May 8, 2011 10:18 pm

From oligarchy to philanthropy


Vladimir Potanin: ‘I would like to create something that would last a long time’

Late last month, Vladimir Potanin was invited to address a club of young entrepreneurs in Moscow. It was, he says, sheer pleasure.

“No one asked me about Vladimir Putin or Dmitry Medvedev,” jokes the tycoon, referring to the debate over which of Russia’s ruling “tandem” will be president next year – which he argues is not particularly important. “And no one asked me about Norilsk Nickel.”

It is hardly surprising Mr Potanin would want to avoid being defined by the struggle for control of Norilsk, the world’s biggest nickel producer, in which he has been engaged with rival oligarch Oleg Deripaska (each man holds 25 per cent) on and off since 2008. With its lawsuits, accusations of conspiracy, disputed share buy-backs and sales of stakes to third parties, the battle has done little for either man’s image. It has revived memories of Russia’s “wild east” capitalism of the 1990s.

Even back then, Mr Potanin aspired to be more than a brash Russian billionaire. He craved recognition from western counterparts. And he wanted to leave something behind. “Of course, I would like people to remember my family,” he says. “I would like to create something that would last a long time. It’s important for me.”

That may owe something to his background. Unlike most of Russia’s early post-communist tycoons, Mr Potanin came from a Soviet blue-blood family, son of a foreign trade official posted to Turkey and New Zealand. He once explained to the Financial Times how he learnt to respect business success when, as a 17-year-old young Communist who believed the propaganda that all capitalists were ruthless exploiters, his father took him to a reception given by one of New Zealand’s richest men. His Soviet father, he said, admitted he respected this entrepreneur who had created a business and employment for thousands.

Mr Potanin followed his father into the Ministry of Foreign Trade but left in 1990 to start a foreign trading business of his own as communism collapsed. He was one of the original “oligarchs”, when the term was first used to refer to a specific group who amassed wealth in the post-Soviet era and parlayed that into political influence. Indeed, he helped create the oligarchs – or at least provided the alchemistic device that transformed their initial millions into billions.

Mr Potanin was a principal author of the infamous loans-for-shares scheme in 1995, when businessmen loaned money to the cash-strapped Russian state. When the state failed to repay, the tycoons were allowed to buy key state assets at knock-down prices. Mr Potanin, with then partner Mikhail Prokhorov, bought 38 per cent of Norilsk, a mining and metals colossus in Russia’s Arctic Circle, for $170.1m. Today, that stake would be worth $18bn.

Though only just 50, he has already proved a great survivor. Of the original “seven bankers” reckoned to control huge chunks of Russia’s economy by the mid-1990s, only three – Mr Potanin, plus Mikhail Fridman and Pyotr Aven of Alfa Group – are still in business in Russia. While Mikhail Khodorkovsky, another of the seven, is in jail, Mr Potanin – who briefly served as the country’s deputy prime minister in the 1990s – has the honour of hosting Russia’s version of The Apprentice television show. His Interros holding company spans banking, mining and media and, in March, Forbes estimated him to be Russia’s fourth richest man, worth $17.8bn.

This being Russia, achieving that wealth has involved some spectacular corporate bust-ups – including not just with Mr Deripaska, but with Mr Fridman a decade ago. Perhaps remembering the deference to others’ achievements his father taught him, Mr Potanin is carefully polite about both. “He’s a successful man and I think that success is a thing we should respect despite the fact that I do not like some of his methods,” he says of Mr Deripaska. The formula is similar for Mr Fridman: “I like this man but we cannot be friends,” he says. “I think we both have respect for each other.”

Indeed, Mr Potanin suggests this willingness to sacrifice relationships is what separates go-getting billionaires from those who “prefer to work for a salary”.

“It’s a common understanding that businessmen are people who are ready to take the risk of losing money. But I think that the major risk which businessmen take is the risk of losing relationships, friends or contacts with people,” he says.

Yet if, as is often suggested, Russia’s oligarchs are following a similar path to America’s Carnegies and Rockefellers – from corporate buccaneers to legitimate businessmen to philanthropists – Mr Potanin is further along than many.

He is hardly the only Russian oligarch to give to charity; Mr Deripaska, for one, has also done so for years. But Mr Potanin was the first to declare, last year, that he would over time hand over essentially all his billions not to his three children but to good causes.

And while oligarchs championing good corporate governance might sound like turkeys extolling Christmas, Mr Potanin has also taken on that role, chairing a national council on governance set up in 2003.

All that has made the bruising battle over Norilsk particularly unfortunate. It flared up with renewed bitterness last June, after a brief ceasefire, when Mr Deripaska’s Rusal group ended up with fewer board directors than Mr Potanin’s Interros in a disputed shareholder vote.

Untangling the truth from the claims and counter-claims is always tricky. The way Mr Potanin tells it, his difference with Mr Deripaska is ultimately one of “mentality”.

He says he believes companies should be managed by independent, professional managers; owners should be at arm’s length, focused on strategy. Mr Deripaska, he suggests, “likes to be CEO himself”. Rusal says Mr Deripaska does not want to be CEO but has sought greater involvement because Norilsk is underperforming.

No resolution seems in sight, even after a recent meeting between the two men at Mr Potanin’s country house outside Moscow. As on many things, the two sides’ accounts of what was discussed differ.

Mr Potanin ascribes his business longevity to “playing by the rules”. Those unofficial rules have gradually evolved since Mr Putin became president in 2000 and said oligarchs could keep their 1990s assets, provided they stayed out of politics and kept their noses clean.

“You gain money and you invest money in the country,” explains Mr Potanin in his rapid-fire English. “You respect the environment, you pay salaries, you pay taxes and you take social responsibility, which means that you help people. . . Frankly speaking, if you compare this with a more developed system like Europe or the US, it’s actually very similar.”

His priority now, he suggests, is to make Interros “an efficient vehicle to manage my fortune” – and that of outside investors. The holding company is looking to exploit opportunities such as upgrading Russia’s creaking infrastructure.

“We are still more competitive in Russia than anywhere else,” he adds. “The macroeconomic situation in Russia is favourable in spite of the fact that the country should work more on improving the business climate. Being a local player it’s easier for us to take the risks posed by the imperfections in the business climate.”

Successfully developing Interros is important, he adds, because this will be the source of the wealth he will give away. He plans to increase his charitable donations – largely to educational and cultural programmes – from an annual $10m to $25m for the next 10 years.

How he will eventually hand over the rest remains to be worked out. But he will leave his family no more than they need to live comfortably.

The decision to emulate Bill Gates and Warren Buffett was motivated in part, he concedes, by a desire to preserve his name. But, in a statement that may surprise corporate dynasties in Europe and the US, he says a big factor was to “help my children avoid the pressure of billions”.

“I made a formula: if you want to help your children, or any person, give him a million dollars. If you want to crush him, give him one billion,” he says. “If [my children] earn money for themselves, they will have their own right to decide what to do with it. If they have money from me, for the rest of their life they are in the shadow of me and the money that was given to them. It’s unfair to them. Maybe they don’t want to be billionaires. Maybe they want to live a different life.”

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