As Local Health Systems Buckle, Russia’s Oligarchs Take Charge
The growing role of business tycoons in the fight against the coronavirus highlights the weaknesses of the state apparatus built by President Vladimir V. Putin.
MOSCOW — As the coronavirus pandemic gained pace in Russia this spring, a billionaire steel magnate, Aleksei A. Mordashov, called four regional governors and urged them to lock down the cities where he operates.
For Andrei A. Guryev, the scion of a fertilizer empire, limiting travel into two Arctic cities of 80,000 people where he runs a phosphate mine was even easier. His company owns the airport and the local ski resort that attracts outsiders.
“We shut them down,” Mr. Guryev said. “The decision was ours alone.”
The influence of the Russian business tycoons known as oligarchs waned early this century as President Vladimir V. Putin consolidated power, transforming them from warring clans to fantastically rich families dependent on the Kremlin’s benevolence.
Now, the coronavirus crisis presents them with another turning point: the greatest economic threat in decades, coupled with an enormous stress test for the state that makes their wealth possible.
And so the oligarchs, with millions of employees and dozens of Russian cities reliant on their enterprises, have become central figures in the national response to the pandemic.
Russia has reported over 177,000 coronavirus cases and more than 1,600 deaths. Roughly half the cases are in Moscow, suggesting that the rest of the country is still in the early stages of the pandemic.
With local health systems buckling, many oligarchs are deploying millions of dollars of their own cash, along with their companies’ logistics and procurement capacity, to fight the spread of the illness, while urging slow-moving regional authorities to act with more resolve.
In the process, they are revealing the Russian state’s weaknesses, and how much Mr. Putin’s system of governance still relies on informal alliances with powerful business tycoons. The depth of their coffers also puts the oligarchs in position to outlast the pandemic — unlike Russia’s reeling small and midsize businesses — meaning that their influence is poised to grow in coming years.
“We’re working on behalf of those people whom the state’s measures haven’t reached,” said Lyudmila A. Guseva, who is helping to implement some of the coronavirus relief efforts at Mr. Mordashov’s steel giant, Severstal.
Oleg V. Deripaska, the metals magnate hit by American sanctions in 2018, is paying for construction of three coronavirus treatment centers in Siberia with 160 beds. Gennady N. Timchenko, a close associate of Mr. Putin who is also under sanctions, said he would spend about $17 million to support coronavirus-related charities and buy ventilators, CT scanners and personal protective equipment for Russian hospitals.
Vladimir O. Potanin, reputedly Russia’s richest man, and his mining giant Nornickel, have set aside some $150 million for the coronavirus fight.
And in late March and early April, as Mr. Putin took a hands-off approach to the pandemic, Mr. Mordashov helped engineer the lockdown of Cherepovets, a city of more than 300,000 people, where Severstal and its sprawling steel mill employ one in four working-age residents.
Mr. Mordashov told regional governors that they should “organize restrictive measures as quickly as possible” and offered his company’s help, said Alexander Shevelev, Severstal’s C.E.O.
Severstal gave respirator masks to the police and delivered mobile housing units to quarantine checkpoints. It drafted company employees to join the police on patrols. Its software engineers designed a service to allow the city to monitor quarantine compliance. It said it was procuring 20 ventilators for city hospitals and set aside corporate housing to isolate anyone arriving in the city.
The Kremlin’s limited relief measures so far have offered little aid to people who are out of work, sparking growing discontent. But in Cherepovets, Severstal has mounted its own emergency relief effort. The company said it would give residents who lost income due to the crisis grocery store gift certificates of about $80 each for every household member. Russia’s minimum wage is about $160 per month.
“We are responsible for the social stability of the regions where we are present,” Mr. Shevelev said.
The close involvement of oligarchs in Russia’s coronavirus fight sheds light on their unwritten contract with the Kremlin. Staying in Mr. Putin’s good graces has helped them profit enormously from Russia’s immense natural-resource wealth. Despite years of sanctions and economic stagnation, Russia still has 99 billionaires, according to Forbes, the fifth-most of any country.
But the oligarchs are also expected to open their coffers to support Mr. Putin’s broader goals, like the 2014 Winter Olympics in Sochi.
In fact, the oligarchs who have remained in business in Russia since Mr. Putin’s rise have so closely integrated their operations with the state that they are sometimes described not as private businessmen but as division managers in a larger enterprise, “Russia Inc.”
In past years, Western officials blamed some oligarchs for lending a helping hand in election meddling and military ventures abroad, operating as a shadow hand of the state. Now, the pressing need is controlling the virus.
In March, the owners of Alfa Bank, Russia’s biggest private bank, donated $13 million to fight the pandemic. The money did not go to charity, but directly to the Russian government’s coronavirus task force.
“In Russia, the business community — especially big business — traditionally carries out more of a social function than it does in the West,” said Vladimir V. Verkhoshinsky, Alfa Bank’s C.E.O.
But many executives have found that donating money is not enough, underscoring the weakness of the country’s health system and casting an unflattering light on the Russian government’s lackluster response. On March 14, when Russian officials were still widely playing down the coronavirus threat, Mr. Deripaska called on the government to close the borders and implement a 60-day quarantine. It would be more than two weeks until a nationwide, partial lockdown went into effect.
In the isolated Arctic city of Norilsk, Mr. Potanin’s Nornickel mining giant took the lead. It procured thousands of testing kits, millions of masks and 46 ventilators for the regions where it operates. It stopped charging rent to dozens of businesses and increased the internet bandwidth it makes available to cellphone operators serving the city of 180,000.
“It’s necessary to relieve the government of some of its headache,” Mr. Potanin told the newspaper Komsomolskaya Pravda.
One reason the oligarchs’ role is central to Russia’s response is that around 10 percent of the population lives in far-flung “monotowns” like Norilsk that are dominated by a single employer or industry. They are also involved with some of the large, remote construction sites that have emerged as some of the country’s biggest outbreak hot spots.
For example, more than 1,900 people have tested positive for the coronavirus at the Arctic village of Belokamenka, where the energy giant Novatek is building a liquefied natural gas supply base with thousands of workers crowded into barracks.
Novatek’s billionaire chief executive, Leonid V. Mikhelson, a prominent player in the global art scene, has kept a low profile during the pandemic, and his company did not respond to a request for comment.
In the Arctic monotowns of Kirovsk and Apatity, Mr. Guryev, the fertilizer magnate, scrambled to prevent an outbreak when a man who arrived from Cuba tested positive in March. Mr. Guryev dispatched the company jet to pick up 100 testing kits and a specialist, and flew them 1,000 miles to Apatity to examine the patient’s contacts.
Mr. Guryev’s company, PhosAgro, also said it had bought ambulances, ventilators and personal protective equipment for the medical workers. In some cases, Mr. Guryev said, the public sector cannot act with the necessary urgency — “for them, it’s a bureaucratic process.”
“For us it’s a same-day decision, often it’s my own personal decision,” Mr. Guryev said. “Buying those tests — I dealt with it personally. I personally dealt with the P.P.E. and I personally dealt with the ventilators, because all this had to be done yesterday.”
Oleg Matsnev and Andrew E. Kramer contributed reporting.