Michael Calvey has been a fixture of the economic conference Vladimir Putin hosts each spring in St Petersburg for a decade, with the US financier insisting the rewards of investing in Russia outweighed the risks.
But this year, the founder of private equity firm Baring Vostok and one of Russia’s largest foreign investors was conspicuous by his absence – in Moscow under house arrest.
Yet despite missing Mr Putin’s roundtable for foreign investors on Thursday, Mr Calvey dominated the forum’s opening day and hamstrung the Kremlin’s attempts to talk up Russia’s investment case.
Alexei Kudrin, head of the Audit Chamber, a government monitor, said Mr Calvey’s case was a “shock” to Russia’s economy, which saw capital flight double to $40bn so far this year.
“Seventy per cent of businessmen think it’s not safe to do business, it’s a difficult, dangerous, and risky enterprise. And the Michael Calvey situation shows that once again,” Mr Kudrin said at the forum on Thursday, citing a survey by the Kremlin’s business ombudsman.
The founders of the technology company Yandex and online bank Tinkoff, two of Baring Vostok’s most successful investments, wore Baring Vostok pins.
Russia’s case against Mr Calvey and three other partners at Baring Vostok, who remain in jail, has cast a pall over the country’s business community since their arrest in February on fraud charges. Mr Calvey denied the charges, which Baring Vostok said were part of a battle for control of the bank with minority shareholder Artem Avetisyan.
Investor appetite towards Russia has already foundered because of souring relations between Moscow and the west, and the effect of sanctions imposed by the US, EU and others against Russia for its 2014 annexation of Crimea.
“People who are already out have another reason to stay out because of this,” a senior western investment banker said. “People who are thinking about getting in are thinking twice.”
The Baring Vostok case threatens to overshadow Mr Putin’s investment pitch at a session alongside Chinese leader Xi Jinping on Friday.
Although more than 1,000 Chinese guests are expected at the three-day gathering, high-profile western visitors – which in recent years have included French president Emmanuel Macron and IMF managing director Christine Lagarde – are largely absent. Mr Putin and Mr Xi will appear alongside António Guterres, UN secretary-general, and the leaders of Armenia, Bulgaria and Slovakia.
Jon Huntsman, the US ambassador who encouraged American companies to attend the forum last year, is boycotting the event in protest at the Calvey case.
Alexis Rodzianko, president of the American Chamber of Commerce in Russia, said the Calvey case highlighted “the risk of doing business in Russia”. He added: “I hope it doesn’t create a signal that it’s open season on foreign investors. That’s the concern.”
Dmitry Peskov, Mr Putin’s press secretary, appeared to signal a shift in tone this week when he said the Kremlin hoped “that all these gentlemen will be released” and “would obviously like to see Michael among the forum participants”.
Mr Putin had privately backed the case against Mr Calvey and refused to intervene despite entreaties from several Kremlin-connected investors. Patrick Pouyanné, chief executive of French oil company Total, and France’s ambassador, have also publicly complained about Baring Vostok partner Philippe Delpal, who remains behind bars.
While in pre-trial detention, Mr Calvey repeatedly told visitors he remained committed to investing in Russia and encouraged others to do so in an attempt to win the Kremlin over to Baring Vostok’s side. But foreign and Russian businessmen alike say the case has made that proposition seem absurd.
It was rumoured on Thursday that Mr Calvey would be allowed to attend the forum on Saturday. If he was, he would have to wear an ankle tag and be accompanied by two prison guards, according to the Russian prison service.
Anton Siluanov, Russia’s finance minister, admitted Mr Calvey’s case was symptomatic of a broader problem. About 6,000 other businessmen are currently in pre-trial detention in Russia over accusations that reform advocates say are often used to push the detained party into making concessions. “We can’t just look at this incident in isolation, we need to solve the whole problem,” Mr Siluanov said.
A Kremlin-connected businessman said: “The secret services aren’t very good on the economy. They suspect everyone of being a criminal.”
With all but one of Baring Vostok’s representatives in jail or under house arrest, the bank has restructured parts of its loan portfolio at several board meetings since the arrests.
Defying a ruling from a London arbitration court, Mr Avetisyan last month won a court case in Blagoveshchensk – the city 5,000 miles east of Moscow where the bank is based – that awarded him a controlling stake in the bank. Baring Vostok has accused Mr Avetisyan of using the Blagoveshchensk court to “seize the bank”. Mr Avetisyan denied the accusation.
Andrei Belousov, the Kremlin’s economic adviser and a friend of Mr Avetisyan, told reporters on Thursday that he hoped “friendship” would resolve the issue. “Huge resources are being diverted to this shareholder conflict. The quicker the situation is resolved . . . the better it will be for the bank’s customers,” he said.
But for many investors, the damage has already been done. “Putin doesn’t trust private business,” said a senior Russian businessman.