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‘Basically, we didn’t lose anything’ - Billionaire Arkady Rotenberg, Putin’s closest friend, on Western sanctions.
‘Basically, we didn’t lose anything’ - Billionaire Arkady Rotenberg, Putin’s closest friend, on Western sanctions.
Arkady Rotenberg is President Putin’s closest friend. He’s also a billionaire and a key investor in Russian infrastructure. Most famously, his company built the bridge from Crimea to mainland Russia in record time.
Arkady Rotenberg tells Sophie Shevernadze about life on the EU sanctions list and how he ended up holding the baby for the daring Crimea bridge project. He explains why Russia is experiencing a breakthrough in agriculture as a result of the EU sanctions which triggered Russian counter sanctions on agricultural imports. Looking ahead, the businessman has some advice about replicating Russia's recent successes in the defence industry in the realm of new technologies.
Questioned about tackling corruption in Russia, the sports fanatic argues that an evolutionary approach is best. He also discusses whether an economic partnership with China can work for Russia and why capitalism needs teamwork to produce good results.
Sophie Shevardnadze: Нello, welcome to SophieCo. I am Sophie Shevardnadze. His fortune is estimated into the billions of dollars, and being a globally-minded person he could invest in lots of worthwhile projects around the world - if it wasn't for the Western sanctions slapped on him. Businessman and sportsman aside, he's also in the Russian president's closest circle. Today my guest is Arkady Rotenberg. Arkady Rotenberg, it’s great to have you on our programme.
Arkady Rotenberg: Hello.
Sophie Shevardnadze: I’m really happy because we’ve got lots to talk about. So there’s a widespread idea in the West that slapping sanctions against certain people, their assets and their companies, will push these people to create an opposition to the Russian president, and that this will eventually result in a policy change. You’re one of the first people who were hit by the sanctions, and they haven’t been eased since then. It’s been five years, and the sanctions haven’t changed Russia’s stance at all. How long are you ready to sustain this pressure? Forever?
Arkady Rotenberg: It would probably be better without sanctions, since it’s easier to do business, and sanctions do have a certain negative impact on the business, but we’re living under these sanctions, we have been for a while now and we’ll continue to do so. It doesn’t bother us really, and there are no major disruptions here.
Sophie Shevardnadze: How much money have you lost because of sanctions? Can you tell how much exactly?
Arkady Rotenberg: No, there’s no such figure. There was the first wave that mainly affected the bank, because there was this global rush, and people started withdrawing money from their accounts, and they took out significant amounts out of our bank too. At first, it did affect our operations. Then we took a number of steps and explained to our clients that it poses no actual risk to them, and thankfully, they believed us. So there is no danger. Basically, we didn’t lose anything.
Sophie Shevardnadze: You filed a complaint to the European Court of Justice, challenging the restrictive measures imposed on you. What are you hoping to achieve? I mean, the Europeans imposed these sanctions against you, they did it legally, based on the EU laws… What makes you think that the European Court of Justice will overturn this?
Arkady Rotenberg: I challenged the sanctions, and it was before we started building the Crimea Bridge, so they had no basis for imposing sanctions. I went to court, and I won. They acknowledged that the sanctions against me in 2014-2015 were unlawful. But in 2015 we started building the bridge, so they extended the sanctions and made them work.
Sophie Shevardnadze: So for you, it was more about them acknowledging the fact that the sanctions against you were unlawful and unfair rather than getting something back?
Arkady Rotenberg: Yes, it was about law and justice, because we believed it was completely unjust, that the sanctions were imposed for no reason whatsoever. Now, we’ve built the Crimea Bridge. Well, we still have a bit to finish up with the railway tracks, and we’ll be all set.
Sophie Shevardnadze: Russia’s top businessmen and heads of state-owned companies stand united in saying that the sanctions are unlawful, they hurt businesses, but, you know, we’ll manage to pull through and will become even stronger. As an ordinary person, I don’t really see any opportunities here and I don’t see that things have somehow improved over the last five years. Why? Could you explain what these opportunities are and how these sanctions are mobilising our economy and pushing us forward?
Arkady Rotenberg: Sanctions have influenced our operations, of course. I simply meant that we learned how to live under these sanctions. That is, it’s not the end of the world, they don’t scare us.
Sophie Shevardnadze: Oleg Deripaska told me that sanctions mean a lack of foreign investments which is very dangerous for the Russian economy, and that this whole thing is actually about opportunities shrinking rather than opening up. How come you don’t share his pessimism?
Arkady Rotenberg: No, I think he’s being too pessimistic about it. Take agriculture, for example. There’s been a huge breakthrough. Now we have new technologies. We’re moving away from the raw-exports role, we had to produce something ourselves, develop our own technologies. That’s definitely a good thing. Now we need to get results. In the past, we could afford to be idle and put things off or not do them at all, but now we need to do them – and fast. If we start falling behind, if we slow down, we’ll fall behind thoroughly and completely, so we have to be pro-active all the time. Of course, it would be easier without sanctions, no question about it.
