New Russian PM's Rise Shines Spotlight On Purported Friend's Mysterious Wealth
By Todd Prince February 24, 2020
Russia has a rising business star in Aleksandr Udodov, an entrepreneur whose apparent success is driven by savvy investments, financial smarts, and a sense of patriotism.
At least that is the picture painted by a sudden series of articles in Kremlin-friendly media outlets about Udodov, owner of an agricultural company called Mushroom Rainbow and several shopping malls.
The timing of the articles may be no coincidence: Udodov is believed to be a close friend of Prime Minister Mikhail Mishustin, the former tax-service chief who was appointed to Russia's second-highest office by President Vladimir Putin last month in a surprise move.
Udodov, 50, plays on the same amateur hockey team as Mishustin and traveled overseas with him as part of an official Russian delegation in 2008. According to an investigation by opposition politician Aleksei Navalny's Anti-Corruption Foundation, he donated two plots of land outside Moscow to Mishustin's sister while two apartments he purchased in the capital eventually ended up in the hands of Mishustin's sons.
And like the fortunes of many businessmen with ties to senior Russian government officials, Udodov's wealth seems as inexplicable as it is large.
His fortunes will be watched closely following Mishustin's promotion. Future successes -- or lack thereof -- could be an indication of whether the new prime minister, upon whom Putin is relying to improve the economy and raise living standards in what could be his last presidential term, is able to consolidate the power of his office against competing factions in the elite.
Udodov hails from a humble town in the North Caucasus region of Daghestan, some 1,500 kilometers from Moscow. He has made two investments in property near the Kremlin likely exceeding $130 million. His share of an investment in Mushroom Rainbow -- which produces about 17,000 tons of the edible fungi a year in the Kursk region -- was around $60 million.
Udodov's "personal website," like the crop of friendly accounts in the media, is silent on what is behind his meteoric rise.
According to a brief biography in Moskovsky komsomolets and material on his website, the entrepreneur jumped from managing the Moscow office of a Latvian logistics company in the late 1990s to buying a stake in a German cargo company in the mid-2000s, then scooped up a high-end Moscow shopping center worth tens of millions of dollars early in the last decade.
Aside from his birth in 1969 and graduation from a Kyiv university in 2001 with a degree in jurisprudence, the biography on his website itself mentions no job or anything else until 2010, when it says he began a five-year stint as a vice president at a large Russian energy company, Itera Group. A 2011 article in the Russian daily Kommersant about an illegal tax scheme contradicted this, describing Udodov as "officially unemployed."
By 2010, in any case, Udodov had already acquired several overseas properties worth a total of more than $40 million, according to Swiss media reports and data obtained by RFE/RL.
One of those foreign investments -- the purchase of a $4 million hotel in the lakeside city of Lucerne along with a promise to invest $45 million to expand it -- sparked a money-laundering investigation by the Swiss authorities, Swiss media reported in early 2012. It is unclear when the authorities launched the investigation.
Udodov sold the hotel in 2013 and the investigation was ended by the Swiss authorities with no charges filed.
In April 2011, Russian police sought to search Udodov's Moscow apartment in connection with a shell company's attempt to recover 1.8 billion rubles (about $60 million at the time) in supposed excess tax payments, but he had left the country a few days earlier, according to the Kommersant report.
Udodov issued a statement a few days later dismissing the Kommersant report, saying that he was employed at Itera and currently abroad for work. He said he was not under investigation.
According to the online outlet Open Media, however, Udodov did appear as a key witness in the case, in which five people were eventually convicted of attempted tax fraud and sentenced to prison.
Mishustin was in charge of the Russian tax service at the time, holding that post from April 2010 until Putin made him prime minister last month.
If Mishustin was far from a household name in Russia before his abrupt appointment as cabinet chief in January, Udodov was virtually unknown to the general public.
That's changing pretty fast. In the weeks since Mishustin's appointment, articles describing Udodov as an astute man with successful businesses that help Russia advance have appeared in various state-friendly media outlets.
"Aleksandr Udodov's Import Substitution Business Has Doubled Revenues In One Year," was the headline of a February article about Mushroom Rainbow in Komsomolskaya pravda, a mass-circulation tabloid that rarely publishes earnings stories, leaning more in the direction of crime, celebrity, and sensation.
"Aleksandr Udodov's European Cargo Business Grew 8 Percent," was the headline Sobesednik chose for a post in late January. A review of Sobesednik's website indicates it has published no other article focusing on a company's earnings this year.
"Aleksandr Udodov: Biography Of An Investor Who Is Developing The National Economy," Moskovsky komsomolets titled its February profile of the entrepreneur and his various ventures.
None of these articles listed an author. Observers said their tone, timing, and apparent lack of investigative rigor could be indicative of a paid promotional campaign.
Udodov did not immediately respond to RFE/RL's questions regarding his work history and source of his wealth.
In addition to the Mushroom Rainbow operation and the cargo business in Germany, Udodov owns a sanitorium in the southern region of Krasnodar, three malls in Moscow, and one mall each in the Moscow region and Kaluga.
