Russia’s richest oligarch bails out Société Générale for himself in a ‘fantastic deal’ – Natural Self Esteem

Vladimir Potanin is still negotiating deals while his fellow oligarchs stumble, raising questions about whether this metal magnate is too big to be sanctioned.

Personal sanctions have hit the wallets and portfolios of many Russian oligarchs, while the US, EU and UK attack their palatial homes, private jets and daring yachts.

One person who has not yet been sanctioned by these powers (but was sanctioned by Canada last week) is Vladimir Potanin, a metal magnate and one of Russia’s original oligarchs. His company, MMC Norilsk Nickel PJSC (aka “Nornickel”), the world’s largest producer of refined nickel and palladium, is benefiting from rising commodity prices amid wartime supply shortages.

Now, amid the turmoil of war, Potanin is trying to expand his business empire. French bank Société Générale announced yesterday that it is selling Rosbank, a Russia-based banking group, back to Interros, Potanin’s investment conglomerate. Société Générale paid Interros an estimated $4.3 billion between 2006 and 2014 to acquire a nearly 100 percent stake in the Russian bank and its subsidiaries.

Transaction terms were not disclosed, but Société Générale said Interros would repay the Russian entity’s outstanding loans and write down $3.3 billion of the French bank.

This was announced by a spokesman for Société Générale forbes by email: “With this agreement, concluded after several weeks of intensive work, the concern would effectively and orderly leave Russia, taking into account its employees and customers. Interros Capital is one of the largest private investment companies in Russia and is familiar with the bank, which would facilitate business continuity.”

Based on the information available so far, the deal was “fantastic” for Potanin, says Jerome Legras, head of research at Paris-based investment firm Axiom Alternative Investments and former deputy head of structural capital financing at Société Générale.

“Business is obviously disrupted because of the economy collapsing and stuff, but he gets a bank for almost zero, so obviously it’s a good deal for him,” says Legras. “From the amount of depreciation they [Société Générale] say they took and from the amount of capital in the company and what has been said about the subordinated debt it is quite clear that this was a nominal price.”

“In terms of pure equity, I think the price was pretty much zero,” adds Legras.

Rosbank serves more than 5 million retail customers and nearly 100,000 corporate and small business customers in Russia. Its shares are up almost 80% since Monday morning’s open for trading; The company closed Tuesday at a valuation of $2.4 billion.

Shares in Société Générale were also up 7% on Monday as investors breathed a sigh of relief: the French bank warned of a possible takeover of Rosbank by Russia on March 3 after threatening Kremlin rhetoric in response to Western sanctions . On March 11, Potanin spoke out against the seizure of Russian assets from foreign companies. “We should not try to ‘slam the door’, but strive to preserve Russia’s economic position in the markets that we have nurtured for so long,” Potanin said on the messaging app Telegram. Any government confiscation of assets, he warned, “would take us back 100 years to 1917.

Whether Potanin’s letter had any impact on President Vladimir Putin is not known (the Kremlin has not approved the seizure of foreign-owned assets), but what is clear is that his takeover of Rosbank is the latest in a string of victories for the 61-year-old Metal magnate who fared significantly better than many of his oligarch peers in the Russia-Ukraine war. Potanin is now Russia’s richest oligarch, with an estimated fortune of nearly $26 billion as of April 12.

“We see Potanin not only as a dealmaker, but also as a consummate political insider in Russia,” says Stanislav Markus, professor of international business at the University of South Carolina, who has studied the Russian oligarchy. “He has been navigating the Byzantine world of Kremlin politics since the 1990s, while some of the other ‘original’ oligarchs were marginalized (or sometimes ruined) in the transition of power from Yeltsin to Putin and later as Putin’s state treaties to his personal friends. The SocGen acquisition could not have been completed without Potanin’s solid understanding of Russian political realities.”

