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Mikhail Fridman


For Mikhail Fridman, 39, the West has long held a powerful allure. He grew up in a Jewish household in Lvov, a melting-pot city on the Western border of Ukraine that once was part of the Austro-Hungarian empire and in the mid-20th century passed from Polish to Soviet rule. He says he never came to see himself as a Ukrainian. Nor did he feel at ease under the anti-Semitic Soviet regime. And although he grew to love Russian culture, what he yearned for most was to feel himself a European -- the ultimate badge, in his mind, of civilization.

Now, Fridman is doing as much as anyone in Russia to integrate his homeland's businesses with Western corporations and to adopt Western management and marketing practices. His biggest achievement is engineering a landmark $7 billion deal, announced in February, in which British energy giant BP PLC took a 50% stake in newly formed Russian oil company TNK-BP. Fridman, a billionaire and one of Russia's most influential businessmen, will be chairman of the oil giant, Russia's third-largest producer, now pumping some 1.2 million barrels a day. He is also a major shareholder.

If the venture succeeds, it will set a new standard for corporate governance and management right in the heart of Russia. The deal also means much more clout for Fridman and his Alfa Group, of which he is chairman and controlling shareholder. This Moscow-based conglomerate had a 50% stake in TNK. It also owns Alfa Bank and other businesses known for their Western-style management. Fridman has hired numerous Europeans to fill executive positions at Alfa, and his new BP connection will give him another excuse to fly to the West. Not that he needs one. His Russian wife and two daughters live in Paris. Still, Fridman, who was 27 when the Soviet Union collapsed, feels most at home among fellow Russians in Moscow's rarefied business, political, and cultural circles. "We are all hostages of our past," he says over a lunch of caviar, cold borscht, and tuna steaks in his private dining room.

Fridman has the instincts, and risk-taking nerve, of a born entrepreneur. Once a student at the Moscow Institute of Steel & Alloys, he got his real education as an organizer of the business cooperatives permitted by Mikhail Gorbachev. With two schoolmates -- both of whom are still partners in Alfa Group -- Fridman created a co-op to wash windows in the late 1980s. He has been creating and consolidating new businesses ever since.

TNK emerged from Russia's murky privatization auctions in the 1990s with Fridman as a leading shareholder. It was then that he became a member of a new club of business titans that today still controls many of Russia's prime assets. Assessing that oligarch system, Fridman is remarkably candid. "It is not very healthy for the economy, and it is not very fair," he says. "The rules for the big players are not the same as for the smaller ones."

But Fridman plays the game well, and that's why BP chose to link up with Alfa Group. He hopes to follow up the TNK-BP deal by linking up other prime Alfa holdings, including Alfa Bank, with Western companies. The bank deal could be a long wait. Russia has yet to pass a law breaking state-controlled Sberbank's status as the only bank permitted to offer deposit insurance. Until that happens, no Western bank is likely to bid for Alfa.

Fridman is frustrated that more of his fellow Russians don't share his admiration for Western economic and political culture. Russia's biggest problem, he says, is the "values gap" between its Western-oriented elite and the "simple people," who are too accepting of Russia's tradition of authoritarianism and are slow to embrace the new market economy. "We will always be behind Europe," he says wistfully. But Mikhail Fridman is doing everything he can to close the gap.


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