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In an effort to challenge the EU sanctions against them, Russian billionaires Mikhail Fridman and Petr Aven have sold their shares in Russia’s largest private bank and its insurance company. They transferred their stakes in Alfa-Bank and Alfa Strakhovanie to Andrei Kosogov, a long-time business associate, last year. This transaction, finalized in 2023 and valued at around 240 billion rubles (or $2.5 billion), was confirmed by documents reviewed by the Financial Times. The two oligarchs controlled nearly half of the bank and 42% of the insurance firm.
Andrei Kosogov has significantly increased his profile by becoming the primary shareholder in both Alfa-Bank and LetterOne, a multinational conglomerate based in Mayfair, thanks to acquiring the holdings of his sanctioned partners.
The rapid sale of these assets, facilitated by the Russian government, who has a keen interest in “economically significant” companies, is part of Fridman and Aven’s strategy to lift the sanctions placed upon them following President Putin’s full-scale invasion of Ukraine.
In a notable development last year, the EU’s General Court partially overturned some aspects of the sanctions, ruling the evidence against Fridman and Aven was insufficient to demonstrate their roles in destabilizing Ukraine. Although this represented a significant setback for the EU’s sanction efforts against Russia, other aspects of the sanctions have remained in place. These ongoing measures justify the sanctions based on Fridman and Aven’s roles as pivotal business figures in Russia, contributing considerably to the Kremlin’s revenues.
The two businessmen are actively contesting this rationale. Should they succeed, EU member states might opt either to remove the sanctions, appeal the court’s decision, or reinstate measures under fresh pretenses. Meanwhile, Latvia has appealed against decisions that favored the oligarchs.
Anitta Hipper, speaking for the EU’s foreign affairs office, noted that while legal proceedings continue, the sanctions against Aven and Fridman remain effective due to renewals made in September 2023 and anticipated in March 2024. She added that the council of EU member states routinely reviews their sanctioned lists.
The imposition of UK and EU sanctions compelled Fridman, Aven, and former partners such as German Khan and Alexei Kuzmichev to relinquish their investment group LetterOne and leave its board. Kosogov, who initially held the smallest stake, acquired Khan and Kuzmichev’s shares in both Alfa-Bank and LetterOne in 2022, making him the major shareholder. Through a deal worth $7 billion, Khan and Kuzmichev extended a loan to Kosogov to purchase their stakes, with an option for recourse within a decade, according to a High Court ruling.
Furthermore, Kosogov arranged to purchase Fridman and Aven’s shares in Alfa-Bank through a Cypriot holding firm, with financing from Gazprombank, as shown by correspondence accessed by the FT. However, the sale hit a snag in Cyprus due to regulatory complications, sparking public outcry from Alfa-Bank’s Luxembourg-based parent company.
Meanwhile, Russian legislation granted the state authority to reacquire control of companies of economic importance held in Western jurisdictions. An initial list by the Russian government included local holding entities of Alfa-Bank, Alfa Strakhovanie, and X5, a supermarket chain founded by Fridman.
Subsequently, a Russian court transferred control of Alfa-Bank and Alfa Strakhovanie from the Luxembourg-based parent company to Fridman and Aven, allowing them to sell these assets to Kosogov.
Kosogov has committed to financing the purchase independently, as per sale agreements. With Cyprus approving the sale in July, the Russian intervention effectively rendered the need for EU approval unnecessary, allowing the transfer of control without hindrance.
Alexandra Prokopenko, a fellow at the Carnegie Russia Eurasia Center in Berlin, explained that this legal framework allows owners to distance themselves from the process, which had favorable ties with the Russian government. This move ultimately binds these companies more closely to the Russian regime by permitting dividend payments and shielding them from sanctions.
Fridman and Aven chose not to comment, while Kosogov did not reply to requests for remarks.
