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Sunday Telegraph (UK)
June 22, 2003
Mega 'magnat' on a mission.
On the eve of president Putin's state visit to Britain, Simon Bell meets Vladimir Evtushenkov, the man behind Russia's biggest hi-tech and most 'Western' company
By Simon Bell

After months of planning, President Putin's state visit to Britain begins on Tuesday, but by Friday night the Kremlin still couldn't say which of Russia's oligarchs had deigned to accompany him. The two who will definitely be here, however, couldn't be better examples of the traditional and the new that live side by side in the country's volatile economy.

In the red corner is Alexei Miller, appointed by Putin as chairman of Gazprom, the introverted and inefficient state-run company that happens to sit on the largest reserves of natural gas in the world. In the blue corner is Vladimir Evtushenkov, who controls Russia's biggest hi-tech company, Sistema, which he created from scratch 10 years ago and which dominates the fields of telecoms, pharmaceuticals, microchips and bio-tech.

Sistema's MTS is the largest mobile phone company in Eastern Europe and is now expanding into India, Pakistan and the US. Another Sistema subsidiary produces one in 10 microchips in the world and Evtushenkov's bio-tech company has recently patented a genetic drug for Hepatitis B that is undergoing clinical tests. Evtushenkov even looks a little like Bill Gates.

He doesn't like the word "oligarch". He prefers the Russian magnat, since it implies a purely business role rather than the notorious political influence wielded by the oligarchs during the Yeltsin years and more recently.

And he is different from the prominent oligarch in so many ways. He did not, for example, participate in the notorious deals of the 1990s which saw Russia's raw material wealth fall into a few hands for a fraction of its worth.

"We didn't have the seed money so we couldn't afford oil assets," he says. "During privatisation we went for the electronics companies that nobody wanted. We never had access to government money."

His headquarters in Moscow are a classical 19th century mansion built for a Russian hero of the war against Napoleon. This is also a world away from the HQs of other oligarchs, which have the style and entry-systems of hi-tech prisons. He has filled the mansion with Russian art and artefacts. And there is not an ashtray in sight.

"In Soviet times," Evtushenkov says, "raw materials were the main export. Hi-tech was not considered to be an export earner and was relegated to military and defence use. Then the market came and those sectors which generate cash were, in the eyes of their owners at any rate, the priority for Russia. So for a decade hi-tech was forgotten. However, in the past few years, the president, government and business have realised that raw materials are not enough."

Evtushenkov is a chemist with an economics degree. In 1987 he went to work for the mayor of Moscow to take charge of hi-tech projects. Over the next five years he had ample opportunity to study a number of them that interested him.

"The raw materials lobby is the strongest in the Kremlin," he says. "But by 2007, if we keep developing raw materials alone, it will not be enough to maintain Russia. We need to develop automobiles, machine tools, washing machines - a lot of products - and if we don't, we'll have to import and the gap for what we can afford will grow and grow. The time to develop is shrinking. We still have the potential in hi-tech business: the scientists, first class education. That's what differentiates us from the other groups who have a lot of cash but don't create."

Anyway, on its 10th anniversary, the privately owned Sistema believes its value is more than $5bn ( pounds 3bn) and growing. Evtushenkov owns more than 75 per cent of that.

"In five years, I would hope to have a market capitalisation of between $25bn to $30bn," he says. "If I have a model it is General Electric [the widely admired US conglomerate]."

Evtushenkov doesn't suffer from the introversion of Gazprom or the more recent raw materials oligarchs. Its MTS subsidiary is 25 per cent owned by the German telephone giant, Deutsche Telecom (probably one of DT's better investments). And from the start, he won backing from ING, the Dutch bank, and Deutsche Bank.

Whereas other magnats, such as Khodorkovksy of Yukos Oil and Deripaska of Russian Aluminium, loudly declare they don't need foreign investment, Evtushenkov disagrees. "We need outside investors. Why not?" He believes that as and when Sistema obtains a stock market listing in New York and London, it will find the discipline of having its accounts crawled over by Western investors less painful than others.

However, Evtushenkov is highly critical of the lack of corporate governance reforms in Russia. The economy's Wild West reputation makes foreign investors wary of Russia, though he insists that investing in Russia is no worse than investing in the US.

He also supports Russia's accession to the World Trade Organisation, which Oleg Deripaska of Russian Aluminium angrily denounced last week to the American ambassador.

"For reform to work," Evtushenkov points out, "it is not enough to write a paper law. And anyway it is impossible to add new laws without enforcing existing ones. These things have to grow in the human consciousness. For decades, Russians wouldn't go to court. Reforms are going on, but it's a slow process. Many businessmen want law to rule."

Some businessmen in Russia fear they would have too much to lose from the implementation of a statutory-based system of corporate governance. "Some of these businessmen will change," he says. "Some will disappear. And some will lose their first rank but continue on a second tier."

This week Evtushenkov will visit Rolls-Royce to discuss a joint venture and then he goes to America to seek the acquisition of a telecoms company. These are bold ambitions for a company whose board includes a man who was selling lemons in a Moscow street market 10 years ago and another who was the captain of a submarine.

"You have to create", Evtushenkov says, before heading to his private jet, a copy of his favourite Russian poems under his arm.

Simon Bell is writing a book on Russia's oligarchs

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