Mikhail Fridman: The Oligarch Who Defied The Odds In Post-Soviet Russia

From the original group of Russian oligarchs, minted during the shady post-Soviet privatization of the economy in the 1990s, few maintain their incredible wealth and political influence today. By and large, Putin has replaced Boris Yeltsin's OG oligarchs with his own cronies. But Mikhail Fridman, worth a whopping $14.5 billion and Russia's second-richest man (after Vladimir Potanin), is one major exception.

Fridman was born in Lviv, Ukraine, in 1964 to Jewish parents. His earliest business ventures came during his time as a student at the Moscow Institute of Steel and Alloys. He and some buddies began scalping tickets to Moscow theater events when not running a discotheque. A few years later, he started a window-washing business with some college buddies, employing university students who needed to earn an extra buck.

It was in 1989 that Fridman founded Alfa-Eco, known today as AlfaGroup, along with classmates German Khan and Alexei Kuzmichov. AlfaGroup is now one of the largest private investment groups in Russia, with a wide range of interests, including oil and gas, banking, insurance, and telecommunications. The next year, Fridman and friends founded Alfa-Bank, one of the first private banks in post-Soviet Russia and the largest private commercial bank in the country today.

During the elections of 1996, Fridman was one of the "Big Seven" oligarchs who were responsible for paying for the re-election campaign of Boris Yeltsin. The very next year, AlfaGroup acquired a 40% stake in the newly privatized Tyumen Oil Company (TNK). By the end of the decade, after additional privatization, that stake was just shy of 100%.

Despite other successes, the TNK deal proved to be the most lucrative for Fridman. In 2003, the company formed a 50-50 joint venture with British Petroleum, called TNK-BP. Its revenues soared to $60 billion a year, making its owners very rich men. But the relationship was rocky, and by 2011, BP was looking to sell its stake to state-owned oil giant Rosneft, run by Putin ally Igor Sechin. The move was viewed as a way for Putin to continue to centralize his power.

When the $55 billion deal closed in 2013, oil prices had yet to collapse. BP received $12.5 billion in cash and an almost 20% stake in Rosneft. The billionaire buddies that represented TNK, however, received almost $28 billion in cold hard cash, with no interest in shares. By the next year, when oil prices collapsed and Putin's invasion of Crimea led to sanctions, Rosneft's value plummeted by 50%. Meanwhile, Fridman walked away from the deal with $5.1 billion in his pocket, enough to start a new Luxembourg-based energy company called LetterOne. By keeping a safe distance from Putin, Fridman has also been able to avoid sanctions by the U.S. and the international community.

And unlike his more flashy fellow Russian billionaires, Fridman's style is much more understated. He doesn't own an international soccer club like Roman Abramovich or a couple of huge luxury yachts like Vladimir Potanin. Instead, he spends his money on strengthening Jewish culture in Russia and abroad, as a founder of the Russian Jewish Congress and Genesis Philanthropy Group.

Table of Contents

• Biography of Mikhail Fridman
• Early Life and Business Ventures
• Foundation of Alfa-Group
• Political Influence and the Oligarchs
• The Lucrative TNK Deal
• Philanthropic Efforts

Biography of Mikhail Fridman

Mikhail Fridman is a prominent Russian businessman and investor, known for his strategic acumen and vast wealth. He was born on April 21, 1964, in Lviv, Ukraine. He comes from a Jewish family, which has influenced his philanthropic efforts later in life. Throughout his career, Fridman has navigated the complex landscape of Russian politics and business.

Early Life and Business Ventures

Fridman's entrepreneurial journey began during his university days. He studied at the Moscow Institute of Steel and Alloys and started various small businesses to make extra money. His ventures included scalping theater tickets and running a window-washing service, which showcased his early instincts for business.

These formative experiences shaped his understanding of the market and helped him build a network of contacts that would be invaluable in his future endeavors. His ability to identify opportunities in the chaos of the post-Soviet economy set the stage for his later successes.

Foundation of Alfa-Group

In 1989, Fridman co-founded Alfa-Eco, which later became AlfaGroup. This company emerged as one of the largest private investment entities in Russia. Alongside his classmates German Khan and Alexei Kuzmichov, Fridman diversified AlfaGroup's interests into numerous sectors, including banking, telecommunications, and energy.

The establishment of Alfa-Bank shortly after the founding of AlfaGroup marked a significant milestone. This bank was one of the first private banks in post-Soviet Russia and has grown to be the largest private commercial bank in the country, reflecting Fridman's business acumen and foresight.

Political Influence and the Oligarchs

During the tumultuous 1990s, Fridman became one of the "Big Seven" oligarchs who wielded considerable influence over Russian politics. His financial backing played a crucial role in Boris Yeltsin's re-election campaign in 1996. This political engagement not only solidified his standing among the elite but also opened doors for future business deals.

Fridman's close ties with the political elite have allowed him to navigate the complex waters of Russian politics effectively. However, these connections have also posed challenges, especially as the political landscape shifted under Vladimir Putin.

The Lucrative TNK Deal

The acquisition of a significant stake in the Tyumen Oil Company (TNK) marked a pivotal moment in Fridman's career. This deal, which began with a 40% stake, expanded to nearly full ownership by the end of the decade. The partnership with British Petroleum in 2003 to create TNK-BP was particularly lucrative, generating immense revenues.

However, the relationship faced challenges, leading to BP's eventual exit and the sale of its stake to Rosneft. Fridman's ability to extract value from this deal, even amidst political turmoil and economic downturns, showcases his resilience and strategic thinking.

Philanthropic Efforts

Fridman’s wealth has allowed him to engage in significant philanthropic efforts, particularly in promoting Jewish culture and education. As the founder of the Russian Jewish Congress and the Genesis Philanthropy Group, he has dedicated resources to support Jewish communities in Russia and abroad.

His philanthropic work reflects a desire to give back and strengthen cultural ties, showcasing a more understated approach compared to other billionaires. Instead of flaunting his wealth through luxury purchases, Fridman focuses on meaningful contributions that make a lasting impact.