Once a Fugitive, This Billionaire Aims to Be Russia's Jeff BezosBy and
Gutseriev’s retail entry caps non-stop expansion since exile
‘You have to be exteremely greedy in business,’ tycoon says
A decade ago, Mikhail Gutseriev was a billionaire on the run trying to avoid the fate of fellow Russian oil titan Mikhail Khodorkovsky, who’d flouted the power of Vladimir Putin and been sentenced to 10 years in prison.
Ordered not to leave the country as Moscow tax officials began raiding his offices, Gutseriev sold his Russneft oil company to a Kremlin-friendly oligarch for almost $3 billion, announced his retirement from business and in July 2007 drove across the Belarusian border before a warrant was issued for his arrest.
Once out of the country, everyone from bank strategists to TV commentators wasted no time pronouncing his commercial death. But they underestimated the shrewdness, charm and connections that made the wily tycoon a negotiator of choice during the Chechen wars in the 1990s and early 2000s, when he helped free some 200 hostages from bands of ransom-seeking Islamist rebels.
Since his return in 2010, when the charges against him were suddenly dropped, the billionaire’s been on a buying binge. He repurchased Russneft from Oleg Deripaska, assembled a second oil company, moved into coal, potash and radio and acquired hotels like The National near Red Square -- all with borrowed money, mainly from state-run lenders Sberbank PJSC and VTB Group. Exactly how he won back Kremlin favor isn’t clear.
With his fortune near an all-time high of $4.7 billion, according the Bloomberg Billionaires Index, the self-professed serial entrepreneur is now embarking on what he’s calling his most ambitious project yet: trying to build a Russian version of Jeff Bezos’s Amazon.com.
“We’re creating an online platform for selling everything except food and clothes," Gutseriev said in an interview in Moscow after winning antitrust approval last month to acquire M.video PJSC, Russia’s leading seller of electronic goods and home appliances.
The $726 million deal for 58 percent of M.video, which closed last week, gives Gutseriev control over a quarter of a market that’s halved in dollar terms over the past three years, hitting $25 billion in 2016, according to researcher GfK. Gutseriev said he entered retail accidentally in 2015, when M.video’s smaller rival Tekhnosila failed to repay its debt to his family’s bank, B&N, during the worst of the longest recession in two decades.
That default, he said, prodded him to consider using the sprawling supply networks of major retailers to create an online marketplace where shoppers can pick up orders at existing outlets that already have ample storage space. He’ll bypass a postal system that’s inferior to those in advanced economies.
In December, Gutseriev acquired another M.video competitor, Eldorado, for an estimated 26 billion rubles ($450 million). The three chains combined have more than 900 locations spread across 11 time zones, from Kaliningrad, Russia’s exclave in Europe, to Kamchatka in eastern Asia.
Even doubters of the plan like Dmitry Kostygin, a stakeholder in online retailer Ulmart, temper their skepticism out of respect for what they say is the billionaire’s preternatural ability to succeed in a range of unconventional ways.
“Mr. Gutseriev obviously has an entrepreneur’s talent, gets enthralled with some idea and then implements it," Kostygin said. “Still, he’s uniting retailers with different management teams that used to compete fiercely with each other, so it will be difficult to integrate.”
After he fled Russia, Gutseriev said he landed in London with the help of an old friend in Minsk, President Alexander Lukashenko, who’s ruled Belarus with an iron grip since 1994. He said he was determined to clear his name, much as his father, an investigator for Josef Stalin’s secret police, was rehabilitated after being jailed by his employer for seven years.
The death of his oldest son following a car accident in Moscow a month after he left Russia steeled his resolve, so he said he started building back-channels to the Kremlin, recruiting fellow tycoons and former ministers to help plot his return, biding his time by learning to play the violin and writing poetry.
A window of opportunity opened in 2008, when Putin decided to cede the presidency for a term to a less autocratic leader, Dmitry Medvedev, and by 2010 Gutseriev was back in Moscow after a court dismissed the cases against him. His troubles started after he tried to acquire assets of Yukos, the oil producer that was seized from Khodorkovsky and his partners and sold off mainly to Rosneft, the oil champion run by longtime Putin ally Igor Sechin.
Gutseriev, who’ll turn 60 next year, said he’s been addicted to moneymaking ever since he got his first taste of success bootlegging vodka with two childhood friends, Kolya and Slava, in Grozny, the capital of Chechnya.
