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Russia’s Clueless New Oligarchs

A new generation of business owners with no experience are snapping up Western companies’ assets at fire-sale prices.

Braw-Elisabeth-foreign-policy-columnist3
Braw-Elisabeth-foreign-policy-columnist3
Elisabeth Braw
By , a columnist at Foreign Policy and a fellow at the American Enterprise Institute.
A worker removes McDonald's logotype from a restaurant in Moscow on June 17.
A worker removes McDonald's logotype from a restaurant in Moscow on June 17.
A worker removes McDonald's logotype from a restaurant in Moscow on June 17. ALEXANDER NEMENOV/AFP via Getty Images

In 2020, the Finnish paper-and-pulp company Huhtamaki decided to build a new factory in Russia, where it would manufacture packaging and egg cartons for Russia’s growing middle class. The factory was scheduled to open in early 2022. Huhtamaki, alas, never got to use its modern facility.

When Russia invaded Ukraine, the Finnish firm withdrew from Russia and had no choice but to sell its assets to a local entrepreneur. That entrepreneur and others like him are making a killing buying Western fire-sale assets in their country. Indeed, Western companies are unwittingly helping to create a new generation of Russian oligarchs.

“We conducted extensive due diligence to find the best possible buyer and future partner for our local,” Charles Héaulmé, Huhtamaki’s president and CEO, announced in a Sept. 2 press release. The buyers, Alexander Govor and Yuri Kushnerov, paid a bargain price of 151 million euros (or $146 million at today’s exchange rate) for manufacturing sites in Russia that employ 724 people.

In 2020, the Finnish paper-and-pulp company Huhtamaki decided to build a new factory in Russia, where it would manufacture packaging and egg cartons for Russia’s growing middle class. The factory was scheduled to open in early 2022. Huhtamaki, alas, never got to use its modern facility.

When Russia invaded Ukraine, the Finnish firm withdrew from Russia and had no choice but to sell its assets to a local entrepreneur. That entrepreneur and others like him are making a killing buying Western fire-sale assets in their country. Indeed, Western companies are unwittingly helping to create a new generation of Russian oligarchs.

“We conducted extensive due diligence to find the best possible buyer and future partner for our local,” Charles Héaulmé, Huhtamaki’s president and CEO, announced in a Sept. 2 press release. The buyers, Alexander Govor and Yuri Kushnerov, paid a bargain price of 151 million euros (or $146 million at today’s exchange rate) for manufacturing sites in Russia that employ 724 people.

Western companies are unwittingly helping to create a new generation of Russian oligarchs.

Huhtamaki may well have conducted extensive due diligence to find the best possible buyer; whether Govor and Kushnerov are the best buyers is another matter. Until they emerged as the venerable Finnish firm’s buyers, Govor and Kushnerov were virtually unknown. In the world of globalized business—which was pretty much intact until Feb. 24, when Russia invaded Ukraine—the names of people who could put down $145 million on the spot were usually well known.

But when I checked with a number of Western business executives with considerable experience in Russia, none had heard of the pair until they surfaced as buyers after the invasion. Govor had a small digital footprint that took off only after Feb. 24, whereas Kushnerov’s digital footprint was virtually nonexistent. A European businessman who lived in Russia for nearly 30 years until he left recently pointed out that in the Russian coal industry, Govor is known for “scandals involving mining accidents.” With the acquisition of a leading manufacturer’s Russian operations, he and Kushnerov are now playing in the big leagues.

Govor has, in fact, been cleverly taking advantage of Western companies’ forced departure from Russia. In May, he bought McDonald’s Russian operations, telling media he’d paid a “symbolic” sum for the deal’s 700 restaurants, which kept operations going under the new name Vkusno i tochka (meaning “Tasty and that’s it”).

If you and the internet have never heard of Govor, it’s because he’s not part of the cadre of Russian oligarchs who shot to fame by acquiring Russian state-owned companies in the 1990s. Far from being a billionaire like Roman Abramovich, Govor is a little-known Siberian industrialist who previously operated 25 McDonald’s outlets in his home region. Govor and Kushnerov jointly own a firm based in Cyprus, but the nature of its activities is a mystery. Unlike a great deal of Cyprus-based companies owned by Russians, it doesn’t even appear in the Panama Papers.


Men like Govor and Kushnerov are soaring to business prominence because there’s a sudden plethora of Western businesses to be had for a song. Several dozen Western companies and high-profile organizations have already responded to Russia’s invasion of Ukraine by completely leaving the country. They vary from budget-apparel retailer T.J. Maxx, which took a $186 million write-off, to British American Tobacco and the Finnish confectionary giant Fazer.

