How Putin’s Friends “Bought Out” Occupied Crimea

IStories has made a list of the top 10 participants of Crimea’s privatization: Yuri Kovalchuk, Arkady Rotenberg and Konstantin Malofeev are among them

1 Feb 2023
How Putin’s Friends “Bought Out” Occupied Crimea
Vladimir Putin with the head of Crimea Sergey Aksenov and the pro-government biker club Night Wolves. PHOTO: ALEXEI DRUZHININ / SPUTNIK VIA REUTERS / SCANPIX

Russia began to nationalize assets in Crimea immediately after annexing the territory from Ukraine in 2014. Ukrainian state property became Russian — or rather, Crimean — according to the decree, "On the issues of managing the property of the Republic of Crimea." It’s a long, growing list of what’s being taken away. Included are many thousands of businesses, apartments and land lots.

No compensation was paid to the owners. Their attempts to sue in Russia were all for naught. “In both Russian and Ukrainian legislation, it is unanimously written that the registration of property rights is the recognition by the state of your rights, and you don’t have to prove anything anymore. In Crimea, the courts, in fact, did not accept a single document on the right of ownership from people,” Crimean lawyer Zhan Zapruta said, indignantly. “The law was ‘raped', they did with it what they wanted.”

Part of what was confiscated was put up for privatization. From 2014 to 2022, 967 land tenders were held in Crimea, where property was sold for more than 27 billion rubles (total starting price). 

IStories presents below the top 10 new owners, which accounted for more than two-thirds of the purchases. The ranking is based on the amount of money paid for property.

1. Yuri Kovalchuk, a Vladimir Putin’s friend

8.2 billion rubles worth of property

  • Massandra production and agricultural association (5.3 billion rubles);
  • Novy Svet champagne wine factory (1.5 billion rubles);
  • Wisteria state dacha (1.2 billion rubles and 98 million rubles);
  • Dolphin boarding house (76 million rubles);
  • Crimea-Vino company (42 million rubles).

Yuri Kovalchuk, a friend of Vladimir Putin’s from St. Petersburg, struck up an interest in Crimean winemaking. First, a subsidiary, Southern Project, of his bank, Rossiya Bank, acquired the Novy Svet champagne factory, and later, Crimea’s oldest and most famous business, the Massandra winery. 

In addition to production facilities, Massandra owns about 10,000 hectares of land and the world's largest collection of wines, per the Guinness Book of World Records. Crimean authorities put Massandra up for auction for just 5.3 billion rubles; the cost of its vineyards alone has been estimated at billions of dollars.

Financial structures associated with Kovalchuk also acquired the Wisteria state dacha, where Soviet Secretary General Leonid Brezhnev liked to vacation. The relationship between the buyer and Kovalchuk was reported by Proekt Media.

Simferopol Airport also appeared under the control of Rossiya Bank: the Crimean authorities signed an investment agreement in 2016, transferring it to the Simferopol International Airport company under the obligation to build a new terminal. The beneficiaries of the company are Kovalchuk and his partner, Oleg Zhestkov. The Belbek Airport in Sevastopol was also transferred to their ownership.

2. Arkady Rotenberg, a Vladimir Putin’s friend

3.7 billion rubles worth of property

  • Krymtelecom company (1 billion rubles);
  • Dyulber health resort (0.7 billion rubles);
  • Zhemchuzhina health resort (0.5 billion rubles);
  • Krymtekhnologii company (0.5 billion rubles);
  • Ai-Petri health resort (0.4 billion rubles);
  • Miskhor health resort (0.4 billion rubles);
  • Fortuna health resort (0.2 billion rubles).

Another friend of Putin’s from St. Petersburg, Arkady Rotenberg, has focused his financial dealings on tourism, having won at auctions ownership of the largest health resorts in Crimea — Dyulber, Miskhor, Ai-Petri and Zhemchuzhina.

The Management Company for Infrastructure Projects (UKIP LLC), whose listed owner at the time was Vladimir Zaritsky, the former head of the Russian Missile Troops and Artillery, won the auctions. UKIP’s competitor in all tenders was the Sevastopol-based company, Sarych, which is also associated with the Rotenbergs. All of the health resorts, as a result, went to UKIP at the lowest possible opening price. A couple years after the tenders, Rotenberg admitted that the health resorts were his enterprise (formally, they were moved from Zaritsky to a closed-end investment fund), and he promised to invest about 15 billion rubles in their reconstruction.

UKIP also acquired the communications operator Krymtelecom, again in a friendly competition with Sarych. Most likely, UKIP’s interest didn’t lie so much in the business, as in the 105,000 square meters of the company’s real estate and 22 hectares of land. Another Crimean state-owned company, Krymtekhnologii, which also went to a company close to Rotenberg, owned 20 hectares of land and 78,000 square meters of real estate at the time of privatization.

3. «Gazprom», a state-owned energy corporation

2.7 billion rubles worth of property

  • Yakov Zhukovsky’s dacha, Novy Kuchuk-Koy (2 billion rubles and 0.7 billion rubles).

The historic estate of financier and artist Yakov Zhukovsky had belonged to the Ukrainian oligarch Rinat Akhmetov. Following the annexation of Crimea, the new authorities seized and sold it to the Ecological and Tourist Center in Parkovoe, which is owned by Gazprom through a chain of companies.

4. Federation of Trade Unions of the Republic of Tatarstan

1.4 billion rubles worth of property

The purchase of the Foros health resort in Crimea by the Federation of Trade Unions of Tatarstan was addressed by the chairman of the Federation of Independent Trade Unions of Russia, Mikhail Shmakov. Asked how the trade unions were able to afford the acquisition, Shmakov said that they simply helped those who had money to buy Foros. He named the largest companies in Tatarstan such as KamAZ, Tatneft, Taif, and RBC's source suggested that the Federation as an intermediary is needed so that the new owners of Foros don’t get sanctioned.

