#Russia: Will Vladimir Putin’s lofty economic goals be achieved?

Vladimir Putin owes a great deal of his popularity in Russia to the “era of unprecedented prosperity” he presided over between 1999 and 2006. It’s an epoch that’s not likely to be repeated, as Putin no longer has the benefit of skyrocketing oil prices, but the Russian president nevertheless is staking his fourth term on shoring up the economy. In his state of the nation address shortly before being re-elected, Putin outlined a number of ambitious goals—including cutting the poverty rate in half over his six-year term—and initiatives intended to boost job creation and promote long-term economic growth.

The Russian economy has significantly improved since the tailspin it was sent into by the 2014 oil price crash. Aggressive intervention by the Russian central bank just barely managed to stave off a deep recession, but, the Russian economy remains fragile, even as oil prices have picked up.  Some observers have laid the blame for this continuing stagnation on Russia’s failure to enact considerable economic and political reforms.

Russia remains seriously dependent on fossil fuel exports, and its wealth is highly concentrated: 111 billionaires control nearly a fifth of the country’s resources. There’s a related, less discussed problem delaying progress: the bitter battles which frequently break out between oligarchs, which mire their companies in chaos and deter investment. Propping up the Russian economy will require a coordinated effort involving not just the Kremlin but also the participation of these often warring and competing oligarchs.

One particular oligarch seems intent on testing the Kremlin’s patience. Vladimir Potanin, who owns 32.9% of metals giant Nornickel and serves as its CEO, is picking a fight with Nornickel’s second-largest shareholder, aluminium magnate Oleg Deripaska. Potanin augmented his stake in Nornickel by 2%, in a move slammed by Deripaska as contrary to a 2012 shareholder agreement. London’s High Court is expected to rule on the dispute in early May and decide the fate of the $30 billion company.

The dispute is ill-timed as Norilsk’s main product, nickel, is taking off on international markets due to its applications in electric cars. Despite serving as the company’s CEO, Potanin may end up being too distracted by his London court case than to focus on devising growth stragies for Norilsk.

But far from being a purely commercial dispute, Potanin’s single-minded desire to control Nornickel stretches back decades. He fell out with long-time business partner and close friend Mikhail Prokhorov in 2007 in what was termed the “biggest divorce in Russian business history”, after the latter was embroiled in a call-girls scandal in an elite ski resort. Potanin’s plan to snatch up his ex-partner’s 25 percent stake in the company for a pittance was foiled when Prokhorov sold it to Deripaska instead, kicking off more than a decade of attempts on Potanin’s part to push the aluminium company out of Nornickel.

The infighting got so bad that the Kremlin had to interfere in 2012, brokering a “peace deal”. The truce brought in a third party, oligarch Roman Abramovich, to serve as a buffer minority shareholder, and imposed a 5-year period during which Abramovich couldn’t sell his stake. Now that the five years have elapsed, Potanin is back to his old tricks, once more putting his petty grievances above his company’s well-being.

In an ironic twist, Abramovich has had his own ugly squabbles. Right around the time he was signing up as a temporary guarantor of peace for Nornickel, the billionaire owner of Chelsea FC was embroiled in a nasty court battle with fellow oligarch Boris Berezovsky over shares in oil titan Sibneft. Their spat ran up a £100 million legal tab, became the largest lawsuit in British history, and saw the two former friends and business partners sling insults at each other. Like Potanin’s longstanding grudge, the case proved both Abramovich and Berezovsky willing to put perceived personal slights over good business: Berezovsky served his rival with the lawsuit’s writ in a luxury boutique in London, gleefully quipping “I have a present for you”.

The two men’s glamorous lifestyles were dragged out into the open in spectacular detail at the trial, as Abramovich described how he paid for his former friend’s French château, private jet charters, and a whole host of other luxuries, including his mistresses’ jewellery. They’re by no means the only wealthy Russians to spill the intimate details of each other’s lives to settle scores, regardless of the consequences for their business interests. In 2017, shipping magnate Roman Trotsenko and real estate developer Sergei Polonsky duked it out in court over a luxury home given to a woman they had both dated after their business partnership went south.

This sordid bickering may provide juicy fodder for gossip mags, but it can have serious economic consequences. Dramatic infighting which began with a tussle between father and son caused the privatization of oil company Bashneft to be delayed in 2016, depriving the Russian government of desperately-needed funds to fill the budget hole it had been left with after years of low oil prices. Discord paralyzed oil producer TNK-BP for more than a decade, blocking potentially lucrative partnerships and jeopardizing its credit rating. Nornickel’s excellent results—its share price doubled—during its 5-year peace deal just illustrated how severely the feuding between shareholders was depressing its operations.

With Potanin now willing to risk that stability—even chancing the possibility of a devastating “shoot-out” which would see the winner forced to buy the entirety of the other’s stake –the jury is still out on whether Putin will step in to calm Potanin down, as he did in 2012. Whether he does or not could set the tone for his new presidential term: with the economy high on its agenda, will the Kremlin allow rapacious oligarchs to sabotage their own companies’ financial health for the sake of their personal grievances?

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