Rusagro - WikiLeaks



Rusagro

Executive Summary

As one of Russia’s largest agro-industrial holding companies, Rusagro deals mainly in sugar, oil and agricultural land. Starting as an intermediary for sugar producers and traders in the former Soviet states, Rusagro’s founder, Vadim Moshkovich, quickly used a sharp eye for opportunities and connections with established and rising businessmen throughout the region to grow Rusagro into a major force in Russia's agricultural sector. Moshkovich himself has risen from low-level mercantile exchange worker to member of the elite Russian billionaire club and senator. He has been careful in cultivating powerful allies throughout the Kremlin and in powerhouses like Sberbank to promote his or his companies’ interests while holding the same tight-knit circle of loyalists around him for decades. At the end of the day, Moshkovich is interested in profit, and though Rusagro has been his mainstay for more than 15 years, he wants either to continue expanding it across Russia and the former Soviet states or start selling it off -- should the price be right.

Rusagro

Rusagro is one of Russia’s largest agro-industrial holding companies, dealing mainly in sugar, oil and agricultural land. Rusagro’s holdings include more than 35 farms, seven sugar plants, an oilseed refinery, eight regional trade branches and dairy and pig-farming assets. A member of the Union of Sugar Producers of Russia, Rusagro is known mainly for its sugar and packaged margarine and mayonnaise produced through its 35 subsidiaries under well-known Russian brands such as Shchedroye Leto, Chaykofskiy, Khoroshiy and Brauni. Most of Rusagro’s oilseed and fats processing is done in Yekaterinburg, while its sugar facilities and crop and pig farms are located in the Belgorod, Tambov and Voronezh regions. Altogether, Rusagro controls roughly 360,000 hectares (1,400 square miles) of land.

History

Rusagro was founded in 1995 to act as an intermediary between Ukrainian sugar producers and manufacturers and Russian confectionary companies. Upon the fall of the Soviet Union, both Russia and Ukraine were among the top 15 sugar producers worldwide, but their industries were plummeting into disrepair because of poor logistics, erratic raw-material supplies and lack of financing during the post-Soviet economic plummet. Before the fall, sugar production fell under the state’s agro-business sector, which was tightly controlled. After the fall, without the state’s organization and backing, nearly all agriculturally based businesses were obliterated.

Despite this, demand for sugar was rapidly increasing as confectionary and related businesses continued to thrive and as Western businesses started to flood into the former Soviet countries. But sugar production needed a heavy dose of investment with little promise of a quick return. As a stop-gap measure to meet the demand for sugar, Russia began importing it from Kazakhstan, Belarus and, most of all, Ukraine—not that any of the other former Soviet states’ sugar producing industries were in good shape either.

Taking advantage of the turmoil following the fall of the Soviet Union was a worker in the Moscow Mercantile Exchange named Vadim Moshkovich. Moshkovich’s job inside the Mercantile Exchange allowed him to form relationships with merchants around Russia and other former Soviet states and see the incredible opportunity in pieces of the economy that used to belong to the Soviet state but were now owned by no one. Moshkovich started by created a company called Augur Estate in 1992 with his good friend Sergei Kirilenko, with the idea of picking up land and residences in the Belgorod region, sometimes without needing any money for the so-called “purchases.”

This was common after the fall of the Soviet Union. Many (if not most) of today’s oligarchs came from middle or lower classes and felt no qualms about picking up pieces of land or assets that used to belong to the state -- without anyone quite knowing who owned what during the chaotic crisis.

In developing land in the Belgorod region -- which had been one of the largest sugar producing regions in Soviet Russia -- Moshkovich saw the incredible demand for sugar. He established the Sugar Trading Company -- later known as Rusagro -- in order to supervise the importing of sugar from the Ukrainian regions to supply Russian confectionary companies such as Krasni Oktybr (Red October), Babayevsky, Rot Front (Red Front), Ulyanovsk and Cheboksary.

At the time, Moshkovich was able to strike deals with the rising Ukrainian oligarchs of shared Jewish background who were taking over their country’s sugar production. These two Ukrainian oligarchs were Viktor Medvedchuk and Gregory Surkis. Moshkovich was not a close personal friend of the Ukrainians, who quickly became two of the country’s most prominent political figures. Instead, he played on their shared Jewish heritage to work him and his new Sugar Trading Company into the Ukrainian system.

Engaging in a myriad of business ventures, including his real-estate firm Augur Estate as well as the Sugar Trading Company, Moshkovich quickly gained enough capital to begin operating in the raw-sugar market (sugar beets) instead of just as a broker. In 1997, the Sugar Trading Company -- renamed Rusagro – took over the Agrointer production and trading firm in Belgorod and began growing its own sugar beets. Also that year, Rusagro purchased the Rzhev sugar plant in Belgorod. These production units were in serious disrepair and under-producing since the fall of the Soviet Union.