Sophie Shevardnadze: You said that you keep thinking about the legacy you want to leave behind. After the Crimea Bridge, do you have a dream or maybe a plan to build something similarly impressive, like a Moon base or crop fields on Mars? Because I don’t really get what could be more grandiose than the Crimea Bridge...
Arkady Rotenberg: There’s a number of things, really. I think it’s like giving birth to a baby. We’ve made this bridge, and now it’s our baby. I have many children. How can I love one of them more than all the others? I have to love them equally. For Russia, the bridge is undoubtedly very important. It was a challenging project. Four times they tried to start construction and failed. I have many new projects in mind, though I don’t really want to go into them, but we do have a dream like that. We’ll be working for a while yet.
Sophie Shevardnadze: So why do you think that you were you entrusted with the Crimea Bridge construction - a strategically very important project? Is it because you’re the President’s close friend and he knows you for a long time? Or because he saw something else in you? There are a lot of rich people in Russia, but somehow you got entrusted with this project - why?
Arkady Rotenberg: There weren’t many takers, to be honest. Some were afraid; some knew they won’t be able to finish the construction. Many had relatives in Ukraine. Firstly, I assessed our capacities, whether or not we could build that bridge. Then I made the decision and said, “If you trust us with it, we can take this project and build the bridge.”
Sophie Shevardnadze: You’re not an engineer or an architect, but you spearheaded the construction of a unique bridge. You had to put together a team that you could trust 100%. How did you oversee their work? How did you pick the experts, considering you are not a bridge-building specialist yourself? If anything had gone wrong, the responsibility would have fallen on you, not the team.
Arkady Rotenberg: You are right, I am not an architect and I didn’t major in construction works. But I knew only too well what could happen if we did not build that bridge. Truth be told, I couldn’t sleep at night knowing that…
Sophie Shevardnadze: All these three and a half years?
Arkady Rotenberg: Yes, yes. I actually never talked about this. Those arches we put there, that was a one-of-a-kind operation. That was meant to be the kind of mechanism where all the gears would work seamlessly, simultaneously. If one of them broke down, the bridge would be doomed. We had never built anything that ambitious, and that is why I knew that if we pulled through, then we would have something to be proud of and pass on to our children.
Sophie Shevardnadze: But it turned your life upside down, you don’t you regret it at all? You can’t even get a vacation outside Russia...
Arkady Rotenberg: Actually, I don’t. It’s not that I could go places anyway since I was on the sanctions list. So, my life didn’t change much. I do love Russia, I love the people and I know a lot of places where I can have a really good time. Especially now that we have Crimea. Crimea, Altai, and Baikal – Baikal is absolutely stunning. I regret nothing. I have many children and I haven’t lost my appetite for life. And I do enjoy it.
Sophie Shevardnadze: There has to be a reason for that common attitude in Russia, “you can’t earn money in Russia, you can only steal it.” Why can’t people these days make money and be honest about it, and how can we change that? It’s not like we can eradicate corruption by endlessly putting people behind bars one after another. Look at China, they have death sentence for that, just like we did during the Stalin times, but every once in a while President Xi detects yet another corrupt official…
Arkady Rotenberg: To my mind, what we need is evolutionary changes. You are right saying that restrictions and punishments would get us nowhere. When you forbid your child to do something, they’ll only keep thinking about how to do that very thing anyway. So, no prohibitions and none of these numerous arrests... I think, and even our President said it, they can stir up some fear, but they will not usher in fundamental change.
Sophie Shevardnadze: How do heads of key businesses and you personally see the so-called high-profile corruption exposés published by either the authorities or the opposition? Does this get on your nerves? Do you even pay attention? Maybe it actually disciplines you?
Arkady Rotenberg: I think it depends. When a case is all transparent and clear-cut, then we need to expose it so that everyone could see it. The certainty of punishment has to be there. However, we should not go over the top, and the problem is that we overdo lots of things, that’s part of our mentality.
Sophie Shevardnadze: But that keeps you on your toes, right?
Arkady Rotenberg: Yes, that’s true.
Sophie Shevardnadze: With all the sanctions in place, is there any hope that we will be able to actually benefit from the breakthroughs in technology and artificial intelligence? I mean, yes, we should advance our own scientific research, but it’s the West and the US in particular that are at the forefront of the technological progress. Where can we get new technologies? Do you think Asia is a way out? China or South Korea, perhaps?
Arkady Rotenberg: We are smart enough, I think. We’ve never been lacking in mathematicians, software engineers, physicists or anyone else for that matter, so we have what it takes to develop. We just need to stop competing with ourselves, because everyone is hogging the blanket. As soon as someone develops a new technology, they keep it to themselves, not willing to share at any cost. It should be vice versa, we need to join our efforts.
