From Russia with cash…. and a jet ski

For most billionaires, the idea of having anything much to do with politics is about as attractive as flying in economy class. The rich love governments most when they get out of the way.

But just at the moment there are few notable exceptions.

In the United States, the Koch brothers are throwing millions of dollars supporting the Tea Party and other conservative causes in the lead up to next year’s presidential elections.

In strife-torn Egypt, telecoms billionaire Naguib Sawiris (valued at $US3.5 billion by Forbes earlier this year) has formed his own political party and looms as an unlikely choice as the country’s next president.

And in Russia, the country’s third richest man Mikhail Prokhorov appears to be positioning himself for a run at the role of president or prime minister.

Prokhorov is a fascinating figure. At the age of 46, he is known as Russia’s third richest man (worth a stunning $US18 billion according to Forbes) and the country’s most eligible bachelor. He owns the New Jersey Nets basketball in America’s National Basketball Association, is a noted athlete and has posted videos of himself doing jet-ski stunts on YouTube.

{qtube vid:=d7OYLWHtCDk}

But the push into politics is something else entirely.

Prokhorov took over the small Right Cause party in June, with a view to bolstering its share of the vote from 3% (according to current polling) to 15%, more than twice the 7% stake it will need to win in elections in December to get seats in Russia’s parliament, the Duma.

Indeed, the ever ambitious billionaire has already set his sights on running second in the elections to Prime Minister Vladamir Putin’s United Russia Party, which currently has 315 of the 450 seats in the Duma.

To help the party’s cause, he’s thrown himself into campaigning, making public appearances and putting up posters with his slogan, “Strength lies in power. The one who is right is stronger.”

A good showing in the December 4 parliamentary elections could also inspire Prokhorov to greater heights.

“If the party will be second in elections, then we will put forward our own candidate for the presidency. I do not exclude my own candidacy,” a statement on his Facebook page.

Interestingly, Prokhorov is yet to confirm exactly where his party sits on the political spectrum – whether it leans right or left or is centrist. The party’s manifesto, published in late August, calls for free education and medicine and social and economic reforms, such as “price fixing of state monopolies”.

But the fact remains Prokhorov is an oligarch. And that could make it very difficult to win over Russian voters.

From stonewash to stone

Like many of the oligarchs, Prokhorov was in the right place at the right time to tap into vast amounts of money flowing out of post-Soviet Russia.

He launched his entrepreneurial career in 1988 while still in college, buying jeans on the cheap, stonewashing them and selling them for 15 times what he paid for them.

From there Prokhorov went into banking, effectively providing credit in the early 1990s for Eastern Bloc countries desperate to trade their goods for hard currency. In 1994, with Russia’s finances crumbling, Prokhorov and business partner Vladimir Potanin worked out a deal whereby they loaned money to the government secured against state-owned mining and energy assets.

When the Government failed to repay its debts, Prokhorov and his partner auctioned the equity stakes in the government-owned businesses and emerged as the buyers of some choice shareholdings, including a 38% stake in nickel giant Norilsk Nickel.

It was this shareholding that would become the basis of Prokhorov’s fortune. After leaving banking, he turned the company from a $US2.5 billion business in 2001 into a $US60 billion giant by 2007. He would sell his stake in the business in 2008 – just before the onset of the GFC – to fellow oligarch Oleg Deripaska for $US4.5 billion in cash, the promise of a further $US2.7 billion and a 14% stake in Rusal, the world’s largest aluminium producer.

It is this Rusal stake (he know controls 17% of the company) and a stake in Russia’s largest gold producer, Polyus Gold, that now forms the basis of Prokhorov’s fortune, although he has some other interesting investments, including the New Jersey Nets and a media company that publishes Snob, a magazine dedicated to the covering trends among Russia’s elite.

The liberal capitalist

Prokhorov’s career has, like most oligarchs, been tinged with some controversy. In 2007 he was held by French authorities who accused him of bringing prostitutes into the country. He was released without charge.

But his money-making strategies haven’t been all driven by ruthless business practices. While managing director of Norilsk, for example, he attempted to improve the wages and conditions of staff, although this was accompanied by large job cuts.

He even went to the extent of secretly funding a newspaper that was highly critical of Nolisk management.

“I said to the editor, ‘I need a bit of criticism all the time.’ The only goal was criticism,” he told the New York Times last year.

“The editor pushed my staff to another level so much that from time to time my security people, who didn’t know about the arrangement, tried to block the distribution of the paper.”

Putin’s support?

This strategy of appealing to the masses will be key to garnering support for Prokhorov’s Right Cause party.

However, many commentators believe that he has an even more important ally on his side: Vladimir Putin.

While there are no formal links between Putin and Prokhorov, Putin’s dominance of the political arena has led some analysts to claim Prokhorov could not be making his political charge without the PM’s tacit support.

If Putin is on Prokhorov’s side, his chances of going from one of the wealthiest in Russia to one of the most powerful are much, much stronger.