Other sugar manufacturers from the West were already attempting to move into Russia, and Moshkovich struck joint ventures with them so that he could learn the business. In 1998, Rusagro worked in cooperation with France’s Deleplanque and Cie to modernize production at the Valuikisakhar sugar plant in Belgorod. From there, Rusagro began picking up pieces of land to use for sugar beet cultivation and on which to build sugar refineries, expanding throughout the Belgorod region and into Rostov, Voronezh and Krasnodar. That same year, Rusagro expanded to the grain and sunflower markets, mainly in Yekaterinburg. Although the company did not have experience in these markets, it picked up two edible-oil manufacturing facilities and four vegetable-oil extraction plants.

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By 1999, Rusagro was among the top three sugar producers in Russia, holding 19 percent of market share. Rusagro began regular sugar deliveries to 50 Russian territories and about 20 confectioneries. It also began working with other foreign firms in addition to Deleplanque and Cie, such as the American food-production heavyweight Cargill. Rusagro invested heavy in its farms and facilities, claiming to sink $500,000 a year in its agricultural lands alone -- a sum equivalent to 50 percent of the entire federal aid to farms.

In 2005, Rusagro was settled in place as one of Russia’s most prominent agricultural businesses, and its owner, Moshkovich, considered selling part if not all of the firm. Food and agricultural businesses that expressed an interest in purchasing the company were Bunge, Cargill and Louis Dreyfus.

But 2005 was also the year that the Russian government started cracking down on the sale of its most important and strategic companies to anyone not Kremlin-friendly, especially foreign firms. Russia was starting an economic consolidation led by then-Russian President Vladimir Putin. Many foreign groups in banking, energy, manufacturing, metals, real-estate and telecommunications were forced out of the country. Not willing to go against the Kremlin’s wishes, Moshkovich gave up on the idea of selling Rusagro to a foreign firm. Most of the largest firms in Russia were also re-organized to ensure that the Kremlin had loyalists running the Russian economy and Russian businesses. Moshkovich did not have to worry on this front, as his ties to the Kremlin were starting to deepen, which helped protect his interests and Rusagro (more on this below).

Since 2005, Rusagro has continued to prosper even with the global financial crisis that began in 2008. At the same time, Moshkovich was considering once again selling part of Rusagro, since he is constantly looking to sell on the higher side of the markets. However, Moshkovich’s planned IPO, scheduled to be held in 2010, was suddenly canceled for financial -- and political -- reasons (more on this below).

Structure and Ownership

Rusagro is an umbrella company made up of three branches, each with a number of subsidiaries and parts.

• Rusagro Group Limited Liability Company (LLC) consists of six food-processing plants, 38 agricultural companies in the Belgorod, Tambov and Voronezh regions, eight regional sales branches and a Moscow-based management company.

• Rusagro Center LLC is the operating branch, producing sugar and developing the long-term plans for the sugar business.

• Agricultural Company Rusagro LLC is an operating company involved in the agricultural business line, mainly seed oil.

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The ownership of Rusagro is constantly in flux and is one of the more secretive aspects of the business. One thing that is certain about Rusagro’s ownership is the involvement, in one way or another, of its founder Vadim Moshkovich.

In the 1990s, Moshkovich owned 81 percent of Rusagro while his partner, Sergei Kirilenko, owned 19 percent. Between 2004 and 2005, Rusagro reported that Moshkovich’s stake in the company fell to 62 percent with a 19 percent stake going to a shady Spanish offshore properties firm called Montblanc, which reportedly has been a holding company for Moshkovich (this is unconfirmed). At this point, Moshkovich and Kirilenko began swapping their shares and putting them into overseas accounts behind the scenes, without leaving any record of who the offshore firms belonged to.

According to the latest public records of Rusagro, Moshkovich owns 62 percent of Rusagro’s shares, his wife Natalia Bykovskaya owns 1 percent, his former partner Kirilenko owns 19 percent and Sberbank owns the remaining 18 percent. However, according to the share breakdown listed when Rusagro applied for its 2010 IPO, Moshkovich owned 94 percent, Bykovskaya 1 percent and Sberbank the remaining 5 percent. Another shift in shares occurred after the IPO was approved but before it took place, with all but one of the shares of Rusagro pulled under two shady firms in Cyprus.

In untangling the secretive spider web of Rusagro share transfers in March, it is clear that two new companies acquired the bulk of the shares. According to the Federal Financial Markets Service, securities management firm TrastAktiv and holdings firm Matchzone took 68.1 and 30.1 percent of Rusagro, respectively, that month. The remaining 1 percent of Rusagro was directly owned by Moshkovich’s wife, Natalia Bykovsky. Upon further investigation, TrastAktiv is also owned by Bykovsky and Matchzone is owned by Moshkovich, and both are running the firms from Cyprus, an offshore tax haven.

