Mykhailo Dzhus, Head of Monetary Markets Department of the Growford Institute
“Well, it does smell … that’s because of my job. Yesterday cats were being strangled, strangled.”
M. Bulgakov “A Dog’s Heart”
Despite the relevance of the topic of Bulgakov himself, that is his presence in the cultural space of Ukraine, we will talk about something else. Namely, about banks, or rather about one bank.
In early 2016, after reaching the agreement on the purchase of Ukrsotsbank by the russian Alfabank, the chairman of the supervisory board of the latter, Petr Aven, frankly humiliated Ukrainian citizens:
“We will work with debtors (of Ukrsotsbank – author) more aggressively. Our relations with problem borrowers are always tougher than in foreign countries. We will chase them for years and get more. In fact, we always got what we needed both in Moscow and here.”
Once again: “We will chase them for years and get more”. How can one not remember Sharikov with his cats.
As we can see, the head of the Moscow bank was not worried by the fact that it is about citizens of the independent country, which a year before experienced a devastating currency crisis with a corresponding impact on the financial condition of borrowers.
One more thing should be noted. Judging by the wording, Aven did not consider Ukraine an independent state at all (for him it is only “here”), and he regarded himself as a foreigner in relation toUkrainians. Rather, as the host.
But could anything else be expected from the grandson of a red Latvian shooter?…
The National Bank of Ukraine did not pay attention to this outburst of frankness. At first, ValeriiaHontareva said that the NBU did not classify Alfa Bank as a russian bank, and in October 2016, the regulator granted its approval to russian oligarchs Mikhail Fridman, Herman Khan, Petr Aven and Oleksii Kuzmichev for the acquisition of a qualifying holding in Ukrsotsbank PJSC through ABH HOLDINGS S.A (Luxembourg).
Three years later, a takeover took place: on September 12, 2019, the National Bank of Ukraine granted its permission for the reorganization of Ukrsotsbank JSC through merging with Alfa Bank JSC under the simplified procedure.
At the beginning of 2019, the NBU identified Alfa bank as systemically important banks and confirmed this status every year, the last time – in March 2022.
In addition to the fact that these banks must meet stricter requirements (in particular, to the capitalsize), there is also an image effect and a signal to society: these are banks that can be trusted.
However, the interests of Alfa Group in Ukraine were not limited to the banking business. In the early 2000s, the russians purchased a stake in the mobile operator Kyivstar, and in 2019 they gained full control over the company, pushing their Norwegian partners Telenor out of the market.
In early 2013, Alfa Group, having purchased a controlling stake in IDS Borjomi, gained control over mineral water producers “Morshynska” and “Myrhorodska”.
On the insurance market of Ukraine, Alfa Group is represented by Alfa Insurance (since 2007), which is one of the leaders of the voluntary medical insurance market.
Indirect evidence of the business success is the fact that in 2016 russians’ insurance company concluded an agreement on corporate medical insurance for NBU employees. As we can see, 2016 was very fruitful for Alfa Group in promoting their interests in the National Bank of Ukraine.
The activities of Alfa Group in Ukraine were not limited to only business. To support the image of a philanthropist, Mikhail Fridman founded an annual jazz festival in Lviv with the eloquent name Alfa Jazz Fest until 2017.
In 2016, russian oligarchs went even further and encroached upon historical memory, creating the Babyn Yar Holocaust Memorial Center, in fact, to promote the russian narrative in the interpretation of the Babyn Yar tragedy.
No matter how strange it may look today, but such well-known Ukrainians as Sviatoslav Vakarchuk and Volodymyr Klytschko are members of the Foundation’s Supervisory Board, and in the summer of 2020, the initiative to build a Memorial under the auspices of the russian project was supported by the President of Ukraine.
That is, despite the ongoing aggression of the russian federation since 2014, Alpha Group had maximum assistance in Ukraine, regardless of the personality of the head of state.
For some unknown reason, russian oligarchs were not considered russian.
However, all this respectability had to be taken leave of after the beginning of the large-scale war of the russian federation against Ukraine.
In the first days after the invasion, the European Union introduced personal sanctions against several dozen russian politicians, oligarchs and propagandists, including Fridman and Aven.
Later, the United Kingdom and Canada did the same.
It is significant that despite the different lists of sanctioned persons, the co-owners of Alfa Group were included in each of them.
As a result, both russian oligarchs had to leave the governing bodies of Alfa Bank and other companies.
At the beginning of April, after information on crimes of the russian army in the Kyiv region was published, the US Treasury introduced a new package of sanctions, which included Sberbank (as the largest state bank of the russian federation) and Alfa Bank (as the largest private bank of the russian federation).
