Yandex seeks Putin’s approval for restructuring plan

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

Three people familiar with the moves said the internet giant informally enlisted senior economic official Alexei Kudrin to get the Russian president’s approval, in principle, for the restructuring plan.

The changes would result in Yandex’s Dutch holding company exiting the Russian market by selling its entire business apart from the international divisions of four key units.

The plan is meant to spare parts of Russia’s biggest tech success story from the disastrous aftermath of Putin’s war in Ukraine, which has driven several thousand Yandex employees out of 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 following the invasion.

When New York’s Nasdaq suspended trading of its shares in February, Yandex’s market capitalization was down to $6.8 billion, down from more than $30 billion a year ago.

If Putin gives his final nod at Thursday’s meeting, Kudrin is expected to leave his current role as head of the Accounts Chamber, a government accountable body, for a leadership position at Yandex, the people said.

While Kudrin’s future position remains undefined, her role will in fact be to serve as Yandex’s krysha, or “roof,” a term that denotes high-level political protection, two of the people said.

“Kudrin is one of the people who can be super krysha – in a good way,” said one of the people. “The president trusted him personally for many years. . . and his values ​​u200bu200bare similar to Yandex’s values. ”

Yandex hopes the restructuring plan will rescue four of the company’s most promising new international ventures — in self-driving cars, cloud computing, education tech and data tagging — by ending their ties to the toxic russian market, according to several people close to the company.

The fledgling but small businesses previously relied on partnerships with major US technology companies, as well as servers, chips and processors. Western sanctions prevent manufacturers 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. The group’s international initiatives, 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 the days of the mayoral administration of St. Petersburg, where the future Russian president cut his teeth in politics in the early 1990s.

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

Like many of Russia’s top economic officials, Kudrin privately opposes the war, according to two people close to him, but he has not spoken out against 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 hasn’t returned to Russia since the beginning, according to friends. Yandex has not made any public statements about the invasion, leaving it vulnerable to allegations of complicity in furthering the Kremlin’s line.

In June, Volozh stepped down as chief executive and transferred voting rights from his controlling stake to the board after the EU fined him for what he said was Yandex’s role in “promoting media and storytelling state 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 “war is monstrous,” but said Yandex would not “get into an armored car” to protect its employees and its activities.

That stance failed to convince many Yandex staffers, many of whom resigned in protest, or the EU, which sanctioned Khudaverdyan soon after, citing his participation in an oligarch roundtable with Putin on the day of the election. ‘invasion. Khudaverdyan resigned and is appealing the sanctions.

Several thousand other Yandex employees fled the country during the war, either to work on spinoffs of international projects, to escape the Kremlin’s sweeping crackdown on dissent, or to escape forced conscription into the Russian military.

Yandex sold its news aggregator, blogging platform and homepage to state-controlled social media firm VK in August after facing criticism over the role of media assets in the war.

Kudrin sealed the deal with Putin and his top domestic policy aide Sergei Kirienko, the people said. Kirienko is also responsible for Russia’s tentative attempts to annex four Ukrainian provinces and his son is the CEO of VK.

Yandex has already granted the Kremlin veto power on key governance issues in a 2019 deal overseen by Kirienko, though the official has 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.

Under the restructuring deal, Kudrin and Yandex have discussed whether the official will take on a small equity stake and assume an indefinite role at the head of Yandex’s governance.

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

Though the discussions remain in their early stages, several Kremlin-friendly Russian oligarchs have expressed interest in a stake in Yandex, according to people familiar with the matter.

They include metals tycoon Vladimir Potanin, who bought SocGen’s Russian branch and leading digital bank Tinkoff at bargain prices in the spring, the people said. Any potential sale would be complicated by penalties against prospective buyers, they added.

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

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