This pulled 100 percent of Rusagro’s shares out of Russia -- and away from Sberbank’s influence. Moshkovich was looking to sell the shares through IPO to produce great profits for foreign -- hopefully Western -- firms. But as long as the shares were inside Russia, Moshkovich believed that Sberbank could put pressure on Rusagro’s shareholders to keep its own stake in the company. So, Moshkovich moved 99 percent of the shares to Cypriot companies that had mysterious owners. Interestingly, Sberbank did not contest this transfer of shares. This is because Sberbank was planning to purchase shares of its own on the IPO listing so that it could own part of Rusagro outright instead of having to maintain a personal deal with Moshkovich to continually swap shares.

Relationship with Sberbank

Sberbank and Rusagro hold a special relationship. Sberbank is Rusagro’s largest creditor, with 90 percent of the group’s loan portfolio. Sberbank also takes on shares of the company regularly. It held a 50 percent stake in Rusagro’s umbrella company in early 2009, and even when Moshkovich was financially short, Sberbank stepped in to take a 95 percent stake in Rusagro until Moshkovich could get back on his feet.

Rusagro has a private agreement with Sberbank, through its chief Sergei Ignataev, that allows for the transfer of its own shares or Moshkovich’s shares when needed, giving the shares a fluid movement between the two groups. Moshkovich tends to swap shares for credit with Sberbank regularly in order to gain funds for his other companies and projects.

For its part, Sberbank considers all of Rusagro’s shares available for its own purchase -- or taking -- as loan security. When Rusagro considered an IPO in early 2010, Sberbank was considering taking control of the company at the discounted listing, but the IPO was suddenly closed before it began and the shares of Rusagro seemed to disappear once again from ownership within Russia (more on this below).

The Board

Besides a shift in shares, Rusagro also saw a shake-up in the board of Rusagro, with two foreigners being brought in -- Finnish dairy kingpin Lars Harry Salonaho, who ran both Valio and Unimilk, and Marcus James Rhodes, a British financier who was on the board of one of Europe’s largest dairy firms, Wimm Bill Dann. In addition to Salonaho and Rhodes, the Rusagro board of directors consists of:

• Vadim Moshkovich, Rusagro’s founder

• Nikolai Moshkovich, Vadim Moshkovich’s father

• Natalia Bykovskaya, Moshkovich’s wife and co-founder of Rusagro

• Mikhail Malikov, a close friend of Moshkovich who has served as a top manager of Moshkovich’s Augur Estate

The foreigners were brought onto the board before Rusagro was planning to launch its IPO in order to legitimize Rusagro in terms of international standards of business, show diversity and depth of experience and attract foreign interest in the company.

The IPO

Rusagro was scheduled to launch an IPO on Russia’s RTS and MICEX exchanges in May, a plan that Moshkovich pulled only weeks before the launch. Moshkovich’s plan was to raise $250-$300 million with the IPO on the London Stock Exchange, a process that was being overseen by Renaissance Capital, Alfa Bank, Credit Suisse and Troika Dialogue. The oversight firms valued Rusagro at approximately $1 billion. At the time of the listing, according to these firms, all shares had been pulled from Sberbank and strictly held by Moshkovich and his wife Bykovskaya. The IPO would have listed some 20-30 percent of Rusagro’s shares owned by Moshkovich’s Matchzone Holding.

Moshkovich was not using the IPO to pay off debt, since Rusagro was relatively debt free. Instead, Moshkovich was preparing to use half of the funds raised for his more personal ventures outside of Rusagro and the other half for Rusagro to further modernization and expansion of manufacturing processes provide a cushion should the financial situation in the country further deteriorate. This was about pure profit to Moshkovich.

Russian media report that there was strong interest by many groups (especially foreign) in Rusagro’s IPO going forward, and this leads to another story explaining why the company cancelled the listing.

The official story pushed by Rusagro and market analysts was that Moshkovich reconsidered the IPO after watching several comparable Russian firms’ IPOs fail to generate the revenue their owners desired as well as the continual fall in April of both stock markets. As the IPO drew near, it became apparent that the listing would give purchasers a 15 percent discount, down to the lower boundary of the shares’ offering price. Moshkovich refused to have Rusagro listed at a discount and felt he had time to wait for more favorable market conditions.

This reason seemed plausible at the time, when many Russian firms were delaying their IPOs because of global market jitters. More than 30 major Russian firms had plans to flood the domestic and international markets with share listings in 2010 after a cash drought during the country's first recession in a decade. But many listings that did go through, for Russian firms such as UralChem, Russian Sea and Rusal, had fallen short of demand.

But there seemed to be another, more personal reason why Moshkovich abandoned his IPO plans.

