MOSCOW/WASHINGTON – He has money, media power and the ear of President Vladimir Putin. Such is his influence that some observers have described Yuri Kovalchuk as the Rupert Murdoch of Russia.
Kovalchuk is one of an elite group close to Putin and has come to prominence outside Russia because he was sanctioned by the United States in March. The U.S. Treasury described him then as the “personal banker for senior officials of the Russian Federation including Putin.”
After the sanctions were imposed, Kovalchuk gave a rare television interview in Russia and shrugged off their impact. He said the sanctions had backfired and spurred support for his banking business.
Kovalchuk and Putin have known each other since at least the 1990s, when Putin was a local official in St. Petersburg. They both had luxury country houses at the Ozero dacha cooperative near the city, and their fortunes have prospered in tandem.
In the 1990s, Kovalchuk and three associates bought Bank Rossiya, at the time a small and struggling local operation. Since Putin became president in 2000, the bank has grown in size and influence, acquiring assets from, among others, Gazprom, the giant state-controlled gas company. Bank Rossiya was also sanctioned by the U.S. this spring. It now has $11 billion in assets, and Kovalchuk is chairman and the largest shareholder with 40 percent. With other interests in insurance, television and a mobile phone operator, he is estimated by Forbes to be worth $1 billion.
But Kovalchuk is more than a financier. By training he is a physicist, and his influence has extended to one of Russia’s strategic interests: space technology.
Until earlier this year, Bank Rossiya indirectly controlled a minority stake in Energia, a Russian space company that is 38 percent owned by the state. Through that minority shareholding, and with the state’s acquiescence, Kovalchuk exerted management influence over Energia, according to company insiders. One senior employee at Energia said the Kremlin had in effect made Kovalchuk Putin’s “unofficial supervisor of the space industry.”
Kovalchuk’s brother Mikhail became chairman of Energia in 2011 and served to 2013; other Kovalchuk associates were directors. Under Putin’s orders, in October 2010 Energia had been placed in charge of Energomash, the company making the RD-180 engines.
The senior employee of Energia said Kovalchuk was not directly involved in the engine contracts. An aide to Kovalchuk said it was wrong to say Kovalchuk had any “management function” or control over Energia or Energomash. Energia declined to discuss Kovalchuk’s role in the company, and said it derived no financial benefit from its involvement in Energomash.
Among his other interests, Kovalchuk also indirectly controlled Gazprombank, a private bank spun out of Gazprom early in the Putin era. Gazprombank has provided large loans to Energomash.
Shortly before the U.S. and European Union imposed sanctions on Russia over the turmoil in Ukraine, Kovalchuk distanced himself both from Gazprombank and Energia. Bank Rossiya no longer controls an indirect minority stake in either company. However, allies of Kovalchuk remain on the board of directors of both companies.
Control of the billionaire’s holding in Energia shifted to the employee pension fund of another major instrument of Putin’s power — the giant Russian gas producer, Gazprom. The fund is run by Yuri Shamalov. He is the son of Nikolai Shamalov, an associate of both Putin and Kovalchuk who owns a 10 percent stake in Bank Rossiya. Nikolai Shamalov was sanctioned by the European Union in July. In May, Reuters documented how Shamalov used money he made from state medical-equipment contracts to help finance the construction of a mansion known as “Putin’s palace.”
Gazfond, the Gazprom employee pension fund, and the Shamalovs did not respond to requests for comment.
According to industry executives in Russia, the other power behind Energomash and Energia is Dmitry Rogozin, Russia’s deputy prime minister, who was sanctioned over Ukraine by the United States in March.
Rogozin was leader of Rodina, a nationalist party and rival of Putin’s United Russia, until 2006. He later became Russia’s ambassador to NATO and in 2011 was made deputy prime minister in charge of the defense and space industries.
In September last year, Rogozin said that he planned to consolidate Russia’s fragmented space industry under a single state-controlled body. At the time, he said the federal government should increase its shareholding in Energia.
In an interview with the Russian news agency Tass last month, Rogozin said that Russia was making progress in reducing its dependence on U.S. and European Union imports for its defense industries. He also drew attention to Russia’s blossoming links with China, saying they were “now actively working in the space sphere, considering possible joint projects in space exploration.”
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