According to Udodov's website and the articles, he worked in logistics in the 1990s and then bought a controlling stake in the Germany-based VG Cargo in 2004.
In 2013, VG Cargo posted a profit of $500,000, half of which Udodov would be entitled to as the controlling owner, according to the company's financial declarations, obtained by RFE/RL from a provider of commercial data.
VG Cargo posted losses totaling about $5.4 million over the next four years and cut its staff by half, according to the financial declarations. Records from 2018 and 2019 were not available.
Udodov's wealth blossomed in the 2010s, a decade that saw Russia's fortunes flag badly after world oil prices plunged and Western countries imposed sanctions following Moscow's seizure of Crimea in 2014, opening up a period of stagnation and reducing disposable incomes for most of the populace.
Udodov purchased the luxury shopping mall Gimeney in central Moscow in 2011, according to his website. Russian media reported he acquired it from Peresvet-Invest, a home builder that struggled following the 2008-09 global financial crisis.
Russian real-estate experts estimated the value of Gimeney at between $80 million and $110 million at the time Udodov purchased it, according to local media. Udodov said he invested another $20 million to renovate the building in the ensuing years. Investors often borrow large amounts of money to buy income-producing properties such as malls, using the building as collateral.
The purchase came before the United States and other Western countries began imposing sanctions on Russia in 2014, after it took over Crimea and backed separatists after helping ignite a war that has killed more than 13,000 people in eastern Ukraine.
Sanctions, low energy prices, and other factors sent Russia into recession and vacancies at shopping centers spiked while crowds of customers thinned along with wallets, hurting their profitability.
As the crisis deepened, Udodov doubled down.
He bought Yakimanka 26, a luxury shopping center next to Gimeney, for about $23 million in January 2015. It is undergoing renovations, at a cost one expert estimated at about $8 million, and has not fully reopened.
Udodov also opened a mall in a Moscow suburb in 2015, and one in the Kaluga region southwest of the capital in 2013.
As Russia sought to replace Western foods that it banned in retaliation for the sanctions -- a much-advertised effort the government called "import substitution" -- Udodov began investing in his mushroom business. It launched production in 2017.
He and his partner have invested at least 5.1 billion rubles ($80 million) in the project, according to the Komsomolskaya pravda article. Russian agricultural companies are eligible for subsidized loans and tax breaks.
The businessman received a sizeable inflow of cash in 2017, when he sold two plots of land in Moscow designated for high-rise housing to developers for about 4 billion rubles ($66 million). Property records show the plots were registered a year earlier to Udodov and another man, Mikhail Davidyanets.
Russian media outlet RBK reported at the time that players in the Moscow real-estate market had never heard of Davidyanets and that his name never came up during sale negotiations.
A Moscow real-estate executive told RBK that Udodov was a "paper developer," a person who acquires land, gets it registered for development, and then sells it at a profit -- a process sometimes known as flipping.
Mishustin headed the Federal Real Estate Cadastre, which handles land registration, from March 2004 to December 2006. He then headed a newly formed agency responsible for special economic zones -- areas where development and commerce is encouraged by tax breaks and other incentives -- until February 2008.
Udodov was one of a handful of people who accompanied Mishsustin and Deputy Prime Minister Sergei Naryshkin on an official trip to Dubai in January 2008 to make a presentation about Russia's special economic zones to the cash-rich emirate, which invests its wealth globally.
According to Middle East Company News Wire, the other attendees included Boris Fyodorov, Mishustin's former boss at the tax agency in the 1990s and a co-founder of Moscow-based investment firm UFG Asset Management; American Charles Ryan, the other UFG co-founder; and Vitaly Kachur, who had worked at Udodov's VG Cargo.
Kachur was later convicted on charges of participating in the hostile ownership takeover of a Moscow building. He served over four years in prison before being granted parole in 2017.
The Middle East Company News Wire described Udodov as a representative of the Magon Trading Corporation. Efforts to confirm the existence of a company by that name were unsuccessful, making it one of several mysteries surrounding his employment status during this 10-year period.
In articles separate from the wave of positive coverage of Udodov, several Russian newspapers have reported that during the 2000s Udodov was vice president of Peresvet-Invest, whose bankruptcy left hundreds of people waiting for the completion of apartments they had already paid for.
One of the co-founders of Peresvet-Invest, Oleg Pronin, is currently on trial for money laundering.
Open Media reported that Udodov and Fyodorov, through one of the private-equity funds under his UFG Asset Management, co-invested in Moscow bank Unifin.
Some media outlets have reported that Mishustin invited Udodov to join him at UFG during his tenure there. UFG said earlier this month that Udodov never worked for the company.
However, the Swiss magazine Beobachter, which published a detailed story in March 2012 about Udodov and the money-laundering allegations against him, claimed his name had been on UFG's website a few weeks before their story ran, but was removed.
Copyright (c) 2020. RFE/RL, Inc. Reprinted with the permission of Radio Free Europe/Radio Liberty, 1201 Connecticut Ave., N.W. Washington DC 20036.
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