Foros’ new owners had a conflict with local residents because of the development of Forossky Park, where the health resort buildings are located. In the park, the construction of a children's sports facility for the Ak Bars hockey club began. Its main sponsor is the oil company, Tatneft, which belongs to the government of Tatarstan.

5. Vladimir Vikhlyantsev, a prosecutor and businessman

0.7 billion rubles worth of property

  • Kerch Metallurgical Plant (0.7 billion rubles).

The Ukrainian oligarch Rinat Akhmetov owned two factories in Crimea: the Kerch Switch Plant, which produced railway switches, and the Kerch Iron and Steel Works, which produced enamel dishware. Crimean authorities decided to “save the factories from bankruptcy,” and nationalized them by merging both into the state-owned Kerch Metallurgical Plant which in turn was sold to the Moscow company, Promstrelkom, in 2020.

Promstrelkom used to be called "Construction and Installation Train-38.” It engaged, in particular, in the supply of railway switch products. The company belongs to Vladimir Vikhlyantsev, who worked in the prosecutor's office, and later in various companies, including insurance businesses. In 2017, Vikhlyantsev participated in a round table as the Deputy Head of the Department for Economic and Information Protection of Business at Rosgosstrakh.

6. Vladimir Kruglov, a business partner of Vladimir Putin’s friend

0.7 billion rubles worth of property

  • Marine oil terminal (0.7 billion rubles).

Vladimir Kruglov wanted to hide his purchase of Crimean assets in order to protect himself from sanctions. To do this, he used the services of Moscow businessman Andrei Guskov: for 25 million rubles, he created a closed-end investment fund, which, through a chain of companies, bought the Marine Oil Terminal in Feodosia at a land tender. We know this from court documents that detail how Guskov tried to steal the oil depot, but he was caught and imprisoned.

Kruglov is a business partner of the St. Petersburg lawyer, Viktor Khmarin, a former schoolmate of Putin’s. Kruglov heads Khmarin's Nefteproduktservice near Moscow. Kruglov and Guskov discussed the cunning scheme for buying the oil depot in Crimea at Khmarin's office.

7. Stanislav Gostenko, a businessman

0.6 billion rubles worth of property

  • Hotel with apartments (0.3 billion rubles);
  • Krasniy Mayak health resort (0.2 billion rubles);
  • Yakor boarding house (59 million rubles);
  • Campsite (14 million rubles).

In 2018, Stanislav Gostenko, a resident of Sevastopol, founded the Maltsovo company with an authorized capital of 100,000 rubles, becoming its general director and sole shareholder. In 2022, Maltsovo won the rights to three tourist facilities at auctions: a hotel, the Krasny Mayak tuberculosis health resort with historic villas, and the Yakor boarding house.

Gostenko has a diverse track record: he has worked in catering, and in road and housing construction.

8. Konstantin Malofeev, an imperialist and businessman

0.5 billion rubles worth of property

  • Livadia health resort (0.5 billion rubles). 

Orthodox imperialist oligarch Konstantin Malofeev is one of the sponsors of the war on Ukraine. A criminal case has been opened against him in Ukraine, and Western countries have included him in sanctions lists.

In Crimea, Malofeev's company, Livadia Resort, acquired one of the most famous sanatoriums, Livadia, the former residence of the Romanovs, where the famed meeting of Stalin, Churchill and Roosevelt took place in February 1945. Malofeev promised that he would demolish the Soviet-era sanatorium and build a world-class resort.

9. Sberbank, a majority state-owned banking and financial services company

0.5 billion rubles worth of property

Even before the annexation of Crimea, Sberbank began building a five-star Mriya Resort hotel there, near Yalta. Close to the hotel, a bank subsidiary Horizont-Service acquired the sanatorium "Zori Rossii", which before the annexation was called "Zori Ukrainy" and belonged to the Prosecutor General's Office of Ukraine.

10. Oleg Belaventsev, former Presidential Envoy to the Crimean Federal District

0.5 billion rubles worth of property

  • Fortuna health resort (0.2 billion rubles);
  • Kastropol boarding house (73 million rubles);
  • Hostels (56 million rubles);
  • Industrial buildings (46 million rubles);
  • Administrative building in Simferopol (32 million rubles);
  • Non-residential buildings (30 million rubles);
  • Warehouses, a workshop (22 million rubles).

In February 2014, Oleg Belaventsev was on vacation in Crimea, as his family has a house in Sevastopol. “When I saw what was happening on the peninsula, of course, I couldn’t stay away. I understood how and what to do. I ended up fully involved in the preparations for the [Crimea’s becoming part of Russia] referendum. I’ll say one thing: the main task that confronted us was to prevent bloodshed,” Belaventsev recalled in an interview.

Belaventsev was appointed presidential envoy to the newly-formed Crimean Federal District, then was included in sanctions lists. In 2018, the head of Crimea, Sergei Aksenov, hired him as his assistant.

Belaventsev owns various real estate in Crimea, including apartments, apartment buildings, and houses. In total, journalists calculated 1 billion rubles of value. Part of this comes from privatization. Three of the former Presidential Envoy’s companies participated in privatization tenders: "Gorniye vysoty," "Zolotaya Yalta" and the Crimean Construction Company. They are united by a common founder, Zarubezhtekhpromproekt, in which Belaventsev, as established by IStories, had at minimum a controlling stake in 2019.