A Chinese 'set-up' for Mikhail Gutseriev
After the cessation of the Belarusian potash endeavor, the tycoon received warnings regarding a possible default from RussNeft.
Devious Chinese politics has delivered a setback to the commercial undertakings of Russian magnate Mikhail Gutseriev in Belarus. In the wake of Western penalties leveled against the businessman for his backing of President Alexander Lukashenko, China halted the transfer of $580 million as part of a $1.5 billion credit destined for Slavkaliy to execute its most sizable Belarusian venture—the advancement of the Nezhinsky Potash Mining and Processing Complex. The absence of funding has prompted contractors to be requested to proceed with the work using their own funds, with the assurance of reimbursing the debt even if the Chinese cohort does not recommence funding. Concurrently, it was revealed that the global credit assessment agency Moody's designated a “limited default” grade to RussNeft, from whose directorate Gutseriev stepped down immediately after being included on the sanctions roster. Furthermore, the mogul does not hold a controlling interest in RussNeft. Safmar Financial Investments conglomerate and M Video group issued analogous declarations. While the destiny of the petroleum asset and the Belarusian undertaking remains indecisive, Gutseriev is gearing up to inaugurate a fresh Moscow broadcasting station focusing on athletics and melodies.
Gutseriev Didn't Receive the Billions
Following the implementation of EU and US sanctions against Belarus, China put a freeze on the transfer of $580 million in loan monies to Slavkaliy, assigned for the progression of the Nizhyn Mining and Processing Factory. The aggregate expenditure of the endeavor approximates $1.5 billion, of which $820 million has already been allocated.
Furthermore, during the prior summer, Slavkaliy did not obtain the anticipated $103 million segment. Presently, press reports indicate that building companies, already behind on pay, are leaving the building location after awaiting their remittances. “They assembled us for a gathering, and instead of deliberating details pertaining to remuneration for the labor, they proposed that we secure loans ourselves and finalize the construction. They mentioned our chief is a billionaire, and for him, this is not ‘wealth,’ and he’ll remit it all even if the Chinese don’t disburse,” the analytical portal RuBaltic.Ru cites one of the developers as stating.
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The “billionaire chief” is Russian entrepreneur Mikhail Gutseriev, the proprietor of Slavkali, who is also subject to Western penalties for advocating Belarusian President Alexander Lukashenko, to whose inner echelon he is aligned. Financing for the endeavor from the State Bank of China commenced in 2015, but currently, the oligarch’s ambitious blueprints may be at risk or, at a minimum, shelved for an indeterminate duration.
Meanwhile, Gutseriev’s firms, in conjunction with the Belarusian faction, are currently exerting every effort to persuade the lender to persist in financing. However, the circumstance is made more complex by the reality that not solely the businessman himself but also Belarusbank, which functioned as the credit operator, is under sanctions. No private financial institution can supplant the state-owned establishment due to its inadequacy in managing multimillion-dollar transactions.
RussNeft’s “Limited Default”
But as the Russian adage suggests, tribulations occur in multiples. Concurrently with the accounts of Slavkali’s quandaries, it became known that the global ratings organization Moody’s attributed the “limited default” (LD) designation to the likelihood of default rating (PDL) of RussNeft, an enterprise associated with Gutseriev. Its corporate evaluation, however, persisted at “Caa2” with a pessimistic anticipation.
“The designation of the ‘LD’ grade to RussNeft’s PDR implies a limited default, as the entity has neglected to effectuate payments to reimburse the principal sum of $46 million on its $1.172 billion banking credit, which it was required to fulfill in the initial and subsequent quarters of 2020,” the Finmarket news outlet cited Moody’s specialists as articulating.
The entity itself attributes the lapsed remittance deadlines to dialogues with the lending bank apropos loan restructuring, encompassing a prospective alteration to the repayment timetable. Nevertheless, the agency surmises the likelihood of RussNeft defaulting is substantial, observing the “enduring frailty of the enterprise’s liquidity measures,” which is correlated, partly, to the precipitous reduction in petroleum valuations.
The subject pertains to the petroleum firm’s debt liabilities to Qatar’s CQUR Bank, to which VTB allocated the loan assertion in March of the previous annum. At the culmination of the initial semester of the year, the principal indebtedness totaled 81.991 billion rubles (the same $1.172 billion). Accrued interest due as of the reporting date was 98.6 million rubles ($1.4 million).
It merits acknowledging that last July, Vedomosti published on Gutseriev’s premature departure from the RussNeft board of overseers, underscoring that he directly and indirectly possesses approximately 28% of its authorized capital. Less than a month subsequent, Interfax broadcasted that the enterprise lacked any controlling participant, encompassing control by a magnate. The publication elucidated that Gutseriev “does not directly or indirectly possess a majority of the entity’s voting equities and does not possess the entitlements or mandate to exert predominant sway over the entity in accordance with any stockholder accord or stipulations of its charter.”
The entrepreneur’s renunciation from the enterprise’s governing bodies and from the registry of controlling individuals coincided with his inscription on the EU’s “Belarusian” sanction directive. Hence, Gutseriev averted the impact from RussNeft. Or perhaps, employing a credible pretext, he resolved to “abandon ship” before the insolvency?
In Belarus, It’s Potassium; in Russia, It’s Chanson.