Longtime Rusagro backer Sberbank was looking at the IPO as an opportunity to purchase shares of Rusagro that were not part of some personal deal with Moshkovich but could actually be directly owned by Sberbank. It wasn’t that there was a break in Sberbank’s personal relationship with Moshkovich, but that they saw an opportunity during the financial crisis to pick up some lucrative pieces around Russia, like Rusagro.

Sberbank made no secret of its interest in the Rusagro shares, saying that it would purchase only 10 percent of the shares. However, inside sources say that Sberbank was really looking to purchase all of the 30 percent offered in the listing through its other firms and subsidiaries. Not only would Sberbank then have a firm stake in Rusagro that couldn’t be swapped away at Moshkovich’s whim, but Sberbank would also have gained those shares at a hefty discount. Moshkovich, for his part, was worried he was going to lose his leverage with Sberbank. Without the ability to use his personal relationship with Sberbank for his own gain whenever needed to, Moshkovich panicked.

Now that the IPO has been canceled, there has been some chatter that the share-swapping relationship between Sberbank and Moshkovich will resume when needed, though Sberbank was not pleased with the IPO’s cancellation.

Vadim Moshkovich

Vadim Moshkovich is the founder, owner and ultimate decision-maker for Rusagro. Born in Moscow in 1967, Moshkovich attended the Moscow Institute of Electronics and Automation to become a radio technician. But soon after he graduated, Moshkovich went to work at the Moscow Mercantile Exchange, where he witnessed the economic upheaval caused by the fall of the Soviet Union. Being part of the Mercantile Exchange, Moshkovich was able to form strategic relationships with the outgoing Soviet businessmen, the up-and-coming Russian business class and the new foreign groups coming into the region. Working inside the exchange also gave Moshkovich an insider’s ability to see businesses, land and other assets that had fallen by the wayside, as so much had during the post-Soviet upheaval.

At the time, Russia and other former Soviet states constituted the world’s Wild West in terms of law, ethics, order and commerce, and only the most ruthless, cunning or flexible entrepreneurs could profit. Moshkovich fell into the latter category. He was something of a Renaissance man, like many of the lower and middle-class Russians who would become incredibly wealthy oligarchs.

In 1992 he started out with an associate at the exchange, Sergei Kirilenko, by selling apartments that had unverifiable claims of ownership under his newly created real estate firm, Augur Estate. Moshkovich also began running oil on what was considered the black market, but dealing on the black market was a common business practice in those days. He also attempted to set up a vodka-trading firm called White Eagle. Moshkovich proved talented in recognizing business opportunities.

In 1995, the ambitious opportunist began acting as a middle-man in the sugar- trading business, running sugar from Ukraine into Russia to supply the still-operating Russian confectionary companies. Russia’s own sugar production industry was in disrepair, so Moshkovich had to cross the border into Ukraine to find supplies for the Russian confectionary companies. Moshkovich was able to use his shared heritage of being Jewish to strike lucrative trading deals with Ukrainian Jewish businessmen like Viktor Medvedchuk and Gregory Surkis to produce sugar beets in the eastern parts of the country. Moshkovich was careful not to be swept into the politics surrounding these two rising Ukrainian oligarchs and was able to maintain a brief, mainly business relationship for his own monetary gain.

The money he was able to scrape together from his myriad business ventures and the new connections he made allowed him to create the Sugar Trading Company. In 1997, Moshkovich settled his focus on the Belgorod region, where he started growing his own sugar and taking over shabby sugar plants. The following year, Moshkovich expanded his company (now called Rusagro) not only into other regions like Rostov, Voronezh and Krasnodar but also into other markets like grain, sunflower oil, hog farming and dairy farming. Moshkovich also continued his real estate venture, Augur Estate, expanding by setting up another firm, Masshtab, while beginning other ventures in banking and, finally, Russian politics.

Augur Estate

Moshkovich’s Augur Estate, an investment and development company, was established in Moscow in 1992, when Moshkovich and his partner, Sergei Kirilenko, began selling cheap apartments without clear ownership after the fall of the Soviet Union. Today, its main activities include investment, development and sales of residential and commercial real estate -- especially luxury properties. Augur Estate works across Russia, though it operates mainly in Moscow, Belgorod and Krasnodar.

Augur Estate is best known for its Moscow-based Camelot residential complex and Tri Topolya clubhouse estates, both of which cater to the wealthiest tier of Russian society. Augur Estate has a quite a few well-known partners in Russia, including the distinguished Mosproyekt architectural firm, the Kremlin-connected Miwel historical preservation firm and Crna Gora construction company, which helps it hold its stake in the highly competitive field.

