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‘A mix of schadenfreude and fear’ The arrest of one of Russia’s richest men following a deadly mine explosion has pleased locals but raised worries about regional stability

Source: Meduza

In mid-December, Siberian Business Union (SDS) head Mikhail Fedyayev, one of the richest people in Russia, was arrested. After the Listvyazhnaya mine disaster in November resulted in 51 deaths, Fedyaev was charged with abusing his authority and violating safety standards. Before his arrest, however, Fedyaev enjoyed near-limitless power in the Kemerovo region: the government is full of his former employees, his holding company received state contracts worth millions of dollars, and presidents and federal ministers routinely paid visits to the SDS headquarters. Now, the prospect of Fedyayev’s property going to a new owner has Kemerovo residents worried, although many are pleased that the region’s “shadow governor” has finally been arrested. Meduza special correspondent Andrey Pertsev tells the story of one of Russia’s last regional businessmen whose influence went all the way to the top.

This was part of a speech Putin made to miners and other employees at the SDS-Mash plant. At that point, Putin had already announced his plans to participate in the 2012 presidential campaign; the event was organized by the All-Russian People's Front and attended by more than five thousand people, and the upcoming election was at the forefront of everyone's minds.

“I fully and completely support Vladimir Putin’s candidacy. This wise man wasn’t afraid of responsibility, nor of the difficulties he faced,” said factory worker Dmitry Plotnikov at the gathering.

The choice of venue was no accident: the Kremlin saw its owner, SDS owner Mikhail Fedyaev, as someone loyal and reliable.

The same day, Putin and Fedyaev paid a visit to the newly opened regional Judo Center (which Fedyaev funded).

“The Prime Minister’s visit was organized by Fedyaev. You could even say Putin came to visit him personally,” a source who worked in the presidential administration at the time told Meduza.

Now, ten years later, Mikhail Fedyaev has been arrested after an explosion at the Listvyazhnaya mine. He’s charged with abuse of authority and violating safety standards.

An establishment guy

Putin’s visit was no accident. Kemerovo political scientist Alexander Konovalov described the relationship between Alexander Konovalov and the regional and federal authorities this way: “He made the decision to stick with the authorities a long time ago — being part of the system is the SDS’s credo.”

Konovalov recalled how in the early 2000s, most SDS employees were United Russia supporters. Fedyaev, of course, was no exception (although the party ended his membership after the Listvyazhnaya explosion). In 2011, when the Kremlin created the All-Russian People’s Front, many SDS employees joined it.

Mikhail Fedyaev’s father, Yuri Fedyaev, also used to move in lockstep with the authorities, albeit the Soviet ones. He ran large agricultural firms, was a member of the Communist Party’s Regional Committee, and was a deputy on the regional council. But Mikhail didn’t quite follow in his father’s footsteps — he enrolled in the Kemerovo Institute, where he studied mechanical engineering. In the Soviet years, he worked in an automobile company, where he quickly moved up the ranks to become deputy director. Then, during Perestroika, he pivoted to the business sector.

After running several small and medium-sized businesses in Kemerovo, he joined Mirinvest, a large federal investment company. There, he met his future business partner Vladimir Gridin — a close friend of Governor Aman Tuleyev. In the Soviet years, Tuleyev ran the Novokuznetsk railroad, and Gridin was his subordinate. Fedyaev and Gridin hit it off and decided to start a business together, which soon became the SDS.

“The holding company always played by the rules, and the rules entailed allocating funds for social development agreements. Fedyaev never advocated against it,” emphasized Alexander Konovalov, adding that Tuleyev sometimes sided with business leaders on some surprising decisions: “In 2006, Prokopyevskugol owner Vladimir Lisin sold his company to the city for one dollar, since there was a ban on closing unprofitable mines or firing mine workers. Ultimately, it was the Siberian Business Union who ended up in charge.”

Indeed, in 2006, Vladimir Lisin’s NLMK group did sell its asset in the region, a company called Prokopyevskugol, to the Prokopyevsk city administration for one dollar. According to a former regional official, there was no real conflict between Lisin and Tuleyev, but “Tuleyev needed owners who were more or less interested in working in Kuzbass [Kemerovo].” Prokopyevskugol soon became part of SDS. Another source close to the Tuleyev administration characterized the former governor’s work methods this way: “If he didn’t like something, he’d force it out of the region.”

