ECONOMY

Gazprom takes majority stake in Russia’s biggest social media site

Russia’s largest social media network VKontakte has come under state control after a series of deals gave a majority stake to companies linked to state-run gas monopoly Gazprom.

Boris Dobrodeev, chief executive of VKontakte’s parent company VK, said on Friday he was stepping down, a day after Russian billionaire Alisher Usmanov’s USM Group said it had sold its interest in VK to Gazprom affiliate Sogaz, an insurance company, while Gazprom Media said it had also acquired a stake.

The two will share control over VK, which was known until recently as Mail.ru, as well as other popular brands in its network, such as social media platform Odnoklassniki. VKontakte, which offers messaging and news, has about 100m active users, making it the largest social media network in Europe, according to Similarweb.

The Kremlin has recently stepped up its decade-long campaign to assert control over the internet, which has previously seen it increase its engagement with domestic internet companies.

In September, Apple and Google’s app stores dropped a tactical voting app made by supporters of the jailed opposition leader Alexei Navalny ahead of parliamentary elections, after coming under pressure from the Russian government.

Sogaz is considered Gazprom’s insurance arm and counts Yuri Kovalchuk, a close ally of President Vladimir Putin, among its shareholders.

Russian media outlets RBC and The Bell cited sources who said Dobrodeev’s successor at the top of VK would be Vladimir Kiriyenko, who is head of Russian state telecoms group Rostelecom and the son of Putin’s deputy chief of staff.

Analysts at VTB Capital said in a note that Gazprom-linked structures had now become controlling stakeholders in VK but added that “it is not clear at this stage how the change of control will affect VK”.

“The change of the actual controlling shareholder of VK does not imply any changes in the fundamental valuation of the company as such, but we still anticipate further corporate changes, which may become an impetus for the growth of share prices,” VTB Capital analysts wrote.

Alexei Miller, chief executive of Gazprom, who is also chair of Sogaz, described VK as a “promising investment”, the Interfax news agency reported.

“The deal is done on market conditions,” he added. “I would note that as a result of the transaction . . . one controlling legal entity has not been created.”

Former Arsenal shareholder Usmanov’s decision to sell VK also follows disagreements with state lender Sberbank over a $1.6bn joint venture that involved some of the companies under VK’s umbrella, the FT reported in March.

USM said it would now focus on other companies in its group, including in the metals and mining and telecoms sectors.

Moscow has deployed a range of different tools in recent years to exert control over the Russian internet, from using law enforcement to tackle dissent online to attempting to slow down some websites or ban certain VPNs and apps outright.

In recent months, it has focused on targeting foreign internet giants with fines and lawsuits in an attempt to force them to remove some content and comply with local data laws. It has framed this push to bring western internet firms to heel as protecting what it describes as its “digital sovereignty.”

But it has also sought to play a role in leading domestic internet companies. Yandex, Russia’s largest tech company, in 2019 set up a special foundation after lengthy negotiations with the Kremlin over its company structure. The foundation can remove Yandex management should it deem this in the national interest, among other powers.

VKontakte founder Pavel Durov left Russia in 2014 after claiming he was pressured into selling his shares in the social media company by Kremlin-friendly oligarchs. Durov then shifted his focus to developing the Telegram messaging app, which Russia’s communications watchdog tried and failed to ban in 2018.

Sogaz said on Thursday it had acquired a 45 per cent stake in MF Technologies, the vehicle through which Usmanov’s USM held 57.3 per cent of voting shares in VK. Gazprom Media said on Friday it had received a stake transferred from Gazprombank, which had earlier bought 36 per cent in MF Technologies.

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