Yandex seeks Putin's approval for its restructuring plan

Yandex seeks Putin’s approval for its restructuring plan

Yandex, the company often described as “Google of Russia”, is seeking Vladimir Putin’s blessing to sell its operations in the country, take care of its major international projects and appoint a longtime confidant of the Russian president to manage its relations with the Kremlin.

Three people familiar with the measures said the internet giant had informally enlisted top economics official Alexei Kudrin to get the Russian president’s approval in principle for the restructuring plan.

The changes would see Yandex’s Dutch holding company exit the Russian market by selling its entire business except for the international divisions of four key units.

The plan aims to spare parts of Russia’s greatest technological achievement from the disastrous consequences of Putin’s war in Ukraine, which caused several thousand Yandex employees to flee the country.

The restructuring appears to be an acceptance that Yandex’s ambitions to be a global internet giant are over, with Western investors and key partners distancing themselves from the Russian group after the invasion.

When the Nasdaq New York Stock Exchange suspended trading in its shares in February, Yandex’s market capitalization had fallen to $6.8 billion from more than $30 billion just a year ago.

If Putin gives his final assent at their Thursday meeting, Kudrin is expected to leave his current position as head of the Accounts Chamber, a government accountability body, for a senior position at Yandex, the people said.

Although Kudrin’s future position remains undefined, his role will actually be to serve as the krysha, or “roof” of Yandex – a term for high-level political protection, two of the people said.

“Kudrin is one of the people who can be super krysha – in a good way,” one person said. “The president has trusted him personally for many years. . . and its values ​​​​are similar to Yandex values.

Yandex hopes the restructuring plan will save four of the company’s most promising international new ventures – in self-driving cars, cloud computing, education technology and data labeling – by ending their links to the toxic Russian market, according to several people close to the company.

The fledgling but small companies previously relied on partnerships with large US tech companies as well as servers, chips and processors. Western sanctions prohibit producers from shipping to Russia.

Yandex also hopes Kudrin will secure a future for its much larger Russian business at a time when the Kremlin is dramatically increasing state control over the economy and the internet amid a mass exodus of foreign companies.

A longtime former finance minister, Kudrin, 62, will become the most senior Russian official to leave office since Putin ordered an invasion of Ukraine in late February.

Yandex.Eats food delivery couriers in Moscow
Yandex.Eats food delivery couriers in Moscow. The group’s international businesses, including self-driving cars and cloud computing, have been hit hard by Western sanctions © Natalia Kolesnikova/AFP via Getty Images

Kudrin and Putin have worked together since their days in the mayoral administration of St. Petersburg, where the future Russian president cut his political teeth in the early 1990s.

“There are very few people who care to keep [Yandex] private but have the big guy’s ear,” one of the people said.

Like many senior Russian economic officials, Kudrin privately opposes the war, according to two people close to him, but has not spoken out against it or criticized Putin. Kudrin did not immediately respond to a request for comment.

Meanwhile, Arkady Volozh, the company’s founder who lives in Israel, is also horrified by the war and has not returned to Russia since it began, according to friends. Yandex has made no public statement about the invasion, which leaves it vulnerable to accusations of complicity in promoting the Kremlin line.

In June, Volozh resigned as chief executive and transferred voting rights to his controlling stake on the board after the EU sanctioned him for what he said was Yandex’s role in “promoting state media and narratives in its search results, and downgrading and removing content critical of the Kremlin.”

Tigran Khudaverdyan, then Volozh’s first deputy, wrote on Facebook in March that “the situation is unbearable” and “the war is monstrous”, but said that Yandex would not “ride an armored car” in order to protect its employees and his businesses.

That stance did not convince many Yandex staffers, several of whom resigned in protest, or the EU, which sanctioned Khudaverdyan soon after, citing his participation in an oligarchs’ roundtable with Putin on day of the invasion. Khudaverdyan resigned and appealed the sanctions.

Several thousand other Yandex employees left the country during the war – either to work on international projects, to escape the Kremlin’s sweeping crackdown on dissent, or to escape forced drafting into the army. Russian.

Yandex sold its news aggregator, blogging platform and homepage to state-controlled social media company VK in August after it came under fire for the media’s role in the war.

Kudrin has reached an agreement with Putin and his top aide in domestic politics, Sergei Kirienko, the sources said. Kirienko is also responsible for Russia’s faltering efforts to annex four Ukrainian provinces and his son is the general director of VK.

Yandex previously gave the Kremlin veto power over key governance issues in a 2019 deal overseen by Kirienko, though the official never exercised his so-called “red button.”

But people close to Volozh say Yandex’s Russian business needs the new deal to ensure it stays in private hands.

As part of the restructuring agreement, Kudrin and Yandex discussed the official taking on a small equity stake and assuming an undefined role as head of governance at Yandex.

Yandex’s Russian management will retain control of the company’s day-to-day operations, but will delegate the company’s increasingly sensitive dealings with the Kremlin to Kudrin, the sources said. The deal would require the consent of Yandex shareholders.

Although talks are still in their infancy, several Kremlin-friendly Russian oligarchs have expressed interest in a stake in Yandex, according to people familiar with the matter.

Among them is metals magnate Vladimir Potanin, who bought SocGen’s Russian subsidiary and leading digital bank Tinkoff at knockdown prices in the spring, the sources said. Any potential sale would be complicated by penalties against potential buyers, they added.

Yandex, the Kremlin, the Accounting Chamber and Potanin did not immediately respond to requests for comment.

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