The Most Lucrative Places

Last year’s list of officially richest Russians consisted of nine people from two oil companies, YUKOS and LUKOIL. In a year, the rating of the legally rich has undergone fundamental changes: new names and new industries have been added, and new records for amount of officially acknowledged capital have been set.

Thirty-Three Russian Business Heroes

In the new rating, we decided to include all Russian business people whose official capital definitely exceeded 1 billion Russian rubles (about $35 million). We found 33 of these people.

It is worth noting a number of very important features. Capital owned by Mr. X was always calculated according to internationally accepted practice, that is, through the share package belonging to this person and the company’s market capitalization. If even one of these two figures fell short (unfortunately, this happened much more often than the reverse), the person’s candidacy was eliminated from the list. Shares owned through offshore companies or other intermediaries, which made it impossible to put an accurate value on the size of the share package belonging to a particular person, were not used in the calculation.

Of course, anyone included in the rating may actually own a larger package of company shares than officially declared. He may also own shares of other companies whose financial reporting is less transparent. Consequently, the real capital of a given person may substantially exceed the figure shown in our rating. However, it is unlikely that anyone except Mr. X himself (and sometimes even he doesn’t know) can give the exact figure.

On the other hand, you can be sure that the “worth” of anyone in our rating is no less than what is shown in the table. This visible tip of the money iceberg is the only way to compare the capital of Russia’s richest businessmen.
There is one more thing: until the investigation in the YUKOS affair is complete, we have decided to leave representatives of this company in the rating, even though their shareholdings were seized by a decision of the Prosecutor General’s Office.

Oilmen are Losing their Positions, Shares, and Money

Last year, YUKOS shareholders occupied two-thirds of the nine places on the list of the officially wealthy. The company was the first in Russian business history to disclose information on its shareholders. In the present list, YUKOS shareholders occupy only one-third of the positions, although the number of company representatives has increased to 11 people.

YUKOS representatives in the rating of Russia’s richest people can be arbitrarily divided into two categories: those whose fate depends on the General Prosecutor’s Office (their holdings are larger) and smaller shareholders whose holdings have been released.

As of last year, Mikhail Khodorkovsky, former chairman of the board of YUKOS Oil Company, was no longer Russia’s richest businessman, but he is undoubtedly the wealthiest prisoner who has ever spent time in a Russian jail. As we mentioned in last year’s review, Fortune magazine estimated his worth at $7.2 billion. However, this figure included the value of shares he did not own but was only their beneficiary. Now the disgraced oligarch owns 9.5% of the shares of the offshore company Group MENATEP, which in turn owns 44.1% of YUKOS’s shares. Based on YUKOS’s present capitalization (considerably reduced after Khodorkovsky’s arrest), if Khdorkovsky were to sell his YUKOS securities now, he would receive a bit more than $1 billion. Of course, he is unable to do this, since the Prosecutor General’s Office has seized his shares. He will only be able to receive dividends on them, which amounted to $84 million in the first nine months of 2003. Khodorkovsky is in fifth place (and even then only tentatively because of the seizure of his shares) in the 2003 rating of Russia’s richest people, compared to second place in the previous rating. However, some of the dividends payable to him exceed one billion, but these are rubles, not dollars. In any case, Khodorkovsky would still be on the rating.

After Mikhail Khodorkovsky’s arrest, Leonid Nevzlin, who until mid-November was rector of Russian State University for the Humanities (RGGU), became the beneficiary of 50% of Group MENATEP’s shares. The seizure of the group’s YUKOS shares by law enforcement agencies did not prevent Group MENATEP from receiving dividends on them (in 2003, YUKOS announced interim dividends of $2 billion, the largest in the company’s entire history). Nevzlin himself will receive dividend payments on these shares. Thus, the former rector’s cash income last year was $440 million. He will presumably pay income tax on this sum in Israel, which granted him dual citizenship last fall. Leonid Nevzlin’s personally owned (and also seized) YUKOS shares are worth about $870 million, plus interim dividends worth $70 million.

