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Fall-out from Russian Move Into Crimea Continues As Alfa Bank Ukraine Closes Crimean Operations

mikhail-fridman_and German Khan - Getty

Alfa Bank Ukraine is set to shut down its banking business in Crimea, amid the rapidly changing geopolitical conditions in the neighbourhood.

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Caught between a rock and a hard place, Alfa Bank is a Moscow based, Russian owned, private commercial bank – which also has a large banking subsidiary in the Ukraine.

The bank said yesterday, “Alfa Bank no longer can work within the legal framework of the new Ukrainian legislation, and doesn’t have a legal basis for continued operations and provision of banking services in the territory of Crimea.”

It also said that Ukraine and the Western countries do not recognize Russia’s annexation of Crimea, and Ukrainian and Western banks have been shutting down their business in the region.

Assuring its Ukrainian customers, the bank said that they can close their accounts and still obtain the full return of their deposits, and can also continue to use its other Ukrainian branches.

The Alfa Bank Group is the largest private commercial banking group in Russia. With headquarters in Moscow, the Alfa Bank operates in seven different countries, providing financial services to over forty thousand active corporate customers and more than five million retail clients.

Alfa Bank is particularly active in Russia, and also the Ukraine, ranking among top 10 largest banks in terms of capital in both countries. Alfa Bank is headed by Pyotr Aven and is part of the Alfa Group which is controlled by three Russian billionaires, Mikhail Fridman, German Khan and Alexei Kuzmichov. Mikhail Fridman and German Khan were both also born in the Ukraine.

As a Russian bank with a large Ukrainian subsidiary, Vladimir Putin’s move into Crimea has presented it with a difficult conundrum. Its Ukraine operation is a large one and it continues to function, however its ability to operate in Crimea itself clearly became impossible for them to manage, both in the context of the ongoing Western recognition issues of the latest Russian move into Crimea, and also, for that matter, of Russian recognition issues concerning the recent ousting of the Ukrainian President as well.

Another Ukrainian bank, the First Ukrainian International Bank, which is owned jointly by Ukrainian oligarch Rinat Akhmetov, and the Ukrainian state-owned Ukrasbank, has also announced it will be ending its banking operations in Crimea as well later this month and others of the 20 Ukrainian banks operating there will likely follow suit.

A number of Western banks with operations in the Ukraine have also said they would cease their operations in Crimea as well.

Businesses on both sides of the east-west divide on Ukraine are clearly uncomfortable about the events that have been taking place in the Ukraine, and this particular announcement may well be a harbinger for more to come if the situation there should get any worse.

About Mikhail Fridman

Mikhail Fridman, who next week turns 50, was born in the Ukraine. He graduated as an engineer from Moscow’s Institute of Steel and Alloys in 1986. He then started his career in trading and financial services before founding the Alfa Group Consortium in 1989. Fridman sits today as the Chairman of the Supervisory Board of the Alfa Group, now one of Russia’s largest privately owned investment groups.

Fridman has been a Russian representative on the International Advisory Board of the Council of Foreign Relations since 2005. Since 2005 he has also been a member of the Public Chamber of Russia.

As an active supporter of Jewish causes both in Russia and Europe, in 1996 he was one of the founders of the Russian Jewish Congress (RJC), and today sits on its governing board. He has made large contributions as well to the European Jewish Fund, a non-profit organization aimed at developing European Jewry and promoting tolerance and reconciliation on the continent.

According to Forbes his personal net worth is about US$16.9 billion at April 2014.

About German Khan

German Khan, who is 52, was also born in the Ukraine, in Kiev, and he first met Fridman when they studied together to be engineers at the Moscow Institute of Steel and Alloys, graduating in 1986. To help finance their studies, the duo made some money trading in theatre tickets.

After graduating Fridman and Khan went into business, in partnership with another fellow student, Alexei Kuzmichov together establishing the Alpha Group Consortium in 1989.
The company prospered in post Communist Russia, diversifying into banking, retailing, and telecommunications as well as the oil and gas company that they formed in eventual partnership with British Petroleum.

When the Alfa Group first took over oil company TNK, Khan ran the operation. When it became a joint venture with BP he remained as its Executive Director.

Khan is married with five children and today lives in the outskirts of Moscow. He enjoys hunting and has a large collection of sporting guns and rifles. Also, like Fridman Khan has been an active supporter of Jewish causes, including making large contributions to the work of the European Jewish Fund. He is also a leading member of the Russian Jewish Congress.

According to Forbes his personal net worth is about US$10.l8 billion at April 2014.

About Pyotr Aven

Pyotr Aven, who today is 59, was born in Moscow and is the son of Oleg Aven, whose own father had once been a Latvian rifleman, and he has a Jewish mother.

He graduated from Moscow State University in 1977 and holds a PhD in Eco0nomics, which he obtained in 1980. After conducting research at the Soviet Academy of Sciences and then moved to the International Institute for Applied Systems Analysis in Austria, from 1989 to 1991.

He then held a series of distinguished appointments for his country, including serving as Minister of Foreign Economic Relations, serving as Russia’s representative to the Group of Seven and conducting several bilateral trade and economic missions to capitals in the west.

In 1994 Pyotr Aven met Mikhail Fridman and joined him, both as a shareholder, and as a member of the Supervisory Board of the Alfa Group. From 1994 to 20111 he served as President of Alfa Bank, the Alfa Group’s principal banking arm and today he serves as its Chairman of the Board of Directors.

As a distinguished Academician Pyotr Aven is also the author of a number of scientific papers and articles on economic and trade issues. He has been a guest professor and lecturer at several universities, including Yale University, Bar-Elan University in Israel, and the University of Glasgow. He has also published two books on econometrics and on economic reform.

According to Forbes his personal net worth is about US$6 billion at April 2014.

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