Putin with Boris (centre) and Arkady Rotenberg © Tass/PA Images
Putin with Boris (centre) and Arkady Rotenberg © Tass/PA Images

Meet Russia's tsar of procurement

10 January 2018

Arkady Rotenberg’s friends say he is a born leader.

In his teenage years in what was then Leningrad, he and his judo partner Vladimir Putin earned spare cash as film extras. The future Russian president kept a low profile on set. Rotenberg didn’t. As a former KGB officer told the New Yorker, “Arkady showed himself to be a real brigadier. He was walking around and giving commands to everyone, even guys older than him. He was cocky, insolent and mischievous – 17 years old and already in charge.”

More than 40 years later, Putin runs the Russian government – and his old friend Rotenberg runs the Stroygazmontazh (SGM) group. Rotenberg’s company wins so many orders from the public sector that Forbes Russia magazine has dubbed him “the king of state procurement” and estimates his personal fortune at $1.4bn, making him the 60th wealthiest man in Russia.

At the moment, the 66-year-old billionaire is in charge of two infrastructure projects that are critical for Putin and his strategy to turn Russia into a Eurasian superpower – one bridge connecting the Russian mainland to Crimea and another, in eastern Siberia, across the Strait of Tartary to Sakhalin Island.

Putin has never denied his bond with Arkady Rotenberg or Arkady’s younger brother Boris. “To this day I am friends with the people, I trained with them”, he said in a rare interview back in 2000. Putin and the Rotenbergs were all mentored by the same judo coach Anatoly Rakhlin.

Yet the Rotenbergs rise – Boris is said to be worth $700m – has astonished some of their contemporaries, with one fellow judo trainee saying: “Arkady was a part-time student at the physical institute. If you were an extension student, you were regarded as a moron.”

Yet Arkady’s pugnacity – even as a boy, his judo teacher noticed, he was “very aggressive, loved to land a punch” – street smarts and connections to Putin have helped his business empire flourish. In 1998, he became the CEO of the Yawara-Neva Sports Club, where Putin is honorary president. One year later, the Rotenberg brothers became partners in Rosspirtprom, a business which came to own more than 100 state spirit and liqueur distilleries. The profits from vodka helped them found the Northern Sea Route bank in 2001.

The Rotenbergs have not looked back since. They have influence on the enormous state procurement organisation Rosreserv – it is hard to say much more than that because most of the body’s activities are classified. Their companies are preferred suppliers to Gazprom, the energy giant that produces 17% of the world’s natural gas. They own at least 10% of Novorossiysk commercial sea port and, through their company Mostotrest, have built relief roads to Sochi, parts of the Moscow-St Petersburg motorway, and improved infrastructure around Skolkovo, where the Russians are trying to create their version of Silicon Valley.

They are so strongly embedded in Putin’s inner circle that when Igor Sechin, the president’s de facto deputy, tried to muscle in on their business by sending officials from the Federal Antimonopoly Service to raid their offices he had to back down. (Sechin hit the headlines in December 2017 when his company, Rosneft, pledged to help Venezuela develop two offshore gas fields.) One business associate said of the Rotenbergs: “They could resolve with a single phone call, issues I had been struggling for months.”

Yet with this power comes responsibility. The brothers have stepped in to help Putin fulfill two of his dreams – connecting Crimea and Sakhalin to the Russian mainland – even though this has made them the target of US and EU sanctions and impoverished them by at least $2bn.

The bridge across the Kerch Strait to Crimea is so prestigious and controversial that other oligarchs didn’t even bid for it. Arkady has likened the $3.9bn contract to the black spot that afflicts Long John Silver in Treasure Island but insists that being ostracised won’t bother him. He is likely to be more worried, given the importance of the project for Russia’s image, that the bridge is completed on schedule by the end of 2018.

The brothers can still make a decent living within Russia – in 2014, their share of public contracts was worth $3.1bn – and they have transferred some of their assets to their sons, who are not sanctioned. Arkady’s eldest son, Igor, 42, owns 28% of Mostotrest and 79% of Gazprom Drilling, and is estimated to be worth $500m.

Yet the Rotenbergs’ scheme to introduce toll charges in November 2015 earned them unwelcome exposure. Massive, determined protests by the nation’s lorry drivers forced Putin to make concessions and, for the first time, put the Rotenberg family in the spotlight. In Dagestan, signs were put up on federal highways saying the Rotenbergs were worse than Islamic State. Despite the concessions, truck drivers are planning more protests.

Putin’s fiercest political opponent, Alexei Navalny, published photos of two giant palaces, allegedly built for Arkady and his nephew, on his blog, with the caption: “Arkady and Boris Rotenberg graduated from a sports college. They have created nothing, they have invented nothing … and in return, they have received everything they could ask for practically free of charge.”

The Rotenbergs could be said to have broken the pact with Putin under which oligarchs agreed to stay out of politics – and the public limelight – if they were left to go about their business.

Putin had not hesitated to sack his old friend, Vladimir Yakunin, who ran Russian railways, when it was disclosed that he used one of his houses purely to store his fur coats. In this context, Arkady Rotenberg’s involvement in the Sakhalin and Crimean projects makes strategic sense. By being seen to do his bit – although there are rumours that the project could go $1.7bn over budget – he can bolster the dynasty’s position within Russia’s ruling elite.

Some analysts say the Rotenbergs don’t have to worry. After the death of Rakhlin, at the age of 76, in 2012, one of the few men Russia’s president regarded as an unquestionable authority, they are among Putin’s closest – and oldest – surviving friends.

Yet in Putin’s Russia only he is invulnerable. Billionaire Vladimir Yevtushenko had his oil business taken off him primarily because its profits were needed to save Sechin’s loss-making Rosneft. The grab appalled one billionaire who said: “It’s far worse than sanctions. This means there are no rules anymore, anything goes.”

The Rotenbergs reign as kings of procurement is secure – until the state, which effectively means Vladimir Putin, deems it useful or convenient to end it.

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