But Augur Estate’s most important relationship is with city of Moscow’s powerhouses. The city’s construction and real estate sectors are almost fully monopolized by Elena Baturina, the wife of Mayor Yuri Luzhkov. The sectors are fiercely protected by Luzhkov’s alleged connections to the Moscow Mob, the world’s largest organized crime group. No construction project or real estate sale occurs without some level of blessing from Baturina. Moshkovich’s Augur Estate has been building and selling in Moscow for decades, which means that it is sanctioned by Luzhkov, Baturina and the Moscow Mob. This does not mean that Moshkovich’s real estate firm is involved in the illegal activities of the Moscow Mob, only that it pays its dues -- mostly cash and political concessions -- in order to operate under their rule. Moshkovich reportedly keeps his ties friendly with these groups via his friendship with Moscow Deputy Mayor Vladimir Resin, who oversees all construction in the city.

Masshtab

The Masshtab Company is the second of Moshkovich’s real estate firms, specializing in developing high-quality residential suburbs in Moscow. Created in 2005, Masshtab is considered the sister venture to Augur Estate and has many joint subsidiaries and holding companies. Masshtab owns large tracts of land of considerable value. Masshtab also runs an architectural company that is known for unique residences in Moscow. The company is also known for taking on incredibly large and financially risky projects.

Masshtab also has a close relationship with the Kremlin, selling land at a discount for large-scale government housing complexes. And it is one of the top firms in competition to provide the land for the Kremlin’s proposed high-tech center, which is intended to be comparable to Silicon Valley in the United States. The firms being considered for the development are all said to be tied politically to the Kremlin clan of Deputy Chief of Staff Vladislav Surkov and President Dmitri Medvedev. Last but not least, Masshtab is also the primary sponsor of the Khimki basketball team, one of Moscow’s elite professional sports organizations.

But Masshtab is embroiled in a bitter legal dispute with the Swedish retail firm IKEA that started in late 2009. Ten years before, IKEA reportedly signed a 49-year agreement to rent the land for its Moscow shopping center MEGA Teply Stan. The agreement was made with the former owners of the land. Now that Moshkovich’s Masshtab owns the land, he refuses to honor the contract without renegotiating a higher rent price. IKEA is also seeking to expand its complex on the property, but has not obtained permission from Masshtab. The dispute is currently in the Moscow Arbitration Court.

Banking

Outside of his agricultural and real-estate ventures, Moshkovich also holds minority shares in the banking sector. Moshkovich is a firm believer that his relationships with the banks in Russia are key to his ability to operate in Russia, as well as understand the country’s business and financial markets.

Sberbank

As mentioned above, Moshkovich began his banking relationships with Sberbank when the highly influential bank started financing both Augur Estate’s and Rusagro’s expansions and operations. Moshkovich took a 0.2 percent stake in Sberbank in 2007 -- not a small stake for an individual to hold. Sberbank’s chiefs, mainly German Gref and Sergei Ignatev, are among Russia’s most respected economists and businessmen and hold the personal ear of both Prime Minister Vladimir Putin and President Dmitri Medvedev. Gref and Ignatev have a long history as presidential aids, economic ministers and heads of Russia’s Central Bank. Moshkovich’s relationship with Sberbank gives him access to one of his most important networks in Russia and, in particular, the Kremlin.

Sobinbank

In 2001, Moshkovich took a 16 percent stake in Sobinbank, which is among the top 30 largest banks in Russia dealing mainly in strategic firms or high-tech commerce. He also became a member of its board of directors. Sobinbank’s clients include some of Russia’s most important institutions, such as diamond producer Alrosa, aeorspace company Energia, oil company Lukoil, National Reserve Bank, Bank Imperial, Bank Eurofinance and SBS-Agro. Sobinbank and Moshkovich’s Augur Estate jointly set up the Komstroi construction and development firm. As in many of Moshkovich’s business deals, his good friend and partner, Sergei Kirilenko, was in tow. Moshkovich set it up for Kirilenko to be president of the board of Sobinbank.

Sobinbank was known for its aggressive financing of risky projects. But amid the global financial crisis, many of Russia’s firms began to flounder, including Sobinbank. Just before the financial crisis hit, Moshkovich downgraded his shares to just 5.5 percent. In October 2008, Sobinbank was swallowed up by Gazenergoprombank, one of the financial branches of state natural gas behemoth Gazprom. The energy firm picked up the bank at a nominal price, what most Russian financial analysts deemed a “symbolic payment.”

Binbank

Binbank was a target for Moshkovich, who wanted to acquire it to help finance his real estate projects. But Binbank came with a political firestorm that forced Moshkovich to abandon his plans.