Chief among these realities: Nornickel’s global reach and market strength. While Canada last week became the first Western power to sanction Potanin, the mining behemoth, in which Potanin has a stake of over a third, was not sanctioned. It is the world’s largest producer of palladium and refined nickel, a key component of steel production. Europe, in particular, relies on nornickel for Class 1 nickel, a purer form of the metal used in electric vehicles and stainless steel production. Potanin’s company provided around 27% of Europe’s nickel imports in 2021, according to natural resources consultancy Wood Mackenzie. The company has distribution centers in Hamburg and Rotterdam and a sales office in Zug, Switzerland. It also operates in the US with a sales office in Pittsburgh, Pennsylvania.

A wartime resource boom has padded Nornickel’s gains as nickel prices have risen more than 100% this year. Nornickel stock is up nearly 20% since its low for the year on Feb. 24, the day Russia invaded Ukraine and the Moscow Stock Exchange announced it was suspending trading in all markets.

If the EU were to sanction Nornickel, “it would cause a disruption in demand because it is very difficult to replace lost product [nickel] Units. Europe is the most exposed,” says Nikhil Shah, head of nickel research at British business intelligence firm CRU Group. By comparison, the US relies on Canada for most of its Class 1 nickel imports, but any US sanctions on nornickel would resonate in Europe, sending prices skyrocketing everywhere, Shah says.

A brief squeeze on nickel futures in early March saw the commodity’s price more than double in one day, to over $100,000 a tonne on the London Metal Exchange, sparking fears of market instability. (Nickel is currently trading around $32,000.) Prices for palladium — a key ingredient in car catalytic converters — soared last week after the London platinum and palladium market announced it would ban metals from two Russian state-owned refiners , increasing nornickel’s importance as the world’s largest producer of palladium.

Economic and market considerations have long been part of the decision-making process of sanctioning authorities. For example, in December 2018, the US lifted sanctions against Oleg Deripaska’s metals producer Rusal and its parent company En+, less than a year after they were imposed, after those sanctions led to a surge in aluminum prices. Similar concerns may explain why Potanin has not been sanctioned by major powers.

“As we found at Deripaska, we took this action and global aluminum prices have gone through the roof,” says Richard Nephew. “You might find that something makes a lot of sense and is entirely justified, but will have significant economic consequences.”

Before the war, Potanin maintained connections with Western financial and cultural institutions. In 2013, he signed The Giving Pledge, founded by Warren Buffett and Bill and Melinda Gates to encourage billionaires to donate at least half their wealth to charity. He has served on the Advisory Board of the New York-based Council on Foreign Relations and is a Trustee of the Guggenheim Museum Foundation. According to the Anti-Corruption Data Collective, between 2011 and last year he donated at least $5.5 million to the Kennedy Center for the Performing Arts in Washington, DC. His charitable organization, the Vladimir Potanin Foundation, has also donated to the University of Oxford. In 2016, she bequeathed over 250 works of Russian art to the Center Pompidou in Paris.

Potanin has apparently also taken care to maintain close ties with Putin. He invested over $2 billion to build Rosa Khutor, a ski resort in Sochi built for the 2014 Russia Olympics. It is known that he and Putin went skiing together and played ice hockey on several occasions.

Potanin was among the original group of Russian oligarchs who built their fortunes in the chaotic 1990s when President Boris Yeltsin oversaw a wave of corrupt privatization deals. He and his longtime business partner Mikhail Prokhorov acquired shares in Nornickel through Yeltsin’s infamous loan-for-shares scheme, in which a small handful of businessmen lent money to the Russian president’s re-election campaign in 1996 in exchange for control of state assets. (The partners split in 2007 after Prokhorov was arrested by French police for recruiting prostitutes. He was not charged but agreed to sell his stake to fellow oligarch Oleg Deripaska’s United Co. Rusal, which still holds its Nornickel shares.)

Potanin was not only a beneficiary of Yeltsin’s plan, but also reportedly its key architect. “Lending for stocks was Potanin’s idea,” says Markus, a professor at the University of South Carolina.

Nornickel and Potanin’s charity did not respond to requests for comment.

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