U.S. Aims Sanctions at Business Empire of Putin Ally Timchenko

As the U.S. imposes a new round of sanctions on Russian President Vladimir Putin’s inner circle, one name comes up again and again: Gennady Timchenko.

Of 17 companies and banks added to the U.S. sanctions list today today, at least 14 are connected to Timchenko, a Russian billionaire and ally of Putin’s. Timchenko, who built his fortune as co-founder of the oil trading company Gunvor Group, said he sold his stake in Gunvor the day before his name was placed on the first U.S. sanctions list on March 20.

The list released by the U.S. Treasury Department yesterday targets Timchenko’s Luxembourg-based Volga Group investment company, as well as 10 businesses it controls, ranging from a mineral-water bottling company to industrial construction firms. Also targeted are three subsidiaries of Bank Rossiya, a previously sanctioned bank in which Volga Group holds an 8 percent stake, according to the group’s website.

Volga Group scoffed at its inclusion on the list. “None of the companies mentioned by the U.S. Department of the Treasury has any connection to events in Ukraine,” Anton Kurevin, a spokesman, said in an e-mailed statement. “There can now be even less doubt that these announcements and measures are politically motivated.”

‘Radioactive’ Companies

In carpet-bombing the business empire of a close Putin ally, the U.S. is pursuing a new kind of sanctions tactic, Jeffrey Schott, a senior fellow at the Peterson Institute for International Economics, said by phone. Taking advantage of financial-tracking techniques that have become available only in the past few years, the U.S. government is able to “name individuals who have extensive cross-holdings,” in an effort to “make them and their companies radioactive,” he said.

Another possible explanation for the tactic is that the U.S. may have evidence that Putin has entrusted his personal wealth to Timchenko, said William Pomeranz, deputy director of the Kennan Institute for Advanced Russian Studies at the Woodrow Wilson International Center for Scholars.

In sanctioning Timchenko last month, the U.S. said Putin had a direct financial interest in Gunvor Group. Both men denied that allegation, and Timchenko said he had sold his 44 percent stake to his Swedish partner on March 19, the day before the sanctions list was announced.

Gunvor, Novatek

The U.S. targeted companies that are concentrated in Russia. It has left Gunvor, which has said it’s never had links to Putin, off the list. Also missing were OAO Novatek, Russia’s second-biggest natural gas producer, and OAO Sibur Holding, the biggest petrochemicals maker in eastern Europe, in which Volga Group holds 23 percent and 32 percent stakes respectively, according to its website.

Timchenko, who lives in Switzerland and has dual Russian-Finnish nationality, has a personal net worth of $7.6 billion, according to an estimate by Bloomberg. Volga Group is his chief investment vehicle.

Among the Volga Group holdings placed on the U.S. sanctions list are Transoil LLC, a pipeline company; Sakhatrans LLC, which is building a shipping terminal for coal and iron ore exports from Russia’s Far East; Avia Group LLC and Avia Group Nord LLC, which develop and manage business-aviation facilities; Stroytransgaz Group, a pipeline and infrastructure builder; and Aquanika, a mineral-water bottler.

In addition to the 14 Timchenko-connected companies on the new sanctions list are Moscow-based SMP Bank, InvestCapitalBank and oil and gas contractor Stroygazmontazh. They’re controlled by brothers Arkady and Boris Rotenberg, two other Putin allies who were named on the previous U.S. sanctions list. Timchenko and the Rotenbergs have ties, too: They co-own Finland’s biggest ice hockey arena.

Timchenko’s interest in Bank Rossiya makes him a partner of another of Putin’s sanctioned allies: Yury Kovalchuk, the biggest single owner of the St. Petersburg-based lender.

Targeting such businesspeople isn’t likely to cause serious economic disruption in Russia, Schott said. That suits the U.S., because it minimizes risks to western European allies that have far greater economic exposure to Russia than the U.S. does. “It allows the sanctions policy to be sustainable politically,” he said.

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