Personal sanctions have hit the pocketbooks and portfolios of many
Russian oligarchs, as the U.S., the EU and the U.K. go after their palatial
homes, private
jets and audacious
yachts.
One person who has not yet been sanctioned by those powers (but was sanctioned by Canada last week) is Vladimir Potanin, a metals tycoon and one of Russia’s original oligarchs. His company, MMC Norilsk Nickel PJSC (also known as “Nornickel”), the world’s biggest producer of refined nickel and palladium, is benefitting from soaring commodities prices amid the wartime supply crunch.
Now, amid the upheaval of war, Potanin is moving to expand his business empire. The French bank Société Générale announced yesterday it was selling Rosbank, a Russia-based banking group, back to Interros, Potanin’s investment conglomerate. Société Générale paid an estimated $4.3 billion to Interros between 2006 and 2014 to amass a near 100% stake in the Russian bank and its subsidiaries.
Transaction terms were not disclosed, but Société Générale said that Interros would pay off the Russian unit’s outstanding loans and that the French bank would write off $3.3 billion.
A spokesperson for Société Générale told
Forbes over email: “With this agreement, concluded after several weeks of intensive work, the Group would exit in an effective and orderly manner from Russia, taking into account its employees and clients. 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 available information so far, the deal was a “fantastic” one for Potanin, says Jerome Legras, head of research at Paris-based investment firm Axiom Alternative Investments, and former deputy head of structure capital finance at Société Générale.
“The business is going to be disrupted of course because of the economy crashing and everything, but he’s getting a bank for close to zero, so of course it’s a good deal for him," says Legras. “From the amount of the writedown they [Société Générale] say they took, and from the amount of capital in the company and what was said about the subordinated debt, it's pretty clear 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 individual clients and nearly 100,000 corporate and small business clients in Russia. Its shares have risen nearly 80% since opening for trading Monday morning; the company closed on Tuesday trading at a $2.4 billion valuation.
Société Générale’s shares also jumped on Monday, by 7%, as investors breathed a sigh of relief: the French bank had
warned on March 3 about the possibility of Russia seizing Rosbank, after threatening rhetoric from the Kremlin in response to Western sanctions. On March 11, Potanin spoke out against the seizure of Russian assets owned by foreign firms. "We should not try to 'slam the door' but endeavor to preserve Russia's economic position in those markets which we spent so long cultivating," said Potanin on the messaging app Telegram. Any government seizure of assets, he warned, “would take us back 100 years to 1917. And the consequences - a global lack of confidence in Russia from investors - we would feel for many decades."
Whether Potanin’s missive had any effect on President Vladimir Putin is unknown (the Kremlin has not authorized seizure of foreign-owned assets), but what is clear is that his takeover of Rosbank is the latest in a series of wins for the 61-year-old metals tycoon, who has fared noticeably better than many of his fellow oligarchs during the Russia-Ukraine war. Potanin is now Russia’s wealthiest oligarch, with an estimated fortune of nearly $26 billion (as of April 12).
“We are seeing Potanin not only as the dealmaker but also as the consummate political insider in Russia,” says Stanislav Markus, a professor of international business at the University of South Carolina who has studied Russia’s oligarchy. “He has navigated the Byzantine world of Kremlin politics since the 1990s while some of the other ‘original’ oligarchs were marginalized (or, at times, ruined) in the transition of power from Yeltsin to Putin and, later, as Putin doled out juicy state contracts to his personal friends. The SocGen acquisition could not have proceeded without Potanin’s solid grasp of political realities in Russia.”
Chief among those realities: Nornickel’s global reach and market strength. While Canada became the first Western power to sanction Potanin last week, the mining colossus, in which Potanin holds an over one-third stake, has not been sanctioned. It is the world’s largest producer of palladium and refined nickel, a key ingredient in 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 hubs in Hamburg and Rotterdam, and a sales office in Zug, Switzerland. It also operates in the U.S. with a sales branch located in Pittsburgh, Pennsylvania.
A wartime commodities boom has padded Nornickel’s profits as nickel’s price has risen more than
100% this year. Nornickel stock is up nearly 20% from its year-low on February 24, the day Russia invaded Ukraine and the Moscow Stock Exchange announced it was suspending trading on all markets.
If the EU were to sanction Nornickel, “It would lead to demand disruption, because it’s very difficult to replace lost [nickel] units. Europe has the greatest exposure.” says Nikhil Shah, head of nickel research at U.K.-based business intelligence firm CRU Group. By comparison, the U.S. relies on Canada for most of its Class 1 nickel imports, but any U.S. sanctions against Nornickel would reverberate in Europe and drive up prices everywhere, says Shah.
The city of Norilsk, Russia, in home to Norickel's mining operations (Photo by Oleg Nikishin/Getty Images) GETTY IMAGES
A short squeeze on nickel futures in early March caused the commodity’s price to more than double within a day, to above $100,000 per metric ton on the London Metal Exchange, generating fears of market instability. (Nickel currently trades around $32,000.) Last week, prices of palladium–a key ingredient in catalytic converters for cars–spiked after the London Platinum and Palladium Market said it would ban metals from two Russian government-owned refiners, heightening the importance of Nornickel as the world’s largest palladium producer.
Economic and market considerations have long been part of sanctioning authorities’
decision-making process. For example, the U.S. lifted sanctions in December 2018 on Oleg Deripaska’s metals producer Rusal and its parent company En+, less than a year after they were imposed, after those sanctions had caused aluminum prices to rise. Similar concerns may help explain why Potanin has not been sanctioned by major powers.
“As we found with Deripaska, we took this action and global aluminum prices went through the roof,” says Richard Nephew. “You might find that something makes a lot of sense and is totally justified, but will have significant economic consequences.”
Before the war, Potanin cultivated ties with Western financial and cultural institutions. In 2013, he signed The Giving Pledge, founded by Warren Buffett and Bill and Melinda Gates to enlist billionaires to commit at least half of their wealth to charity. He served on the advisory board of the New York-based Council on Foreign Relations and was a trustee of the Guggenheim Museum’s foundation. He donated at least 5.5 million dollars to the Kennedy Center for the Performing Arts in Washington, D.C. between 2011 and last year, according to data from the Anti-Corruption Data Collective
. His charitable organization, the Vladimir Potanin Foundation, has also given to The University of Oxford. It bequeathed over 250 works of Russian art to the Pompidou Center in Paris in 2016.
Potanin has apparently been careful to keep close ties to Putin as well. He invested over $2 billion into building Rosa Khutor, a Sochi ski resort built for Russia’s 2014 Olympic Games. He and Putin are known to have skied and played ice hockey together on several occasions.
Potanin was among the original group of Russian oligarchs who built their fortunes in the chaotic 1990s as President Boris Yeltsin oversaw a wave of corrupt privatization deals. He and his long-time business partner Mikhail Prokhorov acquired stakes in Nornickel through Yeltsin’s infamous loan-for-shares scheme, in which a small handful of businessmen lent money to the Russian president’s 1996 reelection campaign in exchange for control of state-owned assets. (The partners split up in 2007, after Prokhorov was detained by French police over soliciting prostitutes. He wasn’t 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 scheme, but was allegedly its key architect. “Loan for shares was Potanin’s brainchild,” says Markus, the University of South Carolina professor.
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