Russian billionaires shut out from world spend fortunes at home

A clutch of Russia’s top tycoons are reaping billions of dollars worth of dividends, getting payouts from their companies even in the face of sanctions over the war in Ukraine.

Five billionaires in the oil, nickel and fertilizer industries are the nation’s top dividend earners, receiving about $10 billion in payouts from their companies since the start of 2022, according to the Bloomberg Billionaires Index. They stand in contrast to many Russian companies that suspended or cancelled dividend payments in the wake of sanctions stemming from President Vladimir Putin’s decision to invade Ukraine, Bloomberg reports.

But these tycoons are still feeling the bite of sanctions as they look to deploy their windfalls. Their isolation from the rest of the world is spurring investments in local firms that billionaires previously hadn’t considered and shows how Russia’s elite is adjusting to the post-war reality.

“Western sanctions have essentially closed the doors to Russian billionaires and pushed them more closely into the hands of the Kremlin. This, of course, increases Russia’s control over their wealth and supports Putin’s calls for the elites to invest in Russia and bring the money back home,” said Liana Semchuk, an analyst at UK advisory firm Sibylline.

Vagit Alekperov, the co-founder of Lukoil PJSC, the country’s second-biggest oil producer, is bidding for a multi-billion dollar controlling stake in Yandex, Russia’s dominant search engine, people familiar with the matter said last month, marking the tycoon’s first major investment into a sector outside oil.

Another example is billionaire Vladimir Potanin, Russia’s richest person and the largest shareholder of mining giant MMC Norilsk Nickel PJSC. The tycoon has branched into finance, buying a 35 per cent stake in TCS Group Holding Plc, better known as Tinkoff Bank, one of Russia’s leading fintech companies. He also purchased Rosbank PJSC from Societe Generale SA through his Interros holding company and is one of the bidders for Yandex along with Alekperov.

For energy billionaires like Alekperov, Leonid Mikhelson and Gennady Timchenko, large payouts have been spurred by a surge in energy prices from Russia’s invasion of Ukraine. Novatek, the country’s biggest producer of liquefied natural gas, gave shareholders the highest dividends in its history, while Lukoil PJSC recommended making the second largest payout. 

Billionaire Andrey Guryev’s fertilizer producer Phosagro PJSC also had its biggest ever profit last year as tighter logistics for Russian producers caused deficits in some markets, driving the prices up. 

Potanin and Guryev are sanctioned by the UK and US, while Timchenko is under EU, US and UK sanctions. Alekperov and Mikhelson have been targeted by the UK.

Novatek didn’t respond to a request for comment. Lukoil and Phosagro declined to comment. A spokesperson for Potanin’s Interros declined to comment on the dividend amount.

To be sure, as the war in Ukraine continues in its second year, Russia’s government is looking to wrest more money from big firms which may affect future dividend payments. The board of Norilsk Nickel in April also recommended to skip final dividends for 2022, citing increased geopolitical risks and as the shareholder accord with second-biggest shareholder United Co Rusal International PJSC that required large payouts expired.