Oligarchs

Another Tycoon Defies the Kremlin


On Sept. 15, Mikhail Prokhorov, Russia’s third-richest man (and owner of the New Jersey Nets), said he was stepping down as chairman of the pro-business Pravoye Delo party because the government had hijacked it. Prokhorov took the post in June with the government’s blessing, and promised to spend almost $90 million to get the party’s candidates elected to Parliament in December. Yet in recent weeks he had repeatedly criticized the country’s leadership, saying that Russia was becoming a “farce and parody of the Soviet Union.”

The Kremlin has not commented on Prokhorov’s outburst, which recalls the clash between former oil baron Mikhail Khodorkovsky and then-President Vladimir Putin. Khodorkovsky ended up in jail, his oil empire dismantled. Ariel Cohen, a senior research fellow in Russian and Eurasian Studies at the Heritage Foundation in Washington, says the Kremlin does not want another Khodorkovsky trial, which generated bad publicity. Yet even if Prokhorov does not end up behind bars, his companies could suffer from frosty relations with the state.

Prokhorov owns a 36.4 percent stake in London-listed Polyus Gold International, Russia’s biggest gold producer, which he wants to merge with a global mining group. Potential partners may now shy away from a deal, for fear that Russian authorities could retaliate by snarling Polyus’s projects in red tape. The company may also find it more difficult to tap capital markets until the uncertainty surrounding Prokhorov has diminished, Yael Levine and Carroll Coley of the Eurasia Group consultancy wrote on Sept. 20. Other Prokhorov holdings include his 49.9 percent stake in investment bank Renaissance Capital, which has been picked to handle state company privatizations, and a 17 percent share of Rusal, the world’s biggest aluminum maker, which has government permission to run much of its trading business in low-tax offshore havens.

Prokhorov hasn’t directly criticized President Dmitry Medvedev, or Putin, who is now Prime Minister. He has however called Vladislav Surkov, a top aide to Medvedev who is also close to Putin, a “puppeteer” who tried to control the political system.

The government initially welcomed Prokhorov’s role at Pravoye Delo (which means “Right Cause”). The Kremlin wanted to raise Pravoye Delo’s profile to demonstrate business backing for its policies. Then Prokhorov began saying that he might seek the Prime Minister’s job or run for President. The billionaire naively assumed the Kremlin would give him free rein, says Mikhail Kasyanov, a former Prime Minister under Putin who is now in the opposition Parnas party. “He agreed to be a puppet and at last realized that he can’t go through with it.”

Prokhorov has admitted he miscalculated. “Despite 20 years in business, strangely enough, I still had some illusions,” he said in a Sept. 16 post on his blog. “I proposed change, but the system wasn’t ready.”

The bottom line: With presidential elections next year, oligarch Mikhail Prokhorov has noisily accused the Kremlin of manipulating the political system.

With Carol Matlack
Meyer is a reporter for Bloomberg News in Moscow.

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