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Russia’s richest man sets example of how to bring offshore capital home

December 23, 2014, 17:26 UTC+3 Zamyatina Tamara
Alisher Usmanov

Alisher Usmanov

© ITAR-TASS/Vladimir Smirnov

MOSCOW, December 23. /TASS/. Russia’s wealthiest man, Alisher Usmanov, has moved the controlling share packages of his strategic businesses to Russian jurisdiction. This decision of his applies to the controlling stakes in the OJSC Megafon, and OJSC Metalloinvest, affiliated with the USM Holdings Ltd., the holding company said in a news release. Usmanov, a multi-millionaire, was the first of Russian big business tycoons to have responded to President Vladimir Putin’s policy of de-offshorizing the Russian economy. Experts polled by TASS believe that although no condition is in place for a massive return of offshore capital home yet Usmanov’s decision is a rather telling sign.

Mobile phone operator Megafon is of strategic importance to the Russian economy. It is one of the leading Russian communication service providers with a clientele of more than 71 million. And OJSC Metalloinvest is the largest iron ore mining company in the whole of Russia and the CIS, its iron ore deposits being of the largest in the world.

Forbes magazine has named Usmanov businessman of the year in 2014 in the Success category. His capital is estimated at 18.6 billion dollars.

“Alisher Usmanov’s decision to move businesses to Russia is the first and only example of this sort so far. But many other business people are bound to follow suit,” the director of the Globalization Problems Institute, Mikhail Delyagin, has told TASS.

“Russia’s richest man has demonstrated his political loyalty and readiness to abide by the new rules of running the economy. What makes these rules new is that the authorities in the current not easy environment take no formal decisions regarding businesses, but address them with certain wishes and recommendations, the way Charles de Gaulle acted in his day. It is up to each individual business whether to follow the advice or not, but toeing the line is better, of course. Life is easier that way,” Delyagin said.

“Will Alisher Usmanov set an example for other business people? I doubt that. Megafon’s and Metalloinvest’s transition to Russian jurisdiction is rather a result of some agreement between the authorities and a specific business man. It is a manually-controlled project, launched in order to calm the market, to give a positive signal, and to ease the existing pressures,” the head of the business processes management chair at the Russian Presidential Academy of the National Economy and Public Administration, Dmitry Zemlyakov, told TASS.

“For the massive return of capital from offshore to Russian jurisdiction businesses will need guarantees of tax benefits and tax preferences, which the Russian president stated in very clear terms in his last year’s message to the Federal Assembly. The corresponding tasks have been set to the economic segment of the government and the legislators. But the work on a package of documents for the economy’s de-offshorization is not over yet, and there are no effective regulatory acts on that score at the moment,” Zemlyakov said.

“In his annual message to the Federal Assembly in early December 2014 Putin promised amnesty for all offshore capital returning to Russia. But the conditions of that amnesty are unclear and have not been formulated yet. In the meantime, business people have very many questions to ask, one of them being will the amnesty apply to all capital or certain exceptions will be made? Even if the widest amnesty is declared far from everybody will be eager to get back home. Many Russians are doing business in Russia quite legally,” the president of the Institute of Modern Development, Igor Yurgens, believes.

“Alisher Usmanov is on very good terms with the Russian leadership, and his authority in business circles is rather high. His wife, Irina Viner, is the president of Russia’s Rhythmic Gymnastics Federation and her services to Russian sports are great, indeed. I believe the couple has no intention of going elsewhere, so they will be working in Russia. By bringing his businesses back home from Cyprus Usmanov demonstrated his loyalty to Russia,” the science doyen of the Higher School of Economics, Yevgeny Yasin, told TASS.

“On the other hand, far from all businessmen are that certain about their own success. In that sense I see eye to eye with business ombudsman Boris Titov, who suggests pegging the legislative base for de-offshorization of the Russian economy to the adoption of a special legal act to amnesty capital returning to Russia. Without that move capital will be frozen and the law enforcement authorities will retain their conviction bias towards businesses,” Yasin believes.

“Number one task for Russia is to create conditions for doing business and for improving the investment climate. There will be no economic upturn as long as this issue remains unaddressed,” he concluded.

 

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