The Money Behind Yevgeny Prigozhin and the Wagner Group

The Money Behind Yevgeny Prigozhin and the Wagner Group – The New York Times

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After a turbulent weekend in Russia, global markets are relatively calm on Monday morning. And there was no news from either Russian President Vladimir Putin or his rebellious military chief Yevgeny Prigozhin after Mr Prigozhin’s aborted march on Moscow.

But experts believe the Kremlin will press the man who has most challenged Putin’s authority in his 23 years in power – and that he will seek to limit the tools Prigozhin uses to establish a multinational, built a multi-million dollar company to fund its operations.

The incident exposed deep cracks in the Kremlin’s war machine. The instability pushed the ruble lower and is likely to roil commodity markets for months. European natural gas prices have soared this morning and Brent crude is rising. (Trading in European equities and US futures was mixed.)

“The risk of further unrest in Russia must now be factored into our oil analysis for the second half of the year,” Helima Croft, head of global commodities strategy at RBC Capital Markets, wrote in a note to investors this morning. Rising commodity prices could add further pressure on central banks, which are already struggling to contain inflation.

Who is Mr. Prigozhin? Europe and the United States have been trying to shut down Prigozhin’s sprawling business operations for years. Mr. Prigozhin, who was on the FBI’s most wanted list, rose quickly in Putin’s Russia – from being the president’s favorite caterer to winning big contracts that funded the Wagner Group, his private mercenary company. Founded in 2014, Wagner wages wars and trains militias in politically troubled countries. It is also Putin’s force of choice when military campaigns go awry, for example in Syria and Ukraine. And Wagner’s internet troll farms target Western democracies and elections, including the 2016 US presidential campaign.

Wagner is a “brutal” transnational criminal organization, according to the Ministry of Finance. Evro Polis, a Prigozhin-affiliated company that received energy concessions in Syria in exchange for military support. In Sudan and the Central African Republic, Wagner has become involved in mining operations to fund his operations.

To avoid sanctions and to cover up his finances, Wagner often demands payment in gold, diamonds, and oil and gas shipments. The Financial Times estimated that revenue from Wagner’s natural resource investments was approximately $250 million between 2018 and 2021.

Mr. Prigozhin also has access to a global network of corporate attorneys according to a separate FT report, to ward off Western authorities. The Treasury has identified business partners supporting Wagner’s fight in Ukraine: two Russian firms – Terra Tech and AO BARL – and Chinese company Spacety, which supplies satellite imagery to the group.

The uprising has weakened Mr Putin, but what will he do next? Bill Browder, a former investor in Russia who has become one of Putin’s biggest critics, told DealBook that the president will try to restore his authority by any means necessary. “If he can’t show that he’s so brutal that everyone has to deal with him, that’s the beginning of the end. Rebuilding will require a massive crackdown,” he said.

Alexander Gabuev, director of the Carnegie Russia Eurasia Center, told DealBook that Mr Putin may not be finished yet. “This could be further evidence of dysfunction, but he’s very good at finding a way to adapt and survive. His greatest talent is staying in power.”

China’s currency hits a seven-month low against the dollar. The renminbi is under continued pressure from China’s slowing economy, including slowing consumer spending. A cheaper renminbi will help Chinese exporters by making their goods cheaper abroad, but domestic companies are likely to suffer.

Britain plans to curb ‘greed inflation’. The country’s finance minister, Jeremy Hunt, is set to meet with regulators this week to discuss ways to stop companies from raising prices too much. The move signals a change on the part of the government, which has previously taken a soft stance on reported profiteering as the UK suffers from stubbornly high inflation.

Wall Street continues to swing the axe. According to Bloomberg, Goldman Sachs is in the process of firing 125 chief executives worldwide, while JPMorgan Chase is cutting 40 investment banking jobs in North America. The moves come as banks seek to cut costs amid an ongoing slump in business processing.

SpaceX is reportedly targeting a valuation of $150 billion. According to Bloomberg, Elon Musk’s rocket company is planning a new round of employee stock sales that would boost its value from $137 billion in January. This comes amid SpaceX’s continued success in launching rockets and expanding its satellite-based internet service, Starlink.

As investment in sports teams surges, a Hollywood motorsport mash-up was announced on Monday: a group that includes actor Ryan Reynolds is taking a 24 percent stake in Renault’s Alpine Formula One team. It’s the latest bet on sports team ownership and the lucrative sponsorship and media rights deals it can generate.

The deal: RedBird Capital Partners (which owns interests in Fenway Sports Group and AC Milan), Otro Capital and Mr. Reynolds’ Maximum Effort Investments are leading a €200 million ($218 million) investment in Alpine, valued at $900 million through. Actors Michael B. Jordan and Rob McElhenney are participating in the investment.