Throughout the early and mid-2000s, Mikhail Fedyaev and Vladimir Gridin’s holding company grew quickly, absorbing industrial plants, agricultural and construction firms, the Kemerovo airport, a distillery, and media outlets.

Sources told Meduza that Aman Tuleyev considered Grudin and Fedyaev to be “close and understandable” — they were “his kind of people,” and they reliably fulfilled his “requests and wishes.” For example, SBS donated kindergartens they had built to local municipalities and assisted with the construction of several churches.

“It was always stressed that this was being done at the governor’s initiative. In exchange, the authorities could turn a blind eye to environmental or labor protection issues. The company’s connections to Kemerovo’s government ran deep,” said a source close to the Tuleyev administration.

The government’s recruiting agency

One of the main ways SBS maintained its influence over the Kemerovo authorities was through its numerous “alumni” who found employment in the government. This process was so well-known that some even dubbed the company the regional administration’s “recruiting agency.”

The opposite was true, too: SDS frequently hired former government officials, as long as their career had been free of scandals. The list of government workers-turned-SDS employees included both Tuleyev’s former chief of staff Yevgeny Baranov and former Lieutenant Governor Nina Glotko, who managed SDS’s construction division.

But SDS didn’t stop there. For example, company representatives received mandates in the regional council of deputies — it was one of these deputies, former SDS general director Yury Deryabin, who took over the company after Fedyaev’s arrest.

SDS also maintained a good relationship with another important institution: the Kemerovo Archdiocese. The holding company donated money to construct a church building, including a whole complex surrounding a cathedral. “Mikhail Fedyaev is a churchgoing person. He attends services, he doesn’t just donate money. It’s obvious that at some point, his Orthodox values replaced his Soviet values,” said Alexander Konovalov.

A source who worked for SDS emphasized the company’s proximity to the regional government: “They’re basically the same thing.” As far as the company culture, he said, “everyone is scrambling over each other, trying to move up a little bit or get a little closer to the managers. […] In the regional government, it’s the same thing. If you leave either the SDS or the government on bad terms, you’re put on a blacklist. You won’t be working in either place anymore,” he said.

The Kemerovo politician Maxim Uchvatov, meanwhile, recalled how in 2019, the authorities detained then-acting mayor of Berezovsky Dmitry Titov in front of the SDS building and found 280,000 rubles ($3,740) on his person. According to the investigation the followed, Titov had taken a bribe from the company’s main accountant. Titov himself admitted to taking the money (he was later fined $3 million).

“After that, all of Kuzbass’s central square lived in fear for three months,” said Uchvatov. According to him, the investigation found that the mayor was receiving a second salary from SDS. “Maybe other mayors received it, too?” said Uchvatov, who told Meduza that Mikhail Fedyaev subsequently left the country just to be safe. In the end, though, the investigation didn’t find any other such cases.

When asked about Fedyaev’s level of influence, a source close to the Kemerovo regional government told Meduza that “he would park his car in Kemerovo and not lock it.”

“The fire changed everything”

Putin wasn’t the only top Russian leader to visit SDS properties. In 2012, Dmitry Medvedev, dressed in a mining uniform and helmet, descended into the Listvyazhnaya mine, where just nine years later, an explosion would lead to 51 deaths.

“Tuleyev usually brought [high-ranking federal officials] to SDS. He knew everything would be in order there; the company would give his guests a proper welcome. The visits were valuable for Fedyaev, too, as it allowed him to interact with important people,” said a source who worked in the Kemerovo regional government.

According to the source, these interactions meant that Mikhail Fedyaev could always reach Vladimir Putin and ask him for help with government-related problems — for example, when he needed help transporting coal. A source close to the government confirmed this to Meduza.

By the time Tuleyev became governor, though, SDS had started to shrink, its owners shedding assets left and right. The Kemerovo airport and SDS Azor, once one of the holding company’s firms, were bought by businessman Roman Totsenko. Some open-cut coal mines were sold as well.

