State-run Bank VEB.RF to Buy Stake in Construction Firm Owned by Arkady Rotenberg

Russia’s state-owned development bank VEB.RF (formerly Vneshtorgbank) announced it will buy a stake in one of Russia’s biggest construction companies, Mostotrest, known for building the controversial Kerch Strait Bridge, Vedomosti reports.

The company is owned by billionaire oligarch Arkady Rotenberg, a close personal friend of President Vladimir Putin. The deal is bound to raise eyebrows as Rotenberg has grown wealthy on numerous state contracts to construct major infrastructure projects. At the same time, since another Putin confident, Igor Shuvalov, has been named chairman of VEB.RF, the bank has been tasked with overseeing a massive, billions-worth state-sponsored infrastructure investment program.

The size of the stake in Mostotrest that the bank is buying is still under discussion and may be “more than a blocking stake,” Vedomosti reported. VEB is prepared to buy from 30% to 49% in the company, according to people close to the deal cited by the business newspaper.

Currently 94.2% of Mostotrest PJSC is owned by TFK-Finance and is indirectly controlled by Rotenberg. The oligarch was added on a U.S. sanctions list last year.

Experts estimate the cost of the deal for VEB.RF will reach between $466 million and $2 billion. The paper says that the idea for the deal came from Shuvalov, who is interested in creating a financial-industrial powerhouse, a favourite business model of Russian oligarchs in the 90sm called financial-industrial groups in those days.

VEB.RF has already united two of its subsidiaries – the Federal Centre for Project Finance, which specialized in financial preparation of projects, and VEB Engineering, which was engaged in designing — into a combined finance and engineering company called VEB Infrastructure.

Earlier this year Putin launched a massive investment program with his May Decrees and the $390 billion investments planned for the 12 national projects that will create more work than the president can oversee personally.

Mostotrest is a key asset and is best known for the $4 billion construction of the Kerch Straight Bridge, a controversial project to connect Russia’s mainland to the Crimea peninsula, annexed from Ukraine. All the companies mentioned in the possible VEB deal have worked hand in glove with the major state-owned behemoths to build essential infrastructure.