How Not to Do Business in the Post-Soviet Bloc

Business in the former USSR is notoriously rough and tumble, where a pronounced lack of transparency means businessmen often act at the outer limits of legality and colluding with influential politicians is a must. The recent saga of Suleiman Kerimov, an extravagant oligarch from Dagestan, serves as a good example of how not to go about things in this ruthless climate.

Suleiman Kerimov was born in 1966 in the North Caucasus region of Dagestan, the son of a criminal investigation lawyer father and an accountant mother. While his economics degree initially only landed him a desk job at a transistor factory in his hometown of Derbent, Kerimov wasted no time in chasing his fortune as the Soviet Union crumbled around him in the early 1990s.

It was during this period that Russia’s new generation of oligarchs rose to power, using the national push to privatization and devalued rouble to purchase struggling state-owned industrial giants for a fraction of their worth. Kerimov’s own path to wealth is characteristic of this new Russia in that his business career truly took off after his political career began. In 1999, Kerimov became a member of the State Duma, Russia’s lower house of parliament, and rubbed shoulders with Vladimir Zhirinovsky and Sergei Isakov, fellow members of the ultra-nationalist Liberal Democrat party and his future business partners.

In less than ten years, Kerimov went from being a junior associate to the 19th richest man in Russia, with an estimated fortune of $14.4 billion, in a series of shady dealings, silent partners, and criminal conspiracy allegations. Kerimov’s moneymaking schemes were suddenly cut short, however, when he chose to use his leverage to break the powerful BPC potash cartel. Pressured into selling his shares and apparently finding himself on the outside of Moscow’s most powerful circles, the following points show what the next budding oligarch can learn from Kerimov’s disastrous example.

1.    Keep a low profile

As is often the case when one chooses to regularly skirt the law, it is best not to draw too much attention to oneself. In Putin’s Russia, where oligarch’s enormous earnings more often than not stem from unsavoury dealings with the law-making and law-enforcing class, this maxim counts double. Though Kerimov has been an elected official since 1999 and has wisely stayed away from the press throughout his career, the Dagestan oligarch has consistently thrown caution to the wind when it comes to flaunting his wealth.

Whether hiring Beyoncé to entertain guests at his mansion in the south of France or rubbing shoulders with ex-spy Anna Chapman on his 295-metre yacht, Kerimov has gained a reputation for reckless debauchery. In November 2006, Kerimov made tabloid headlines in Russia and abroad after crashing his brand new Ferrari Enzo into a tree in Nice, France. In the passenger seat was Tina Kandelaki, a darling Russian TV presenter whose widespread popularity and support of Putin even prompted discussion as to whether she would be appointed Education Minister.

2.    Choose the right allies

As stated above, networking with the political elite is essential in modern-day Russia. One’s business ventures will rarely be successful without at least the tacit approval of an influential statesman. Kerimov’s business empire was wisely built on such a network. As the former deputy editor of Forbes Russia once stated, “All of his money to the last cent has been made through connections”.

However, Kerimov’s political calculations turned out to be slightly incorrect when he chose to strengthen his relationship with former President and current Prime Minister Dmitry Medvedev instead of showering Putin’s United Russia faction with gifts. In July 2013, Kerimov directed the Russian potash company Uralkali, in which he and his partners owned a majority stake, to dispense with their Belarusian partner, plunging the neighbouring country into an economic crisis. Assuming that the Moscow political establishment would have his back, Kerimov found himself sorely mistaken. In less than 4 months, Kerimov was forced into selling his shares to Mikhail Prokhorov, a long-time Kremlin insider.

3.    Don’t mess with Putin

All this brings us to our final point: Don’t mess with Putin. As is explained in the excellent 2004 book Putin’s Russia, written by the late Russian journalist Anna Politkovskaya, who messed with Putin and was murdered shortly after, few large-scale business ventures succeed/exist that the current Russian President does not have a finger in. During the Medvedev years, Kerimov may have avoided criminal charges through making the right friends in the right places. Now, however, Belarus has issued an arrest warrant for Kerimov and Vladimir Putin is all that stands in the way of the oligarch’s transfer to a Minsk prison.