“If an opportunity appeared, they jumped on it, but managing a colossus like that was a challenge. The company was divided into various offices — SDS-Coal, SDS-Construction — but the [management] problems remained,” said a source close to Fedyaev.

By that point, the holding company had racked up some serious debt. According to Forbes, in the fall of 2017, SDS had various debts ranging in size from $1 billion to $50 billion, all of which had been accrued when the company had purchased new assets back when coal prices were high; they had since fallen.

Naturally, Fedyaev’s influence in the government began to shrink, too. Tuleyev found new favorites, several of whom were not fans of SDS and considered its leaders their opponents in the struggle for power.

In 2018, the governor hired a new first deputy: Sergey Tsivilyov, the former head of the Yakutia-based coal company Kolmar. Rumors began to spread that Tsivilyov would soon replace Tuleyev, who at that point had been governor for 21 years. According to a source close to the presidential administration, the Kremlin was focused on preventing Tuleyev from appointing a “successor” — in other words, making sure the region was under Moscow’s control, not Tuleyev’s.

Tuleyev, however, was set on maintaining control. “He was considering transferring his power to one of his close associates. Fedyaev’s name was in the mix, but Fedyaev himself didn’t actually want to be governor — he preferred running his business and exercising his influence that way. If it hadn’t been for the 2018 fire in Kemerovo’s Winter Cherry shopping mall, Tuleyev probably could have chosen his own successor, but the fire changed everything,” a source close to the Kemerovo authorities told Meduza.

After the fire, thousands of people gathered for a spontaneous protest rally in Kemerovo’s central square. Among other things, protesters demanded the resignation of the governor and other city officials. Soon after, Aman Tuleyev told Vladimir Putin that the protesters were “troublemakers” and assured him that none of them were related to any of the fire victims. Tsivilyov, meanwhile, faced the crowd, kneeling before them and asking forgiveness.

“Tsivilyov’s behavior might not have been the best, but he behaved better than Tuleyev. It became obvious that Tuleyev had lost his ability to understand other people; in the past, he marketed himself as someone able to tame a region that was full of protesters in the 1990s because he knew what residents needed. By 2018, he’d been in his bubble of powerful people for so long that he’d forgotten how to enter a dialogue with the people,” said a source close to the presidential administration.

On April 1, 2018, Aman Tuleyev resigned. “I consider this to be the right decision, a conscious decision, the only correct decision, because with such a heavy load on the governor’s office right now — well, it’s impossible, morally impossible,” he said at the time. Still, Meduza has learned, the Kremlin was counting on him working until May and taking responsibility for the fire in the Winter Cherry mall.

After Sergey Tsivilyov became acting governor, local influential businessman started to wonder whether at least a small part of the unwritten rules of existence established under Tuleyev would stick around. According to one regional government source, SDS leadership had its reservations about the new administration, but they ultimately proved unfounded. Sergey Tsivilyov and Mikhail Fedyaev found a common language, though not immediately. “At first, there was some real hostility, but the appointment worked in the end — there was no alternative,” said a source close to the presidential administration.

The practice of hiring people from SDS to the regional government resumed, as well. Former SDS employee Roman Bykov became head of the administration’s press service. Nina Glotko, former director of SDS’s construction division, and Valery Kazakov, deputy director of the company’s coal department, were hired as Tsivilyov’s external advisors.

“When Tuleyev left the post, practically the whole team stayed behind: both Tuleyev’s people and people close to the holding company [SDS]. They took Tsivilov prisoner, so to speak; he was surrounded by care and affection, attention, celebrations every day. Everyone stayed in their places and all of the systems that were in place under Aman are in place under Tsivilyov,” said Maxim Uchvatov.

He noted that it was under Tsivilyov that SDS started vying more actively for state contracts and winning them more frequently. “That wasn’t going on under Tuleyev, unless maybe SDS could get a great deal on land for housing construction. The price of coal was stagnating, there was patching up to do, which affected the budget.”

For example, SDS received a contract to construct a bypass road around Kemerovo for 54.76 billion rubles ($73.2 million), in addition to building a new city square for 1.2 billion rubles ($16 million).