Binbank, also one of Russia’s top 30 banks, was run by Mikhail Shishkhanov, the nephew of oil billionaire Mikhail Gutseriyev. In 2008, Shishkhanov’s plan was to sell all of his and the majority of the other shareholders’ shares -- amounting to 99 percent -- to Moshkovich. But Shishkhanov, Binbank and, inadvertently, Moshkovich were swept into a political battle surrounding Gutseriyev. In 2007, Gutseriyev’s oil company Russneft was being targeted for tax evasion in a battle that looked very similar to those of fallen Yukos and Slavneft. The Kremlin’s plan was to sweep Russneft into its energy major Gazprom, though other Kremlin-friendly oligarchs like aluminum kingpin Oleg Deripaska were also looking at Russneft. The battle waged for a year and ended up with Gutseriyev fleeing the country after a warrant was issued for his arrest.

The following year, Gutseriyev’s nephew tried to sell Binbank to Moshkovich in a deal that looked pretty cut and dry on the surface. But following the transaction, the Kremlin stepped in and forced Moshkovich to withdraw from the already agreed-upon purchase. Kremlin energy chief and Russian political heavyweight Igor Sechin was looking to pressure not only Gutseriyev but also his family and business connections. Sechin was going to make an example of Shishkhanov and Binbank.

Moshkovich had been around the Kremlin long enough to know not to make an enemy of someone as powerful as Sechin. He pulled out of the Binbank deal, though Shishkhanov protested that the deal had already been made. Moshkovich ended up asking his banking ties to call in a favor from Russia’s Central Bank to officially cancel the deal with Shishkhanov.

Politics

Vadim Moshkovich became senator of the Belgorod region in 2007 and is currently considered one of the wealthiest senators in Russia’s legislative (he is ranked third). Representing Belrogod, where Rusagro is an economic powerhouse, was a natural evolution for Moshkovich.

Moshkovich has had a long history with the government of Russia. In 2001, as a major agro-industrial businessman, Moshkovich introduced and lobbied at the highest levels of the government for new agricultural laws. Moshkovich was behind the revolutionary legislation that would give agricultural producers the ability to sell and buy farm land, the core of Moshkovich’s business. At the time, Russian citizens could only buy and sell real estate that was not farm land. Since the state still considered farm land part of the Soviet collective farm legacy, the purchase or sale of it had to go through intricate bureaucratic procedures. Moshkovich knew that without a change in laws it would be difficult for him not only to gain more land but also to utilize investment to increase crop output or modernization without the government bureaucracy being involved.

Moshkovich introduced a bill in Parliament that would make buying and selling farm land easier and then aggressively lobbied the government to promote its passage. Moshkovich found representatives of other Russian businesses to lobby with him, from companies like the financial powerhouse Interros.

The legislation began to gain much attention and received the political backing of Duma Agricultural Committee head Vladimir Plotnikov. The Duma ended up being split on the legislation, with the more right-leaning parliamentarians supporting it and the left-leaning parliamentarians staunchly against it. For Moshkovich, the legislation also made an enemy out of then-Agricultural Minister Alexei Gordeyev. The legislation ended up being passed when it was taken by Duma members all the way to then-President Vladimir Putin.

Now a member of Russia’s esteemed Federal Council of Russia, Moshkovich is among a slew of Russian businessmen integrated into the government. Being a senator allows Moshkovich to wield the weight of the Kremlin behind his business transactions and it protects him and his interests from other business groups. But being part of the Federal Council, along with being a billionaire, comes with the explicit understanding that no business interests can go against the Kremlin or do anything without its approval. It is a new code for the dual businessmen and politicians in the Kremlin.

Russian Jewish Congress

Besides being an influential businessman and politician in Russia, Moshkovich is also a member of the esteemed Russian Jewish Congress. Under the guise of a non-profit charity, the Russian Jewish Congress is more a protective network of some of Russia’s most influential Jews. The Russian Jewish Congress is an organization respected by the Kremlin’s leaders, Dmitri Medvedev and Vladimir Putin, and it includes the most powerful and well-known Jewish politicians, businessmen, actors and religious figures. Its members include former Foreign Minister Andrei Kozyrev, UES CEO Yakov Urinson, Moscow Deputy Mayor Vladimir Resin, billionaire Mikhail Fridman, Chief Rabbi Berel Lazar and Vitali Ginzburg, father of the Soviet hydrogen bomb.

The Russian Jewish Congress acts as a networking and political club for the country’s most powerful Jews and is connected to similar groups throughout the former Soviet states and Europe. Through the congress, Moshkovich holds a personal relationship with Vyatchelsav Moshe Kantor, head of the European Jewish Congress and a close personal friend of Vladimir Putin’s.

Organized Crime Links

Like any prominent businessman in Russia, Moshkovich does have to deal with Russian organized crime, and there are separate organized-crime groups that he has understandings with. The first is the Tambov gang, which is the second largest organized-crime group in Russia and allegedly one of the most ruthless and powerful enterprises in the country. Created by a group of brothers, the Barsukovs, in the Tambov region, the group moved to St. Petersburg in the mid-1980s just as other groups were trying to secure control of the city. Tambov now runs a vast business network between Russia’s southwestern regions and second largest city.

