The Kremlin’s new buyers for Yandex

Putin’s domestic policy czar hopes to engineer a sale that would further consolidate the state’s control over Russia’s Internet industry

The Kremlin’s domestic policy czar, First Deputy Chief of Staff Sergey Kiriyenko, is advocating a new plan to sell off tech giant Yandex’s remaining Russian assets, journalists at Meduza and The Bell have learned. Kiriyenko’s plan would transfer the enterprises to a consortium of businessmen with known ties to Yuri Kovalchuk, the billionaire known as “Vladimir Putin’s personal banker,” consolidating his control over the commanding heights of the Russian Internet and expanding the Kremlin’s influence over the industry. As Meduza and The Bell reported last month, the Yandex deal’s future became uncertain after the company’s board of directors opposed selling off the assets to individuals under Western sanctions, even though Vladimir Putin personally approved the list of buyers.

Three sources familiar with the talks told The Bell that Lukoil founder Vagit Alekperov withdrew from the deal amid fears that his involvement could invite new international sanctions. Alekperov is already sanctioned in the U.K., Canada, Australia, and New Zealand, but crucially not in the U.S. or E.U., which made him a reasonable “compromise” buyer for both the Kremlin and the foreign members of Yandex’s board of directors.

Sources told Meduza and The Bell that Sergey Kiriyenko drew up a list of new potential buyers and presented it roughly a month ago to Alexey Kudrin, the former government official who now serves as Yandex’s corporate development advisor. Kiriyenko named Kismet Capital Group owner Ivan Tavrin (the former head of Megafon), an enterprise owned by Alexey Nechaev (the founder of the cosmetics company Faberlic and the head of the New People political party), and either the Russian Direct Investment Fund or the Gazprom pension fund Gazfond, which is managed by Yuri Shamalov (whose father is one of Putin’s oldest friends and whose brother was once Putin’s son-in-law).

A source told Meduza and The Bell that Tavrin would satisfy all parties best: Yandex’s board of directors would get a “clean” candidate not sanctioned in the West, and the Kremlin would get an investor whose loyalty it trusts. At the same time, however, a source close to Tavrin says the businessman hasn’t yet conducted any specific negotiations with any of Yandex’s shareholders or executives.

How does Kovalchuk fit into this?

In any case, Kiriyenko’s candidates likely wouldn’t be Yandex’s final owners. Two sources familiar with the sale negotiations said any buyers will later be “asked” to transfer their shares. The deal’s most likely beneficiary is thought to be Yuri Kovalchuk, who expressed interest in Yandex last year but dropped out of the running. Together with Gazprom Media, Kovalchuk’s business empire already controls another major IT company in Russia: VK (Vkontakte). That acquisition worked out well for the Kiriyenko family, incidentally: after buying VK from Alisher Usmanov in 2021, the new owners put Sergey Kiriyenko’s son, Vladimir, in charge.

Every candidate on Kiriyenko’s new list has some connection either to him or to Kovalchuk. “Tavrin is interested in any asset he can turn around and sell for a profit, and it doesn’t matter to whom,” an informed source told Meduza, pointing out that Tavrin already has experience selling businesses to Kovalchuk and competing in bids that resemble the situation with Yandex.

Five years ago, Tavrin and Alisher Usmanov sold STS Media to Kovalchuk’s National Media Group, expanding an information conglomerate that already included Channel Five, REN TV, Izvestia, film and TV studios, and half of Channel One. Last fall, Tavrin made an even bigger deal when he beat out VK in his 151-billion-ruble ($1.7-billion) acquisition of Avito, Russia’s largest classified ads website.

The South African company Naspers received more than a dozen bids for Avito. VK was viewed as the front-runner for the sale, bidding more aggressively than its competitors and with the Kremlin’s support. “It was made clear to us that there was no need to haggle over Avito because the asset was earmarked for the right suitor, meaning VK,” a source familiar with the negotiations told The Bell. Naspers was divesting from Russia, however, and categorically refused to sell Avito to “the right suitor,” given VK’s close ties to the state and the fact that its CEO, Vladimir Kiriyenko, is sanctioned in the West.

Though Avito went to Tavrin, market insiders say they expect him to resell to VK eventually. Tavrin denies these rumors, and his deal with Naspers stipulates a minimum period during which he is prohibited from reselling the company to a third party.

Of all Kiriyenko’s preferred candidates, Alexey Nechaev is the most unexpected, but his inclusion fits the pattern, too, under closer examination. While Nechaev is under numerous Western sanctions, one of the enterprises under his family’s control could still bid on Yandex’s Russian assets. A source close to the New People party leader told Meduza that Prime Minister Mikhail Mishustin personally encouraged Nechaev to buy a stake in Yandex. (Representatives for both men declined to comment for this story.) When the New People party won enough votes in 2021 to gain seats in the State Duma, journalists at Kommersant reported that it was thanks to the Kremlin’s “administrative resources.” Meduza has also reported on the party’s links to the Putin administration and to the Kovalchuk brothers. (Nechaev denies that his party is a “Kremlin project.”)

What comes next (and last)

According to sources who spoke to Meduza and The Bell, Arkady Volozh and Yandex’s senior management initially hoped that Alexey Kudrin would coordinate the sale of the company’s Russian assets, working closely with Vladimir Putin. Executives reportedly believed that Kudrin’s long relationship with the president would allow him to preserve at least some independence from the state for the businesses sold off. Instead, Sergey Kiriyenko’s lobbying capabilities have proved more influential, thanks in part to the fact that he sees the president in person more often, one source claimed.

Like the VK deal two years ago, Kiriyenko’s efforts to steer Yandex toward selling to individuals tied to Yuri Kovalchuk conform to the Kremlin’s grand strategy of “consolidating the RuNet” in the hands of loyal businessmen. Another source told Meduza and The Bell that Kovalchuk’s nephew, Stepan, could even be named VK’s next CEO. In February 2022, Stepan Kovalchuk became the senior vice president for media strategy and services development, and he is well-positioned for a promotion after VK’s CEO and several top executives suddenly left the company earlier this month. Incidentally, VK acquired Yandex’s two main media assets (its News and Zen services) in the spring of 2022.

How the Yandex deal actually comes together is still unclear, according to three sources familiar with the negotiations. And whatever the final configuration, all parties must return to President Putin for his approval.

As Kiriyenko lines up bidders from the Kovalchuk constellation, Yandex’s own workforce reportedly fears an outright takeover. “Right now, employees don’t really think the sale will go ahead at all,” said a source close to Yandex’s management. “Many of them are talking about the promised nationalization as a very real scenario.”

Story by Svetlana Reiter (Meduza), Valeria Pozychanyuk (The Bell), and Irina Malkova (The Bell)

Translation by Kevin Rothrock