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Funny Money Or Savvy Investing? Critics Want Answers About Source Of Russian PM's Wealth

Unlike the typical storyline of Russian government officials and their enormous wealth, Mikhail Mishustin does have a past in a lucrative private sector. But was it enough?
Unlike the typical storyline of Russian government officials and their enormous wealth, Mikhail Mishustin does have a past in a lucrative private sector. But was it enough?

It is a notorious Russian comedy that has been playing now for decades.

A career government official and his wife and other relatives are found to possess assets worth far more than what his state salary could justify.

If he responds at all, the official answers the uncomfortable questions with claims of his relatives' business or investment acumen despite their notable lack of prior experience.

The curtains on that play seemed to be rising once again last week when activists zeroed in on the wealth surrounding new Russian Prime Minister Mikhail Mishustin, who was appointed on January 15 by President Vladimir Putin in a major government shakeup.

Mishustin and his wife, Vladlena Mishustina, claimed total income over the past decade of slightly more than 1 billion rubles ($16 million), including 213 million and 789 million rubles, respectively, according to public disclosure filings that are mandatory for high-ranking officials.

The income comes from various sources -- Mishustin's salary as head of the tax service, profits from investments, and the sale of a business and other assets, according to the daily Kommersant.

Mishustin's declared income over the period in question consists nearly entirely of his government salary, Kommersant reported.

The couple's real-estate assets have raised further questions. The couple owns a house in a luxurious Moscow suburb valued at nearly $10 million, according to the online investigative site Proekt, as well as an apartment near the center of Moscow.

The opposition media organization Open Media, which is funded by former oligarch Mikhail Khodorkovsky, reported that at least two of Mishustin's sons studied at Institut Le Rosey, an elite boarding school in Switzerland, a luxury that costs about $100,000 a year.

Then there is his sister, Natalia Stenina-Mishustina.

She owns three residential properties -- including a 750-square-meter suburban villa next to her brother -- and a stake in Moscow commercial property, according to the BBC, citing in part nonpublic data it received from a whistle-blower in the Federal Tax Service. Her real-estate assets total more than $16 million, the BBC said.

Wealthy Russian politicians often disguise their wealth by registering assets in the names of their close relatives, including parents, children, and siblings.

Stenina-Mishustina worked for Aeroflot early in her career, according to various Russian media outlets, but it is unknown if she has been employed anywhere thereafter. She co-invested in a loss-making Moscow restaurant with Aleksandr Udodov, who is considered by Russian media to be a member of Mishustin's inner circle.

According to the state property register, Udodov -- whose biography on his own website lists no employment until 2010, when he was 41 years old -- gave Stenina-Mishustina the 750-square-meter home as a gift in 2009, the BBC reported.

Kommersant reported in 2011 that investigators sought to search Udodov's apartment in Moscow in connection with an illegal attempt by a shell company to receive a sales-tax refund totaling 1.87 billion rubles, which at the time was equivalent to $60 million.

Kommersant described Udodov at the time as "officially unemployed, but able to resolve many things in the tax sphere." Itera Group, a real-estate firm, issued a press release a few days later stating that Udodov worked there as a vice president and was not a suspect in any cases.

Mishustin has not commented on any of these reports.

Private-Sector Claims

However, unlike the typical storyline of Russian government officials and their enormous wealth, Mishustin's script has a bit of a twist that blurs the play's conclusion.

Mishustin worked in the private sector in the 1990s and from 2008 until 2010 in hot sectors where people were making money hand over fist -- in some cases, nearly overnight. Exactly how much Mishustin made during his years in business is unclear, though a 2010 statement by the tax service shows he earned a few million in at least one year.

Kommersant, which is owned by an oligarch close to the Kremlin, recently published a scenario that justifies how the Mishustins –-- excluding his sister -- could legally possess so much wealth. The article was later cited by state media to dispel any rumors, while critics trashed it as a disguised press release by the family.

Kommersant claims -- without citing anyone -- that Mishustin transferred assets acquired during his business career, including a stake in an unnamed company, to Vladlena Mishustina upon returning to government service in 2010.

Mishustina sold the stake over two years and reinvested the money in "conservative" income-generating bank deposits, the paper reported, citing unspecified "media reports."

Mishustin's Mysterious Millions: Questions Over Russian PM's Wealth
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One-year Russian-ruble deposits paid on average around 6.5 percent over 2017-18, while dollar deposits at Russian banks paid around 2 percent, according to Russian central bank data.

An equal mix of dollar and ruble deposits would imply that the Mishustins have as much as $20 million in the bank, based on Mishustina's investment income over the past two years.

Kommersant claims Mishustin bought the elite home in the Moscow suburbs in 2000 with the salary from his first private-sector job.

The home purchase would have cost a small fraction of its current value. Russia defaulted on its debt in August 1998, sending the economy and real-estate prices crashing.

The apartment near the city center was given to the Mishustins in the early 2000s by the government as compensation for his low government salary, Kommersant reported, saying it was a common practice at the time.

"It is just a press release by Vladlena Mishustina signed by [the Kommersant author], with zero sources and evidence," said Leonid Volkov, an aide to popular opposition figure Aleksei Navalny.