With Moshkovich’s business dealings in Tambov, Belgorod and Voronezh, he has to have have permission from the Tambov gang in order to operate. Moshkovich does not involve himself in any of the Tambov gang’s illegal business dealings, nor does he have a personal relationship with anyone in the gang. Instead, Moshkovich allegedly pays a monthly stipend of approximately 10 percent of the revenues in that particular region to the gang -- a standard percentage in Russia for any business. In return, the Tambov gang not only permits Moshkovich’s operations but also extends a level of protection to Rusagro.

The second organization Moshkovich must deal with is the largest organized-crime group in Russia and the largest in the world: the Moscow Mob. As mentioned before, one of mob’s leaders is allegedly Moscow Mayor Yuri Luzhkov, whose wife monopolizes the city’s construction and real estate markets. In order for both Augur Estate and Masshtab to operate in Moscow, Moshkovich must have the blessing of Luzhkov, his wife and the Moscow Mob. But as in his relationship with the Tambov gang, Moshkovich does not hold any personal relationships with anyone in the Moscow Mob. Instead he pays a monthly stipend in order to operate on their turf.

Moshkovich’s Character

As a successful businessman and politician, Moshkovich also has the reputation for being a very savvy entrepreneur. He began his business life by picking up the discarded remains of the Soviet economy and spinning them into successful ventures. Moshkovich paid careful attention while working at the Moscow Mercantile Exchange in order to find opportunities that few others saw. Some Russian businessmen consider him lucky in stumbling upon weak assets and turning them around, though it was more a matter of his making many investments that others would not risk. Moshkovich is a dynamo at gambling with his businesses.

One of the most profitable risks he has taken is bringing politically elite Sberbank into Rusagro and spinning the connection into a long-term relationship. This has given him political, financial and economic protection for almost 15 years. And it is a relationship in which Moshkovich has fought to maintain his leverage, as seen with the IPO.

As he has developed his businesses, Moshkovich has been far more interested in maximum profit than loyalty to his business ventures. This was evident in his nearly selling Rusagro on two occasions: once in 2001 to oligarch Oleg Deripaska and once in the IPO. He is willing to sell almost any asset he owns if the price is right. Moshkovich has now collected enough wealth -- entering Russia’s elite billionaire’s club -- that he can now be patient in waiting for the right price.

Out of Moshkovich’s two decades of business dealings, two constants emerge: his close friend Sergei Kirilenko and his wife Natalia Bykovsky.

Key Players

Sergei Kirilenko

Sergei Kirilenko has been part of Moshkovich’s business life since the beginning. Moshkovich and Kirilenko met at the Moscow Merchantile Exchange in 1991 and a year later the two launched Augur Estate, which both still own. Kirilenko also helped Moshkovich with his vodka running business White Eagle. When Moshkovich bought up a stake in Sobinbank, he ensured that Kirilenko was nominated chairman of the board, although Kirilenko already had a personal relationship with the head of the bank, Konstantin Bekov. Kirilenko also has run Moshkovich’s Masshtab.

Kirilenko has been known to take on substantial stakes in Moshkovich’s Rusagro, but mainly as a placeholder while Moshkovich strikes business deals with others. Kirilenko also possesses a high level of financial savvy and advises Moshkovich on nearly all of his business dealings. The two men will likely be intertwined in nearly all of their business dealings for some time to come.

Natalia Bykovsky

Moshkovich’s wife, Natalia Bykovsky, worth about $3 billion, is considered Russia’s second richest woman, behind Elena Baturina, the wife of Moscow’s mayor. This officially makes Bykovsky three times as wealthy as her husband. The main reason is that Moshkovich tends to keep most of his wealth under his wife’s name. In Russia, all property of the spouse is considered community property, though it is easier to keep shares and assets non-transparent if they are listed under the not-as-well-known spouse’s name. It is a common little trick used by many prominent Russian businessmen.

The two were married in 1996 and have a son and daughter. Since their marriage, she has been active in Moshkovich’s business ventures. Bykovsky is considered very knowledgeable about business and how a complex organization like Rusagro is run, and she is good at dealing with Rusagro’s day-to-day operations. She has held positions as Rusagro’s deputy director general and member of the board. Currently, Bykovsky also owns the Cypriot holding firm Trastaktiv that now holds a large stake in Rusagro. The couple is known to have a collective and constructive marriage and Moshkovich holds Bykovsky’s business decisions in great confidence.