Sophie Shevardnadze: You are talking about socialism and patriotism, because when everyone's on their own – that’s capitalism.
Arkady Rotenberg: No, when everyone is on their own, it’s bad capitalism. This way the only thing we get is a handful of small companies with little capital to work with. I think it’s way better to start big, to establish a major company – look at what Ali Baba and Mail.ru are doing. They are building something really big, and that would be a huge step forward. That business they are starting will have what it takes to actually grow and develop. Take a look at the defence industry. We pulled through, even though no one in the West thought we would actually do it. But we did!
Sophie Shevardnadze: Then, we need to invest in technologies as much as we did in weapons. Is this happening?
Arkady Rotenberg: Yes, and that is exactly the plan. Of course, the West is not going to stand and wait for us. Today, we are trailing behind, but we need to move forward anyway. Let’s look at the alternative. We can find a way to snatch some new technologies from them, but they would respond with more sanctions – and once again we will be cut off and have to go asking for handouts. We need to start doing something on our own. For example, artificial intelligence, this is serious. Anyway, but we need to move forward whatever it takes – and we shouldn’t expect help from anyone, even China. We should find resources here in Russia and tap into the potential we have.
Sophie Shevardnadze: Do we even have the money? I’m not sure we have the money...
Arkady Rotenberg: Yes, absolutely. The mindset we have is more Asian-like. We’ve always had very ambitious slogans – “let’s complete a five-year plan in four years”, as we used to say in the Soviet times. So, if we give our people enough inspiration and somehow unite them, there will be nothing we couldn’t do – just as it happened with the Crimea Bridge.
Sophie Shevardnadze: Let’s talk about that pivot to the East, to China – is it any good for us? The Chinese people I talked to, they say this is good for us in the international arena, because China and Russia together are a power to be reckoned with. And I also spoke about that with a lot of people from the political and business circles, and they think that the Chinese are difficult partners, it’s difficult to reach an agreement with them, their loans are expensive, while terms and conditions are oppressive. Could you share your experience?
Arkady Rotenberg: I’ve had some experience of dealing with them, even though I don’t have any joint projects with the Chinese at this point. The Chinese have a whole different mindset, they are very different.
Sophie Shevardnadze: I know that you encourage Russian businesses to pull their money off from offshores because of the risks – the West can arrest that money at any moment in this war of sanctions. Why would a Russian entrepreneur need an offshore at all – and I think ordinary people have a certain distaste for the word – why can’t our businessmen just keep their money in Russia? Is it that unprofitable?
Arkady Rotenberg: That happened because for some time offshores were like a honeypot, everyone believed that it was all unstable and unreliable in Russia, but they thought that everything was great over there. Russian businessmen wanted to do business in the West, because they feared someone could take everything away from them in Russia. But now it’s the opposite: their businesses outside of Russia were snatched, all assets frozen, all blocked, and now they sit and whine about it...
Sophie Shevardnadze: And no one can take away your business here?
Arkady Rotenberg: And we are good, all we have is in Russia. Nothing is impossible, but I believe the business climate is getting better and better.
Sophie Shevardnadze: I asked because after Crimea reunited with Russia, the rules of the game between major businesses and the Kremlin have obviously changed. Now, any businessman who lives in Russia and who is wealthy enough has to build something – like you had to build the bridge – and be slapped with sanctions. President asks to finance a project – and our businessmen cannot but say yes, this way they all have to contribute somehow to Russia’s geopolitical interests. If we compare that to what we had 10 years ago, this is not freedom, is it?
Arkady Rotenberg: Well, if we look at the situation with the bridge, for example, the president never said, “Hey you, come here. You are going to build the bridge, and if you don’t – we will cut off your arms.” It was quite the opposite, actually. He warned us, asked us to consider the risks. And I was aware of the risks. What we do here we do for our country, because our children live here, and we have no plans to move anywhere else. Why shouldn’t we build this bridge? When I talk to oligarchs, many of them say, “Look, we made all our money here, under this president. Why should we take it somewhere else? He doesn’t give orders telling us what to do with our capital. We want to invest here or invest there, why not?”
Sophie Shevardnadze: Have you ever thought of what your life would be like under the next president, who is not your personal friend? I am asking because I experienced something similar in Georgia during the revolution. You know, when power change happens in our countries, people that you thought you could rely on just disappear somewhere. It’s very surprising because it’s not at all like you thought it would be. I understand that you are very close with the president, but what is your life going to be like when he is no longer president?
Arkady Rotenberg: Of course I think about it. We’ve been friends, and we will remain friends no matter what. Our friendship has stood the test of time – over 50 years.
Sophie Shevardnadze: Thanks for everything, thanks for this talk. Good luck.
Arkady Rotenberg: Of course! And thank you.