Vladimir Putin continued paying visits to the SDS headquarters after Tsivilyov took over — in 2018, he visited the Chernigovets coal mine, which Mikhail Fedyaev and Vladimir Gridin had set out to control back in 1999.

“There was no other financial and industrial group in the region that would be so loyal to the regional authorities. Under Tuleyev, the close relationship with the SDS allowed the authorities to solve big problems related to social development in coal mining towns. Tsivilov gave the company a new opportunity to be useful in the region: they were able to implement major PR campaigns, including a grandiose celebration of the 300-year anniversary of the discovery of coal deposits in the Kuznetsk Basin,” political scientist Alexander Konovalov told Meduza.

One Kemerovo journalist told Meduza on condition of anonymity that after the explosion in the ​​Listvyazhnaya mine, the local media were given “strong recommendations” from the government not to criticize SDS in their materials about the tragedy: “The relevant authorities are dealing with it, it’s too early to judge, and so on.”

Governor Sergey Tsivilyov, however, assured Meduza that “the [Kemerovo] government’s relationship with SDS holding company is structured like any other large business working in our region.”

Tsivilyov added that he doesn’t consider SDS “systematically important” to Kemerovo Region. In his view, “considering any one player important on a systemic level contradicts the principle of economic diversification.” He also doesn’t see SDS as playing an especially important social role in the region. “The overwhelming majority of businesses working in our region have social programs, and SDS is no exception.”

When asked why he visits SDS’s properties and businesses so often, Tsivilyov said, “I regularly visit various construction sites in the region, I keep an eye on the quality of the work that’s being done, and I talk to residents, employees, and construction workers. It’s important to get feedback from people and have first-hand knowledge of how projects are going in cities and rural areas. In the same way, I take work trips to various businesses in Kemerovo when necessary. It’s an important part of the region’s economy. And in the context of my travel schedule, it doesn’t matter who’s the contractor or the owner of a given property.”

Justice vs. stability

In recent months, coal prices have broken all of their previous records. As a result, Meduza has learned, major federal players have taken an interest in SDS’s coal assets. At the same time, SDS itself sees a chance to make a lot of money. According to the SPARK-Interfax database, in 2020, SDS’s coal revenue reached 5.8 billion rubles ($77.5 million) — a profit of 14.5 million rubles ($194 thousand). Consolidated data about indicators for the whole holding is unavailable, but sources who spoke to Kommersant estimated its value at two billion dollars, excluding debt.

After the mine explosion, Vladimir Putin spoke with Fedyaev by video call, showing no sign of the rapport they once had. “Does the board of directors actually keep track of what’s going on with safety in there, or do they just count money?” Fedyaev said in response that he was “ready to bear any responsibility.”

But Putin continued. “[The Investigative Committee’s preliminary report] found that systematic measures were taken to conceal the excessive gas contamination in the mine, and that data was falsified — someone must have done this. Why? To mine more coal and export it?” the president asked.

On December 15, Mikhail Fedyaev was arrested. Kemerovo residents are already anticipating the transfer of SDS to new owners — though it’s not clear who they will be. “[But ordinary people] are applauding: they got an oligarch. That’s a general trend in Russia: people want justice,” said Maxim Uchvatov.

A source close to the Kemerovo authorities told Meduza that he was nervous about the prospect of the transfer. According to him, the chances of Fedyaev being replaced “grew rapidly” after his arrest. His greatest concern is that the holding’s various enterprises will be divided up: “Someone will just want the coal, someone else will want the train cars, and someone else will want the construction.”

Political scientist Alexander Konovalov told Meduza that “the restructuring of SDS could spark political instability throughout [Kemerovo].” “People are worried: right now, they have work and at least some modest government benefits. There’s a lot of schadenfreude, but a lot of doubt, too. It’s clear that the holding company can’t operate for multiple months with nobody at the helm,” he said.

According to political scientist Alexander Kynev, a loss of political stability in the region is a real risk. “Local authoritarian regimes can hold on until their underlying support structures are touched. When that happens, all coordination breaks down. Tuleyev left, but his system stayed put. The thing to understand is that authoritarianism is built on informal practices — it’s a quid pro quo philosophy.”