Russian billionaires pool money to buy banks

As reported by Reuters recently, news out of Russia emerged about Russia’s richest man, Mikhail Prokhorov looking to form a bank along with a few other Russian billionaires and pool their money in order to take advantage of (mostly) Russian banks and other large companies who are in desperate need of financing. I find this story very interesting and important for people not only in Russia but globally.

Why is it important to you as a non-Russian resident? Well, this story emphasizes the direction Russia is going in and has been clearly headed in since Vladimir Putin came to power, but really began during the fall of the Soviet Union in the late 80′s-early 90′s. During this time, the country sold off assets at greatly reduced prices to Russian businessmen who had very convenient relationships with the governmental powers in Russia. This created a small number of extremely wealthy people. Since then, these people have acquired companies not only in Russia but worldwide and this story shows that they are becoming even more influential and powerful even within Russia.

To you and me, as people who do business in Russia or would like to or those simply interested in global business trends, this needs to be considered when looking at doing business in or with Russia. In order to do business in Russia, such as exporting a product there or investing there, it is very important and most likely an absolute must to have some government contacts or access to someone there who is a well to do business person. I would recommend this for many countries, but for Russia it is even more important. When you have a country like Russia, where the rich hold this much of the power and not only control industries but also have their way in the government due to convenient friendships and is a country so greatly impacted and fueled by corruption, it is crucial to have someone there who is either in the government or is in business because they will know how to get things done and more importantly who to talk to. To be clear though, Russia is a very good market to do business in and is an emerging business power. Having a presence in this country will be very good moving forward in to the future.

Back to this news story, to wrap up my thoughts on it, Mr. Prokhorov’s idea of buying up distressed Russian banks and companies is actually a smart move on his part and should be acknowledged as such. I think any smart business person with the necessary resources in hand would do the same thing. There is some irony in this though as it seems to me that this new bank, MFK Bank, will be doing something similar to what happened during Perestroika (the term used for the Soviet economic and government system restructuring). Especially the part where you buy assets at greatly reduced prices due to immediate circumstances but whose value is obviously much greater and even some of the same players are the only ones able to take advantage of it. The major difference here however is that this is more ethical.