorov announced they intended to stop doing business together and split their assets. The divorce was loud – with the banging of doors and neighbors getting involved. What exactly caused the breakup is still a mystery – whether it was provoked by Prokhorov’s scandalous arrest in January 2007 in France (for allegedly being involved in a prostitution ring), or whether that was just a pretext. In any case, the split didn’t go as Potanin had planned. Prokhorov outplayed him in the division of Norilsk Nickel.
Here is what Forbes magazine said about Vladimir Potanin in November 2009:
“The split from his longtime partner, Mikhail Prokhorov, in early 2007, has not helped his pocket book. His fortune has fallen more than $17 billion in the past year, as shares of his biggest holding, the world's largest nickel producer, Norilsk Nickel, collapsed by three-fourths. Still his stake in Norilsk is not as large as he hoped, as Prokhorov sold out to billionaire Oleg Deripaska instead. As part of the division of assets, Potanin still has a stake in Rosbank. He sold a 20% stake in Polyus Gold to another billionaire, Suleiman Kerimov, in late 2008. He has variously served as a deputy prime minister of the economy under Boris Yeltsin and as a partner to George Soros in the telecom monopoly Svyazinvest. He is active in philanthropy in Russia and is a supporter of the arts.”
Charity and art in the life of an oligarch-philanthropist
Vladimir Potanin was one of the first Russian tycoons to engage in philanthropic activities early last decade. His Charity Foundation was established in 1999 to support young students and teachers. The Foundation gives away millions of dollars in grants and scholarships. It finances the RussianOrthodoxUniversity and the commission grooming managerial staff for the national economy of Russia. In September 2002 Vladimir Potanin was presented with a commemorative award for philanthropy and charity from the Russian Ministry of Education. In 2010 the businessman announced he intended to increase annual donations from $10mln to $25mln for the next 10 years until he sets up a new fund to manage his fortune for charity.
According to the non-Russian media, Potanin was “seeking prestige.” Others called it “a step to improve his image” in the West with more than $1m annual donations to the Guggenheim Foundation – he also has a seat on the board of trustees of the GuggenheimMuseum.
A big sponsor of the HermitageMuseum in St Petersburg , in April 2003 Potanin was also elected Chairman of the Board of Trustees. It was he who bought the famous “Black Square” by Kazimir Malevich for one million dollars and passed the masterpiece onto the Hermitage.
“Fortune-telling” in 2010
In 2010 Vladimir Potanin remained in control of many assets including 25 percent plus 1 share of Norilsk Nickel, 35 percent of one of Russia’s largest private banks, Rosbank, 100% of Profmedia (a media group which has stakes in TV, radio and internet assets including Rambler Media, Afisha magazine and MTV Russia), 40% in the Open Investments real estate group and the $1.5 billion Rosa Khutor Olympic ski development project in Sochi.
As the Financial Times newspaper put it: “Although Vladimir Potanin’s fortune was shredded in the financial crisis (according to Forbes, his personal wealth fell from an estimated $22.4 bln to $2.1 bln by April 2009), it is since likely to have climbed again as Russian share prices and commodity prices have recovered.” (FT, 1.02. 2010).
Written by Darya Pushkova, RT correspondent