'Dot.Ru' Boom

The collapse of the Soviet Union in 1991 and the launch of market reforms opened the door to massive wealth for the select few who had the connections, the brains, or the moxie to meet the massive Russian demand for consumer and commercial goods.

Entrepreneur Oleg Tinkov was typical of that group, importing foreign electronics such as calculators and televisions for resale to domestic customers at prices far exceeding their cost. Tinkov eventually opened an electronics chain store and sold the business a few years later, making millions. In 2019, Forbes ranked him the 47th richest businessperson in Russia with a fortune estimated at $2.2 billion.

Mikhail Khodorkovsky, once Russia's richest man before his 2003 arrest on tax-fraud charges that he called politically motivated, got his start in business in the 1980s during perestroika by importing computers. He parlayed the money from that business into a bank that would scoop up shares of Russian companies during the era of privatization in the 1990s.

The market for personal computers and software -- which had already taken off in the West and parts of Asia -- was nearly nonexistent in Russia when the Soviet Union collapsed. Profits from reselling imported "second-grade" computers in Russia were as high as 300 percent during perestroika, Kommersant reported in 1994.

Levon Amdilyan -- an economist who studied at Moscow State University alongside Yegor Gaidar, the future acting prime minister under Boris Yeltsin -- spearheaded the creation of a noncommercial organization in December 1988 called the International Computer Club (MKK).

Its goal was to establish contacts between Soviet and foreign technology specialists and to attract foreign technology, including computer hardware and software, into the country.

The club held an annual computer trade show in Moscow from 1990 through the mid-1990s, attracting the likes of Apple, IBM and other top U.S. technology companies, according to contemporary articles.

The forum, however, was intended for a "narrow circle" of people that included top brass at technology companies on the one hand and large customers on the other, namely government agencies and banks.

Senior Russian government officials "authorized to make buying decisions" were among the visitors, and they purchased "a lot, willingly, from everybody," Kommersant reported in 1994.

Amdilyan sometimes traveled with government officials to foreign technology trade shows, underscoring his influence with agencies at the time, according to Kommersant.

Mishustin, a friend of Amdilyan, was involved in the club from an early stage. During a rainy November day, as Amdilyan drove his daughter to school in 1989, he discussed the idea of holding a computer trade show in Russia with Mishustin.

"Over the course of two hours, we discussed and developed plans for the forum and picked a date: June 17, 1990. Now I can hardly believe that it was possible," the club's website quotes Mishustin as saying.

Thus, Mishustin would have been at the center of the burgeoning Russian computer hardware and software market, interacting with the biggest names in the industry at home and abroad.


However, the market was rife with illegal practices, with the Business Software Alliance estimating in 1995 that 94 percent of all business software in Russia was pirated.

After the Soviet Union collapsed, Amdilyan transformed MKK into a private joint-stock company owned 50-50 by him and Mishustin, according to registration documents. Mishustin's stake was eventually transferred to his wife.

Wholesale trade and consulting were among its listed activities, though it is unclear what the company exactly did aside from hosting the trade show and, then later, an elite conference in Sochi.

Mishustin would eventually become board chairman of MKK before leaving the private sector in 1998 to join the tax service, where he initially served as assistant to its chief, Boris Fyodorov, overseeing information technology.

Neither Amdilyan nor Mishustin have said how much MKK earned during the 1990s.

Amdilyan would go on to invest in technology companies such as Takskom, which would become one of five data operators to receive a license from Mishustin's tax agency for a new service, the Russian online publication Republic reported. The annual market for that service was estimated at $100 million, Republic said.

Back In Business

Mishustin would work the next decade in government, first moving up the chain at the tax service to deputy minister and then moving over to lead the federal agencies for the real-estate register and special economic zones.

When Mishustin left government service in early 2008 to join UFG Asset Management, an investment firm co-founded by his former tax boss Fyodorov, Russia was nearly as hot a market as China.

Russia's economy had been surging for about eight years amid high oil prices, and its stock market was the world's best performer over that period.

Amid the gold rush, Moscow-based investment firms were paying top dollar for executives, with multimillion-dollar annual salaries for top brass that could deliver deals not unheard of.

The industry riches were attracting some government officials like Mishustin into the private sector, where they could potentially leverage their connections to boost business. For instance, Troika Dialog, a Moscow-based investment bank, in 2007 hired former Deputy Economy Minister Andrei Sharonov as a managing director.

Mishustin received 79 million rubles, or about $2.5 million, in 2009. The tax service he ran told the daily Vedomosti in April 2010 that the amount comprised his UFG salary and consulting fees for the firm.

Two former executives active in the Russian asset-management business in the 2000s and speaking on conditions of anonymity said $2.5 million seemed "rich" and "generous." Mishustin, they said, would have had to bring "serious" business to justify such a payout.

Whatever the truth about the current source of Mishustin's money, the end result is likely to follow the usual script.

Mishustin will not respond to the reports. He will not be investigated. The majority of Russians, getting their information from state-controlled television, will never know about the matter.

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    Todd Prince

    Todd Prince is a senior correspondent for RFE/RL based in Washington, D.C. He lived in Russia from 1999 to 2016, working as a reporter for Bloomberg News and an investment adviser for Merrill Lynch. He has traveled extensively around Russia, Ukraine, and Central Asia.