Another four YUKOS shareholders remain in our rating from last year. They are Mikhail Brudno, Vasily Shakhnovsky, Platon Lebedev, and Vladimir Dubov, who each own 7% of Group MENATEP’s shares, or about 3.1% of YUKOS’s shares. The current value of these shares is equal to nearly $761 million, but these holdings were also seized. These four share ninth place in the rating, but like Mikhail Khodorkovsky, only tentatively.

Five more YUKOS shareholders—former company president Sergei Muravlenko, member of YUKOS’s board of directors Yury Golubev (now acting president of Group MENATEP), former first vice-president of YUKOS Viktor Ivanenko, former president of YUKOS Exploration and Production (YUKOS-EP) Viktor Kazakov, and chairman of the board of directors of Russian Investors Investment Company (IK Russkie investory) Aleksei Golubovich—own identical company share packages of slightly less than 0.4% each, which are worth a bit less than $100 million. These five gentlemen share 21st place in the rating.

Information on the share in LUKOIL’s charter capital of three of the company’s private shareholders who remain in our rating from last year has not changed over the year. Company president Vagit Alekperov, who essentially founded LUKOIL in 1991, still owns 10.38% of the shares. At current capitalization, this share is worth slightly less than $1.9 billion. This is about $600 million more than last year’s value, which made Mr. Alekperov the country’s richest businessman. Unfortunately, according to the results for 2003, the former champion has ended up in only fourth place in the new rating. Two other LUKOIL shareholders—member of the company’s board of directors and president of the NIKoil Investment Banking Group (IBG NIKoil) Nikolai Tsvetkov and LUKOIL vice-president Leonid Fedun—are in sixth and eighth places, respectively.

Still one more oilman in our rating is Vladimir Bogdanov (Surgutneftegaz). Officially, according to the company’s report for the second quarter of 2003, he owns only a small package of shares, something like 0.3%. However, the market value of even this small package makes Mr. Bogdanov an official billionaire, if only a ruble billionaire.

Metallurgists are Getting Richer

The dramatic growth of capitalization of Russian metallurgical companies has moved their representatives well up in the ranks of the rating of richest Russians.

Two companies in this sector, Severstal and Norilsk Nickel Metallurgical Combine (GMK Norilsky nikel, or Nornikel), disclose information about their beneficiaries. Severstal’s capitalization as of the end of December 2002 was just slightly more than $1 billion. Based on this information, Aleksei Mordashov, chairman of the company’s board of directors was worth a bit more than $210 million (he personally owns 16.63% of the company’s shares and also owns another 5.1% through a controlling block in Severstal-Garant). In 2003, Severstal’s capitalization increased to $2.571 billion (as of December 1, 2003). Mr. Mordashov’s fortune accordingly increased 2.5 times to $558.8 million.

At the same time, whereas Aleksei Mordashov earned $8.3 million in dividends in 2002, based on interim dividend payments in 2003 (the company paid them twice, after 3 months and after 9 months), his personal earnings have increased to $38.3 million.

However, the richest Russian metallurgist and the second richest Russian resident by official standards is Mikhail Prokhorov, general manager of Norilsk Nickel Metallurgical Combine, who owns 28.87% of the company’s shares. He was worth $1.162 billion in 2002 (the company’s capitalization as of the end of December 2002 was $4.27 billion). Owing to the fact that Nornikel’s capitalization nearly tripled in 2003 (to nearly $12 billion as of December 1), Mr. Prokhorov’s share capital reached nearly $3.5 billion. His dividend earnings for all of 2002 were $44.7 million; but in 2003, his earnings from interim dividend payments for the first nine months alone will be $86.6 million. The fortune of another Nornikel shareholder, Vladimir Potanin, also increased substantially in 2003 (he owns 28.5% of the company’s shares). Mr. Potanin “weighed in” at $1.147 billion in 2002 and $3.385 billion as of December 1, 2003 (third place in the Russia-wide rating). Vladimir Potanin’s personal earnings also increased along with Nornikel’s capitalization and increased dividend payments. Whereas he earned $43.4 million from dividend payments in 2002, his dividend earnings had already reached $85.2 million in the first nine months of 2003.