He said his “incredible desire to win” was cemented by Jack London’s “The Mexican,” which he’s read five times, as well as Theodor Dreiser’s protagonist in “The Financier,” Frank Cowperwood, who earns a 70 percent return in a single day by buying and selling cases of soap. But the best “archetype” of the Russian businessman, he said, is Stepan Plyushkin, the miserly landowner in Nikolai Gogol’s “Dead Souls,” which examines flaws in the national character.
“You have to be extremely greedy in business,” Gutseriev said. “I’ve been waking up every morning thinking about money since I was 13.”
That was when he fulfilled his first dream -- being able to buy all 50 seats in his local movie theater so he and a friend could enjoy a private viewing, which in their case was “One Million Years B.C.” starring Raquel Welch.
Gutseriev’s ancestors, natives of the North Caucasus, were exiled to Kazakhstan during World War II, moving back to Russia when his father was rehabilitated. After graduating high school in Grozny, he moved to Kazakhstan to study in Dzhambul, an ancient city along the old Silk Road now called Taraz. After getting a degree in engineering, he moved back to Grozny to work for a budding capitalist collective that united 32 makers of handicrafts.
Within three years, Gutseriev had taken charge of the enterprise and over the next three years increased annual sales from 1 million rubles to 32 million rubles, mainly by branching into ceramics that he exported to Cuba -- all while opening and running scores of other companies.
“He’s a one-man orchestra,” said billionaire Vladimir Evtushenkov, a Medvedev ally and former Russneft shareholder who helped end Gutseriev’s exile. “He can do many things at once.”
At the end of the 1980s, as the economy frayed and the Soviet Union lurched toward dissolution, Gutseriev opened one of the first private banks in the country, in an old police building in Grozny, using a holding cell as a vault. He also set up a wool business, supplying a weaver in Moscow that paid him in finished fabrics, which he sent to clothiers in exchange for men’s suits that he sold for cash. He said the whole process generated returns of 500 percent.
At the age of 30, he said he was earning 1 million rubles a month, making him one of the richest men in the region. By December 1991, when the Soviet Union finally collapsed, Chechnya had a new leader with separatist aspirations who freed thousands of prisoners, triggering a crime wave as federal funds dried up and a half million people lost their jobs. Gutseriev said he decided to sell his holdings and move to Moscow after armed men seized his handicrafts factory.
“There were no businessmen in the republic who could afford any of my assets,” Gutseriev said. “I sold banks, factories for $10,000 to $20,000 each.”
Arriving in the capital with $1 million, the future billionaire opened a new bank, B&N, with his nephew, Mikhail Shishkhanov, and started a chain of stores selling gold jewelry. In 1994, after President Boris Yeltsin’s government created a tax-free zone in the new republic of Ingushetia, which was once joined with Chechnya, B&N became the sole administrator. More than 3,000 companies from across Russia registered there over the next two years, providing a windfall to Gutseriev’s bank.
As his network of contacts expanded, he joined nationalist firebrand Vladimir Zhirinovsky’s LDPR party and was elected to the State Duma in 1995. He quit parliament in early 2000, just as Putin was coming to power, to run Slavneft, the government’s oil venture with Belarus. He lost that job in 2002 as Slavneft was being privatized, sold to a group led by Roman Abramovich and Mikhail Fridman, two of Russia’s richest men.
With fresh knowledge of the oil industry, Gutseriev created his own producer, Russneft, and started shopping for assets with about $300 million from a partner, Glencore Plc, the Swiss trader he’d worked with at Slavneft. Output soared from about 2 million tons in 2003 to almost 15 million tons in 2006 as he snapped up dozens of small, mismanaged producers.
“He never stops working,” said Dmitry Perevalov, who introduced Gutseriev to Glencore oil chief Alex Beard when he was a vice president at Slavneft and now runs his own refining business. “He’s always got to win, but he doesn’t throw money away. He doesn’t know how to relax.”
That’s not completely true. Gutseriev spent millions of dollars on one of the highlights on the Moscow social calendar last year, his younger son’s wedding, which featured performances by Jennifer Lopez, Enrique Iglesias and Sting.
Besides, even when he’s relaxing, making money is never far from his mind.
Shortly after his London exile ended in 2010, Gutseriev said he flew to Kislovodsk, a spa city in the North Caucasus, to savor his victory. There, he saw a woman playing a violin for donations in a park, piquing his competitive instincts. He asked to borrow her instrument and began bowing.
“I was looking shabby in sneakers and a jogging suit, so passers-by probably pitied me, but they started tossing money in the case,” Gutseriev said.
In less than an hour, he said he made more rubles than that woman could earn all day -- about $50 worth. The billionaire said he left the money, returned the fiddle and strolled on.
— With assistance by Alexander Sazonov