But withdrawing from Russia isn’t as easy as it sounds: Imagine moving houses, but the move involves lots of different houses at the same time, not to mention the people living in them. “A company’s local management and, at worst, even its board of directors and owners may face serious legal consequences for discontinuing operations,” Lauri Veijalainen of East Office, a Finnish consultancy that promotes trade in Russia and Ukraine, told the Finnish newspaper Kauppalehti in March. “This applies especially to companies with production or activity on their own premises in Russia. Companies have effectively three options: to continue their operations, hand over their shareholdings to a Russian company, or discontinue operations.”

Continuing operations, of course, exposes companies to Western consumers’ ire, as Uniqlo painfully discovered in March. It’s hardly surprising that companies are in a hurry to leave Russia—and that means they’re willing to take massive losses. In February, BP sold its 19.75 percent share in Rosneft to Rosneft itself, which brought the British energy giant a $25 billion loss.

There are a whole lot of virtually unknown Russian entrepreneurs getting their hands on valuable assets.

Such a buyers’ market is a massive and unexpected opportunity for entrepreneurs like Govor, who have until now firmly resided in the second or third tier of the Russian economy. Danish industrial equipment giant Danfoss has sold its Russian assets to local managers, as have Oerlikon of Switzerland, Norwegian packaging company Elopak, beauty retailer Sephora, and Sweden’s packaging giant Tetra Pak. The Finnish forestry manufacturer Ponsse has sold its Russian and Belarusian operations to OOO Bison, a Russian company set up a month earlier by the owner of its local retailer. That’s a whole lot of virtually unknown Russian entrepreneurs getting their hands on valuable assets.

It’s a lot like the early 1990s, when then-unknown Russian entrepreneurs snapped up valuable state-owned companies at fire-sale prices. Russia’s war against Ukraine is creating a new generation of prospective oligarchs. But the new oligarchs are nothing like the previous generation, said Anders Aslund, a Swedish economist who served as an advisor to the Russian government during those turbulent first years of the 1990s. “They’re the opposite of the young entrepreneurs during the 1990s who did everything that was needed in order to succeed,” he told FP. They also lack a key asset those early oligarchs benefited from: free access to international financial markets, international supplies, and international companies keen on doing business with them.

Indeed, being able to acquire well-run Western companies for a cheap penny doesn’t guarantee commercial success. “Everything is wrong about this arrangement,” Aslund said. “The companies won’t be able to access Western services like management consulting and auditing, nor will they get access to Western technology or spare parts. It’s likely that most of the companies without government support … will go bankrupt.”

As of last week, they face a much more immediate headache than lack of auditing: lack of workers. Tens of thousands of men have already fled the country to evade the partial mobilization announced by Russian President Vladimir Putin on Sept. 21, and countless more are trying to do so. Approximately 300,000 men have already been called up for military duty, and the mobilization is unlikely to stop at that number. With any fit men to be found now being needed for war duty and others trying to avoid being found by the call-up officers, companies face labor shortages.

Packaging companies may seem less vital to society than, say, energy firms, but one only needs to imagine food retail and consumption without packaging to see why it’s in the Kremlin’s interest that these formerly Western companies don’t collapse. Until last week, Putin was able to conduct his war without fear of a popular revolt simply because most of the Russian population wasn’t being inconvenienced by it.

Since announcing the mobilization though, Putin is on thin ice. Now, if Russia isn’t even able to operate its newly Russified versions of the Western companies that have departed and people face tangible inconveniences, he risks real unrest. The premise of Russian oligarchs taking over Western firms’ Russian operations is that they’ll be able to mirror what those firms did—in other words, “Tasty and that’s it” across the economy.

As for Vkusno i tochka itself, a Kremlin bailout would perfectly epitomize Russia three or so decades after it first embraced capitalism. McDonald’s was famously the first major Western brand given permission to operate in the Soviet Union; when, in 1990, it opened its first restaurant, Muscovites had to wait in line for two hours to enter the golden arches near Pushkin Square.

The botched mobilization will now prompt more Western companies to shed their Russian operations—and the last ones are likely to leave when their insurance expires. Most insurance policies cover one year, and most Western underwriters no longer insure business operations in Russia. That means that many more companies will leave the country in late February 2023 at the latest. And that means many more holdings for Govor and his comrades. Putin can only hope that the new oligarchs, unlike their predecessors, don’t develop any political ambitions.

Elisabeth Braw is a columnist at Foreign Policy and a fellow at the American Enterprise Institute, where she focuses on defense against emerging national security challenges, such as hybrid and gray-zone threats. She is also a member of the U.K. National Preparedness Commission. Twitter: @elisabethbraw

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