It’s the first deal for Otro Capital, which spun off from RedBird to invest in sports teams and will be led by Alec Scheiner, who previously worked for the NFL’s Dallas Cowboys and then ran operations for the Cleveland Browns. Mr. Scheiner will join Alpine’s Board of Directors.

It’s a bet on continued US interest in Formula 1. The competition has grown in popularity in the United States since its sale to Liberty Media in 2017. That’s thanks in large part to the Netflix series Drive to Survive, which has helped propel the sport’s viewership and overall fan base to new heights.

Renault hopes to continue expanding the Alpine brand. The team, which finished fourth in Formula 1 last year, is a key example of the French automaker’s EV performance as the company aims to see EVs account for more than half of its sales by 2030.

Buyers have had a lot of success profiting from sports teams:

  • RedBird acquired a 15 per cent stake in Rajasthan Royals, the Indian Premier League cricket team, in 2021 – and has seen the value of its investment soar after the cricket league sold its broadcasting rights at a record price.

  • And Mr Reynolds and Mr McElhenney bought Wrexham AFC, the junior Welsh football club, in 2020 and turned them into a media phenomenon, thanks in part to the hit reality TV series Welcome to Wrexham.

“They looked at us like, ‘Maybe you can help us in the industries that you’ve been successful in in the US — ticketing, hospitality, sponsorship, licensing, merchandising, content,'” Mr. Scheiner told DealBook.

As global deals falter, Big Law increasingly seeks to capitalize on Saudi Arabia’s oil-fueled investment spate to boost their fortunes. This now includes big firms like Kirkland & Ellis, which are considering opening offices in the kingdom, joining the likes of Latham & Watkins and Greenberg Traurig, reports the Financial Times.

However, this could land some companies in an awkward internal conflict:

The incursion of major law firms into the kingdom creates a potential conflict between the liberal values ​​espoused by senior staff in the US and elsewhere and Saudi Arabia’s human rights record, where dissidents remain jailed and homosexuality remains a capital crime. …

American law firms are increasingly facing political pressure to drop certain clients. Last year, Kirkland & Ellis parted ways with two star lawyers representing the gun lobby, the National Rifle Association, following widespread outrage over a Texas school shooting. Other companies have refused to work for anti-abortion groups or opioid manufacturers, while former US President Donald Trump and his associates have been rejected by numerous elite organizations.

Some top lawyers defended their firms’ growing ties with Saudi Arabia: “We do not independently assess the local customs, religious beliefs and value systems of each jurisdiction and culture that we enter,” Richard Rosenbaum, Greenberg’s chief executive officer, told Traurig the FT. “It’s not our job to judge that way.”

— Larry Fink, the CEO of BlackRock. Speaking at the Aspen Ideas Festival, Fink — a longtime proponent of incorporating environmental and social concerns into investment decisions — said the common term for this strategy is too politicized. (He reiterated that he has not abandoned the principles of ESG investing.)

Inflation data, a major central bank meeting and profits from large consumer facing companies will be in the spotlight. Here’s what to see.

Tuesday: The Conference Board will release its latest Consumer Confidence Report. Walgreen Boots reports earnings for the fiscal third quarter.

Wednesday: The European Central Bank concludes its annual forum in Sintra, Portugal. Central bank leaders, including the Fed’s Jay Powell, the ECB’s Christine Lagarde and the Bank of Japan’s Kazuo Ueda, will discuss monetary policy there. The Fed is set to release the results of its annual bank stress tests, the first major report on lenders since the Silicon Valley bank collapse.

Microsoft CEO Satya Nadella and his Activision Blizzard counterpart Bobby Kotick are expected to testify on the final day of a hearing related to the FTC’s efforts to block its $70 billion deal.

Thursday: Nike and H&M deliver quarterly results.

Friday: Japan and the Eurozone will release their latest CPI reports. The Department of Commerce will also release its latest report on personal consumption spending.

Offers

  • Western banks fear rising tensions between Washington and Beijing could prevent them from participating in agrichemicals giant Syngenta’s Shanghai IPO. (FT)

  • IBM agreed to buy Apptio, which makes information technology management software, for $4.6 billion. (IBM)

  • Junk bond sales are increasing as issuers offer more protection to potential buyers. (WSJ)

politics

  • The Gerson Lehrman Group, which connects clients to a network of industry experts, is reportedly laying off employees in China as Beijing cracks down on Western consulting firms operating there. (FT)

  • Centrist political group No Labels is pushing for Senator Joe Manchin, a Democrat from West Virginia, to run for president in a third-party bid — but won’t say who is funding the effort. (politico)

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