Billionaire Alisher Usmanov’s partnership with Alibaba reveals his strategy for survival in the era of sanctions

What happened

Russian oligarchs are making difficult decisions in the face of possible new sanctions. Some are trying to do everything to distance themselves from those in the Kremlin. While others are doing the exact opposite and getting as close to the authorities as they can. The best example of the latter is Alisher Usmanov, who — on his 65th birthday no less — announced a deal fully in line with the government’s aim to build economic ties with China. On September 11, telecommunications giant Megafon (partially owned by Usmanov), internet group Mail.ru Group (Usmanov owns 15% via Megafon), and the Russian Direct Investment Fund (RDIF) announced the creation of a joint venture with Alibaba Group. The Bell wroteabout preparations for this deal last month.

• Aliexpress Russia will be controlled by the Russian partners (52%), while the remaining stake will be held by the Chinese (48%). It is not known how much money each stakeholder put up. The RDIF alone will invest up to $300 million, Vedomosti reported.
• Although online commerce in Russia is developing, there is no “single platform”. There isn’t a Russian equivalent of Amazon and the internet giant doesn’t even deliver goods to Russia. In these conditions, Aliexpress Russia has a good chance of success: Russians already make more than half of their foreign purchases via Alibaba’s online platform, AliExpress, which is operational in Russia. In addition, Alibaba will get access (via Mail.ru) to the country’s most popular social networks: Vkontakte and Odnoklassniki. But Aliexpress Russia will face competition from the new joint venture between Yandex (Russia’s answer to Google) and state-owned bank Sberbank. These companies have already launched a beta version of their online store. Sberbank previously tried to do a deal with Alibaba, but it didn’t work out.
• This partnership with Chinese giant Alibaba is only one part of a grand project to ‘return Usmanov to the motherland.’ The billionaire long ago sold his shares in Apple and Facebook, delisted Megafon from the London Stock Exchange (the listing officially ends on October 5) and put up for sale 30% of Arsenal Football Club, over which he had fought for the last decade. Usmanov publicly supports the “digital transformation” announced by Putin, a key part of the president’s election campaign. Together with state conglomerate Rostec and Gazprombank, Usmanov in May announced the creation of a new digital company, MF Technology. Usmanov has also talked about a joint investment fund. All of this, of course, makes Usmanov very vulnerable to sanctions. But the billionaire has likely earned what he was probably fighting for in the first place: the Kremlin’s loyalty. On his last birthday, Usmanov received a personal telegram from Putin.

Why the world should care

One of the most important questions U.S. lawmakers are now discussing is how effective new sanctions against Russian oligarchs will be. The example of Usmanov illustrates there isn’t a universal answer to this question. If Usmanov is added to the sanctions list, serious problems for his businesses will follow — but it is highly unlikely to make him abandon the Kremlin. At the moment, Usmanov sees business opportunities amid Russia’s isolation from the West.

Peter Mironenko

This newsletter is made with the support of the Investigative Reporting Program at UC Berkeley.