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Vladimir Yevtushenkov is enjoying a new life. A few years ago, after a battle with state oil giant Rosneft risked bankrupting his Sistema conglomerate, the 72-year-old Russian tycoon is now leading the way in a boom in the country’s long-dormant stock markets.
Sistema, whose main asset is Russia’s largest telecom group MTS, wants to list companies from agricultural producer Steppe and health clinic Medsi to pharmaceutical group Binnopharm Group, one of the main producers of Russia’s Sputnik V Covid-19 vaccine, and the bank of MTS .
The group’s recent success with other IPOs appears to have justified Yevtushenkov’s decision to reaffirm its commitment to technology investment following the state’s 2014 seizure of its majority stake in oil producer Bashneft.
Ozone, an e-commerce site co-owned by Sistema, has doubled in value since its IPO last year, while paper maker Segezha’s sales rose 45 percent year-on-year in the most recent quarter after its own IPO.
Meanwhile, Sistema’s crown jewel, MTS, is joining a race to create a technology-based “ecosystem” that offers customers everything from financial services to streaming entertainment.
“We used to live with . . . ideals of self-reliance and on our own ability. And we were not an investment company,” Yevtushenkov told the The Washington City Times. “Now people understand that we don’t lose our own money and neither do others.”
While many of Sistema’s tech investments are still years away from making a profit, Yevtushenko said they were offset by the traditional assets in his portfolio. “We are not concerned. If we screw up with Ozone, another company will pull us through. Our strength is that we are diversified.”
Today, Sistema invests alongside state-owned banks and attracts further funding for its venture capital as it looks to future IPOs – made possible in part by a recent surge in Russian retail investors.
“The market is very unstable, the interest on bank deposits is close to zero and inflation is quite severe,” Yevtushenkov said. “So people look for safety when buying and selling stocks because if you guess right, it will bring them a lot more income than keeping their money in a bank. It’s like a medicine. You become addicted and you can’t stop.”
Yevtushenkov, a former Soviet factory engineer, began trading oil and computers with colleagues from the Moscow mayor’s office at the dawn of the Russian capitalist era. For years he was close to the powerful then mayor of Moscow, Yuri Luzhkov, although the two men got into an argument in 2004.
Unlike many oligarchs, Yevtushenkov has received praise from investors for his commitment to public markets and corporate governance, rarities in a country where governance is often ceremonial and shareholders pay themselves sky-high dividends.
Sistema is Russia’s largest listed diversified holding company. Last year, children’s goods retailer Detsky Mir made the first Russian company to be 100 percent owned by its free float of shares, though an investor has since built up a 30 percent stake.
Other oligarchs see Yevtushenkov as a whistleblower for Russia’s business community, which struggles with years of sluggish economic growth and declining consumer purchasing power.
Calls for reform have largely fallen on deaf ears as the Kremlin expanded state control of the economy and sought to reduce companies’ reliance on Western finance following US and EU sanctions over the 2014 annexation of Crimea.
Yevtushenkov spent several months under house arrest that year on charges of illegal privatization of Bashneft, which was later withdrawn. After a lengthy legal battle and the intervention of President Vladimir Putin, Sistema agreed in 2017 to pay Rosneft, who bought Bashneft from the state a year earlier, $1.7 billion in damages for alleged asset stripping.
Largely because of the Bashneft deal, the conglomerate has about Rbs 210 billion ($2.9 billion) in debt, an expense that Yevtushenkov said prevented Sistema from reinvesting in his company.
The issue of corporate reinvestment became particularly poignant in Russia this year after Putin criticized companies for pocketing record dividends while ordinary people suffered during the pandemic. When prices rose for staple foods like grains — of which Steppe is one of Russia’s largest producers — Prime Minister Mikhail Mishustin blamed the “greed” of businessmen.
The sharp remarks sent a chill through Russian business. More than three-quarters of entrepreneurs fear unfounded criminal charges, according to a survey by the Presidential Security Service in May.
“We’ve always done what the president said without fail,” Yevtushenkov said of Putin’s comments. “We practically didn’t pay any dividends because the company was always in need of money.”
American investor Michael Calvey, whose private equity fund Baring Vostok co-owns Ozone alongside Sistema, was given a six-year suspended sentence last month for embezzlement. The case against Calvey was widely seen as a sign of how the Russian investment climate has been pushed into the background by the priorities of the security services.
Yevtushenkov suggested that those legal issues were part of doing business in Russia. “I’ll be honest with you – I could have stopped investing. But I survived. I think Calvey is a tough guy. He will survive and he will continue to invest,” he said.
Yevtushenkov, who sees things as a “minefield”, has made peace with playing by state rules.
“The state has the right to make all decisions that business likes or dislikes”. . . There may be some unpleasant consequences for someone – they were there for us. But that’s life,” he said. “Business has to work in the interest of the state. Once it loses sight of that, something unpleasant always happens.”