Communications Above All

The wealthiest businessman from the Russian telecommunications industry, as well as the country’s officially richest resident, is Vladimir Evtushenkov, head and founding shareholder of Joint-Stock Financial Corporation (AFK) Sistema. According to previously published official information, Mr. Evtushenkov owns 75.9% of its shares. The corporation has a share in hundreds of different companies, but most of its revenues come from telecommunications assets. Sistema owns 51% of the shares of Mobile Telesystems (MTS), the largest cellular operator in Eastern Europe. In terms of MTS shares alone, Mr. Evtushenkov’s fortune reaches $3.173 billion. A 46% shareholding in Moscow City Telephone Network (MGTS) adds another $300 million to this sum, putting Mr. Evtushenkov in the lead.

Four more private persons “from among ranks of the company’s founders, members of the board of directors, and senior management,” according to AFK Sistema’s website, also made it into our rating. When estimating their capital, we assumed that the size of their shareholdings had not changed since June 2002, when these data were published.

Another representative of the telecommunications industry in our rating is Dmitry Zimin, founder of Vympelcom. He owns about 10.4% of the company’s shares worth nearly $350 million (fourth place in the rating).

Other Private Persons

There is one food company in our rating: Wimm-Bill-Dann, whose shares are quoted on the New York Stock Exchange. The company is represented by four shareholders: Gavriil Yushvaev (18.8% of the shares), who does not take part in managing the company; company founders Sergei Plastinin (12.6%) and Mikhail Dubinin (10.6%); and David Yakobashvili, the head of the company (6.41%).

Kakha Bendukidze, general manager of United Machinery (OMZ), represents the engineering industry. As of October 1, 2003, he owned 25.93% of the company’s shares.

Timur Goryaev, director of Kalina Concern and owner of two-thirds of its shares, represents the chemical industry in the rating.

Finally, last on our list, but by no means the least in importance are three shareholders of RBC Information Systems, Dmitry Belik, German Kaplun, and Aleksandr Morgulchik.

Not on Any Lists

Clearly, there are more than 30 ruble billionaires in Russia; however, all of them are absent from the rating at their own request, one might say.

For example, it is unlikely that Roman Abramovich’s fortune is less than $1 billion. There is indirect proof of this from newspaper reports on the sale of Russian Aluminum (Russky alyuminii) shares for $2 billion. Even a rough calculation of the amount Mr. Abramovich has spent on acquiring new players for the Chelsea football team proves that the governor of Chukotka is a worthy candidate for our rating. However, his capital does not have that visible part by which we compared others on the list.

It is a similar story with Oleg Deripaska. Reports that he paid about 300 million rubles in income tax for the second year in a row gives us reason to assume that Mr. Deripaska is a least a ruble billionaire. However, his capital is not transparent enough to allow an estimate.

President of Adygea, Khazret Sovmen, who declared income and bank accounts amounting to hundreds of millions of dollars in the State Duma before taking part in the elections, is also absent from the rating, for the simple reason that the information he reported dates to 2002.

A large number of businessmen, particularly from the airline and construction industries, were not included in the rating due to a lack of quotations of the shares they own (thus making it impossible to do an adequate evaluation), although even an approximate estimate clearly shows that they meet the requirements of our rating in terms of amount of capital.
We hope that by next year and the next review, the situation will have changed and our rating of Russia’s richest people will be enlarged by worthy new representatives.

(From Kommersant, 12.9.2004)
__________________________

There some fun photos in the original paper...