The Puzzling Presidential Candidacy of Mikhail Prokhorov

Posted on Jan 3, 2012

AP / Dmitry Lovetsky

Political posters for Mikhail Prokhorov, left, and Vladimir Putin overlap in St. Petersburg, Russia.

By Ivo Mijnssen

Crowds in Moscow and St. Petersburg are still protesting against the irregularities of the Dec. 4 Duma elections. Russia’s political establishment, for its part, is turning its eye to the presidential elections of March 4. The candidacy of billionaire Mikhail Prokhorov in particular has caught the attention of political analysts and media outlets in Russia and abroad.

Prokhorov announced his candidacy in the wake of the Moscow protest on Dec. 10. He has presented himself as a “consolidator” of the liberal opposition, a capable candidate who could challenge Vladimir Putin. Referring to blogger and political activist Alexei Navalny’s popular characterization of the ruling party United Russia, Prokhorov said: “I am no swindler and no thief. I am a manager!”

The 46-year-old Prokhorov, with assets estimated at $18 billion, making him the third-richest man in Russia, is an unlikely candidate for president. He has a reputation for being a playboy and owns a 300-foot yacht, at least two custom-made private planes and the New Jersey Nets NBA team. In 2007, French police arrested him on suspicion of running a prostitution ring. He claimed that the women were just students and models, and the charges were dropped.

As one can imagine, “oligarchs” like Prokhorov are very unpopular in Russia. Their escapades fill tabloid magazines and their lifestyle is so radically different from those of other Russians that they might as well live on a different planet. The collapse of the Soviet Union—the reason for the impoverishment of the vast majority of Russians—made those with the right connections and business savvy extremely wealthy.

This was no different for Prokhorov. He made use of the economic opportunities that opened up during Mikhail Gorbachev’s perestroika. He joined the Communist Party at a time when it was no longer a necessity—“purely for career reasons,” as he recently admitted in an interview with the Russian magazine Itogi. At the same time, he was a successful early Soviet businessman, earning his first car by dealing in jeans. He began working at the Soviet International Bank for Economic Cooperation in 1989 and made contacts with those actors in the Soviet government who would lead the transformation to a market economy merely two years later.

He also met Vladimir Potanin, today Russia’s richest man and a deputy prime minister responsible for the privatization of the state-run economy in the 1990s. The two founded one of the first private banks in Russia and began luring customers away from state banks. Within six months, they had accumulated capital equivalent to $300 million.

The early 1990s were a time of great opportunity for any Russian businessman with money. Soviet corporations were being privatized and, within the country, very little capital was available. Had the Boris Yeltsin government sold state corporations at their market value, Western companies would have inevitably bought them. Hence government officials sold them for a fraction of their real value to Russian businessmen they considered to be loyal. Whoever managed to make it into this select circle was guaranteed to become very, very rich.

Potanin and Prokhorov bought the company Norilsk Nickel for $170 million. This made them billionaires overnight. In 2007, the company was worth $60 billion. The economic and financial crisis in Russia in 2008, in which fears of the political fallout of the war against Georgia and a plunge in oil prices led to a crash of the stock market, cut this value in half. Prokhorov, however, sold his shares in time and was thus one of the only Russian billionaires who was relatively unaffected by the crisis. In his early 40s, he could have easily retired and focused on his hobbies (he is said to work out twice a day, and he loves kickboxing and heli-skiing).

Instead, Prokhorov decided to go into politics. As the case of Mikhail Khodorkovsky shows, this step is not without dangers for Russian oligarchs. When Khodorkovsky, then the richest man in Russia, began funding the opposition and publicly criticizing Putin on government corruption in 2003, he was arrested and has been in prison ever since.

Prokhorov was more careful. In the spring of 2011, he became the head of the pro-business party Pravoe Delo (“Right Cause”). According to Alexei Kudrin, the former finance minister under Putin and Dmitry Medvedev, this happened with the Kremlin’s explicit consent. The goal was to reposition the party under Prokhorov so that it would secure the Kremlin the votes of the business community and parts of the urban elite.

Prokhorov invested $100 million of his own money in the party. However, after only four months, an intraparty coup removed him. Although the reasons for this coup remain unclear, Hans-Henning Schröder, a political scientist at the Stiftung Wissenschaft und Politik in Berlin, and numerous other analysts believe it was the Kremlin that toppled Prokhorov because he became too unpredictable and independent.

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