Maksim Bassov

Maksim Bassov is the current general director of Rusagro. Born in 1975 in Moscow, Bassov earned degrees in economics, finance, international business and philosophy from New York University. Known for his sharp mind for business, Bassov started off in finance working for Citibank, MKF-Renaissance and McKinsey & Co., but he quickly launched himself into leading executive positions in the metals industry. The metals companies that evolved from the former Soviet Union have always been in a class unto themselves, and some of the world’s largest steel, aluminum, iron and precious-metals companies are Russian. The country’s metals and mining companies are enormous and highly diverse both domestically and internationally, with projects in Africa, East Asia and Latin America, as well as, former Soviet states.

But the Russian metals sector -- especially the steel firms -- experienced an extraordinarily nasty series of battles (even by Russian standards) in the 1990s and early 2000s. The literal body count from the so-called Steel Wars is hard to gauge; targets ranged from billionaire company heads to lower-level employees and their families. The metals firms that survived did so only because they fought the hardest and most ruthlessly. This is one sector in which even the Kremlin has been very careful about meddling.

Bassov entered into the world of metals deputy director of investments for Severstal in early 2002, when the Steel Wars were in full swing. He then bounced between a few different firms, but found one of his strongest and most important positions when he joined Ukraine’s Interpipe as first deputy chairman in 2004. Interpipe has been one of the most politicized firms in all of Ukraine, and Bassov was brought in at a time when Ukraine’s political tide was turning with the Orange Revolution. Interpipe’s owner, Viktor Pinchuk, was the son-in-law of Ukraine’s outgoing pro-Russian President Leonid Kuchma. Pinchuk was also one of the wealthiest oligarchs in all of the country. The outcome of the pro-Western Orange Revolution left Pinchuk and Interpipe top targets for the new government.

Bassov came into the company not only to shape its future within this new reality but also to protect Interpipe’s assets from the government, which was looking to nationalize the company. Bassov lead the effort to defend Interpipe, especially when the government started to go after its facilities, such as the Nikopol Ferroalloy and Kyrvorizhstahl plants. Bassov was the face of the fight against the new government, rallying the workers at Interpipe to strike and organizing the legal battle. He was considered very successful in his defense of Interpipe.

Also while working for Interpipe, Bassov also became associated with Rinat Akhmetov, Ukraine’s largest and most powerful oligarch. Pinchuk and Akhmetov have long been close associates, and Bassov was part of their team to fight against the new Ukrainian government. Akhmetov also allegedly is one of the fiercest businessmen in the country, with deep ties to Ukrainian and Russian organized-crime groups.

In 2006, Bassov moved over to one of Russia’s largest metals and mining companies, Metalloinvest, starting off as its general director and heading up its holding firm, Gazmettal. By 2009, Bassov had moved onto the giant company’s board of directors. Metalloinvest is controlled by Russian billionaire Alisher Usmanov, who runs hot and cold with Prime Minister Vladimir Putin but is still considered one of the most respected businessmen in the country. Usmanov is also considered tied to the more Western-leaning oligarchs and has a close personal relationship with President Dmitri Medvedev from their time together at Gazprom.

Bassov was brought in to use his Ukrainian network to supply new contracts in the country for Metalloinvest, though the Ukrainian government was staunchly against it. Bassov’s influence was evident in the deals struck between Metalloinvest and Ukrainian groups over a number of Western suitors. Proving himself, Bassov was allowed to be fully integrated into the elite network of liberal businessmen in Russia.

Bassov was brought into Rusagro in July 2009, not only for his connections but also for his ability to maneuver through a fierce and dangerous political landscape. He is also very dedicated to the companies he serves. Moshkovich has been interested in Bassov’s connections in Ukraine, where Rusagro still does business but could stand to expand. Bassov is tied to a myriad of politicians and businessmen in the eastern part of the country, where agriculture is the strongest and which is more pro-Russian. Bassov also is now part of the elite club in Russia led by the steel tycoons that has a reputation for being very aggressive in business ventures. Bassov’s addition to Rusagro benefits the company in many ways.

Vladimir Gomodov

Vladimir Gomodov is the First Deputy General Director of Rusagro. Born in 1973 in Moscow, he attended the State Academy of Management and obtained a degree in economics and production management. Following graduation in the mid-1990s, Gomodov went directly into SBS-Agro bank, Russia’s second largest bank, which would be swallowed up by the government’s Central Bank during the 2008 financial crisis.

Gomodov joined Rusagro in 1999 as the deputy chief financial officer and then quickly became the director of finance. In 2005 he became the company’s deputy general director for economics and finance. Gomodov served as the director general of the company from 2007 to 2009, when he was forced to step back into a deputy role when Bassov joined the company. Gomodov was considered one of the financial brains at Rusagro, but he was also thought to be lacking in the forward-thinking aggressiveness that Bassov brought to the table. Gomodov is most effective at daily financial and planning tasks, so he has been kept on in that role.

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