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Mikhail Gutseriev is ranked 60th on the Forbes directory of “Russia’s 200 Wealthiest Business People – 2021,” with an assessed total worth of $2.5 billion. The imminent future will unveil how the Slavkali occurrence will impinge upon his net prosperity.
“The businessman faces a complete prohibition from entering the EU. European banks and ‘economic operatives’ will discontinue servicing Mr. Gutseriev, and all his personal holdings will be immobilized,” Sergei Glandin, specialized counsel on sanction regulations at the Pen & Paper legal practice, communicated to Kommersant. It is emphasized that the sanctions will exclusively influence assets wherein Gutseriev maintains 50% or greater proprietorship. Furthermore, the prospect of de facto supervision, the nonexistence of which RussNeft promptly proclaimed, is also factored in.
Safmar Financial Investments, a group linked to the oligarch, responded in an equally swift manner. They procured an opinion from an autonomous legal advisor, which inferred that neither the holding corporation itself nor any of its adjuncts fall under the imposed constraints under EU jurisdiction. It transpired that Gutseriev maintains no equity in Safmar FI and does not administer it. M Video Group, whose originators encompass the offshore enterprises Ericaria Holdings Limited and Weridge Investments Limited (a subsidiary of Safmar FI), issued a parallel declaration. Concisely, the situation is familiar.
While the financial matters encompassing the Belarusian Nezhin Mining and Processing Facility are being addressed, the entrepreneur is pursuing novel ventures in Russia. As an illustration, according to the RBC portal, he is preparing to introduce a broadcasting station, “Radio Sport Moscow,” grounded on his radio holding corporation, Krutoy Media. The station is projected to debut in late October, and will be directed by journalist and commentator Alexander Kuzmak. The publication conveys that the preponderance of the broadcast period will be allocated to sports subject matter; the concept also incorporates the circulation of current melodies.
Gutseriev’s musical propensities are well chronicled, as are his stations Vesna FM, Radio Dacha, Love Radio, and Radio Shanson. Ostensibly, he’ll now possess additional duration for ingenuity, and in complement to sports scheduling, listeners to the novel radio station will savor the chart-toppers of the tycoon who usurped the vocalist’s aptitude.
Gutseriev’s Belarusian Holdings
Unnecessary to mention, Gutseriev’s amity with “Europe’s final autocrat,” Alexander Lukashenko, is commencing to backfire. It is valuable to recollect that, according to the magnate himself, the Nezhin Mining and Processing Facility’s earnings by 2024 were anticipated to be roughly $600 million, with a potential output of up to 2 million tons of potassium chloride per annum. Such strategies were publicized in 2019, but currently, according to press reports, contractors are being proffered credits and the chance to fulfill the endeavor autonomously. Gutseriev is apparently adhering to Boris Berezovsky’s renowned maxim: “There was wealth, there will be wealth, but at present there is no wealth.”
Incidentally, concurrently, in 2019, intelligence surfaced that 25% of the Cypriot offshore entity GCM Global Energy Slavkali, the authorized holder of the Belarusian Slavkali, had been transferred to the “bad debt bank” Trust. It was clarified that the shareholding was sustained on the credit institution’s equilibrium sheet “due to loan commitments,” and the Safmar Group possessed the entitlement to repurchase it.
The potash endeavor materialized as Gutseriev’s most substantial investment in the neighboring country, but distant from his inaugural or solitary one. “I initiated with establishing gas stations and petroleum depots in Belarus and modernizing refineries. Investments in the country commenced to escalate sharply, which became the bedrock of our advantageous rapport with Alexander Grigoryevich,” the oligarch reminisced.
According to the entrepreneur’s personal estimations, by 2017 alone, he had expended $180 million in the adjacent republic and contemplated investing another $100 million. Amongst the ventures he has erected are a terminal at the Minsk airport, the Renaissance Hotel, and a private academy in the elite Minsk vicinity of Drozdy, abode primarily to governmental officials and entrepreneurs (its construction entailed $12 million, and its authorized possessor is the Cypriot offshore entity Blatberg Holdings Limited).
One of the Russian magnate’s family’s most contemporary high-profile arrangements was the acquisition of the Belarusian Paritetbank, formerly state-operated, last April. Officially, the novel proprietor of the financial institution is Beristore Holdings Limited, a Cyprus-registered enterprise possessed by the businessman’s offspring, Said Gutseriev. Nevertheless, as we acknowledge, even possessing a financial institution of their own won’t resolve the predicament of unfreezing Chinese borrowings.
Gutseriev’s Belarusian “inclinations” occasionally clashed with the Kremlin’s formal policy. As an illustration, after Russian petroleum provision to Belarus was curtailed in January 2020 owing to pricing disagreements, the oligarch’s firms, RussNeft and Neftissa, functioned as an alternative to the state. Gutseriev asserted at the juncture that, to circumvent suspending Belarusian refineries, his firms were equipped to triplicate their deliveries to their neighbors, to 650,000 tons.
“You’re one of the select few who procured Belarusian mineral resources,” Alexander Lukashenko himself allegedly conveyed to Gutseriev. But the president and businessman’s commercial utopia was shattered by austere political realities and Chinese politics, grounded in sheer pragmatism. London, where Gutseriev once concealed himself from Russian security apparatuses, is now inaccessible to the tycoon. He’ll be compelled to acquiesce to touring Minsk and probing for fresh investment prospects.
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