The sanctions were also imposed on all organizations directly or indirectly owned by Sberbank and Alfa Bank, but an exception was made for the Ukrainian subsidiary of the latter.
The NBU duplicated this information in a separate press release, noting that international sanctions against russian Alfa Bank did not apply to Ukrainian Alfa Bank JSC, and once again emphasized its systemic importance.
In addition, the National Bank of Ukraine announced that it had applied corrective actions that forbid the shareholders of the bank (citizens of the russian federation) to exercise their right to vote.
Obviously, this did not help, because a month later (May 16), Prosecutor General Iryna Venediktova announced the arrest of russian oligarch Fridman’s assets in Alfa Bank worth more than UAH 12.4 billion (securities of Cypriot companies).
According to Venediktova, Fridman and businesspeople controlled by him used the bank and Cypriot companies to withdraw funds from possible sanctions.
Almost simultaneously with this, there appeared information that Fridman and his partners proposed additional capitalization for the Ukrainian Alfa Bank by USD 1 billion so that it “remains manageable and continues to be an active player in favor of the Ukrainian economy” (according to Roman Shpek, the head of the bank’s Supervisory Board).
But despite the big words, no one had any doubts that in fact it was an open bribe with the aim ofavoiding sanctions.
In early summer, the Head of the National Agency on Corruption Prevention (NACP) Oleksandr Novikov, demonstrating an example of pragmatism, announced that Mikhail Fridman was consulting with the Ukrainian authorities about obtaining Ukrainian citizenship and moving his assets to Ukraine.
In July, rumors spread that the co-owners of Alfa Bank, Fridman and Aven, had already been granted Ukrainian citizenship. However, this information has not been officially confirmed or refuted.
The next step of the owners of Alfa Bank was completely meaningless: on August 12, the bank changed its name to Sense Bank “to have nothing in common with the aggressor nation, even at the level of associations and the brand operating in the russian federation”. That is, the shareholders still hoped to have a foot in both camps.
At the beginning of autumn, the topic of Alfa Bank became more active again. This time, information about Fridman’s proposal to capitalize the bank by USD 1 billion (in exchange for the lifting of sanctions by Great Britain) appeared already on the page of The Wall Street Journal. The Head of the Supervisory Board of Alfa Bank, Roman Shpek, and even the leader of the presidential faction in parliament, Davyd Arakhamia, promoted the idea of additional capitalization by USD 1 billion.
Presumably, the next round of negotiations on Alfa Bank was the result of the increased attention of the Government of Ukraine to the sanctions, in particular, the creation of the Interdepartmental Working Group on Implementation of the State Sanctions Policy (IWG) on August 30.
According to the Economic Pravda, shortly before that, the President of Ukraine expressed dissatisfaction with the lack of progress in imposing sanctions on war criminals and russian oligarchs.
Finally, on September 30, the National Security and Defense Council of Ukraine (NSDC)imposed sanctions on thousands of russian individuals and legal entities, which were previously subject to US and EU sanctions.
According to mass media, Mikhail Fridman is among them.
In addition, the President of Ukraine announced consideration of the draft law on the nationalization of all russian assets in the Verkhovna Rada.
Forbes, with reference to an anonymous source in the IWG, informs that there has been a decision on Alfa Bank: “The bank will be nationalized. But it will not be state-owned for long – currently an investor is being looked for it”.
It is quite possible that for this event, draft law No. 8069 on the specifics of withdrawing a systemically important bank from the market under martial law is awaiting consideration in the Verkhovna Rada.
By the way, the search for investors for the sale of Alfa Bank after the probable nationalization may appear to be no less intriguing than the entire described epic with the imposition of sanctions on it.
A few days before the historic decision of the NSDC, Forbes published information regarding the possible sale of the Ukrainian Alfa Bank to the Azerbaijani investment holding NEQSOL in the spring of 2022. The reason for the failure of the deal was, on the one hand, problems with confirming the origin of NEQSOL funds, and on the other hand, the fact that the Azerbaijani investor intended to buy the bank from the state after its nationalization.
However, after the decision of the NSDC and the announcement of the resignation of the Governor of the National Bank of Ukraine, we are very close to the moment when both obstacles to the above-mentioned deal may disappear.
And we hope that in the search for an investor, the authorities will take into account the strategic vector of Ukraine’s development toward democracy and will carefully follow the destinations of Nancy Pelosi’s plane.
In addition, it is important that while imposing sanctions, the Ukrainian authorities shouldremember all assets of the owners of Alpha group in Ukraine, including the Babyn Yar Holocaust Memorial Center. Because the war that the russian federation has started against Ukraine is beingwaged, first of all, for identity and historical memory.