Russia Tycoon Prokhorov Quits Party After Kremlin ‘Takeover’

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September 15, 2011, 7:27 AM EDT By Henry Meyer and Lyubov Pronina

(Updates with analyst comment starting in sixth paragraph.)

Sept. 15 (Bloomberg) -- Mikhail Prokhorov, the Russian billionaire who owns the New Jersey Nets, may form a new political party after what he says was a “hostile takeover” of his Pravoye Delo movement by the Kremlin.

“To all followers who supported me, I call on you to quit this party bought by the Kremlin,” Prokhorov, Russia’s third- richest man, told a meeting of his Pravoye Delo followers in Moscow today.

The pro-business Pravoye Delo, or Right Cause, party discredited itself after “fake” candidates took power, hijacking a congress yesterday, Prokhorov said. He warned Sept. 13 that the party was fighting presidential administration attempts to destroy its independence and install a new leader.

Prime Minister Vladimir Putin centralized power and sidelined opposition after becoming president in 2000, with pro- government parties controlling 87 percent of seats in parliament and the Communist Party holding the rest. Prokhorov, 46, whose fortune Forbes estimates at about $18 billion, has grown increasingly critical of government policy since being elected head of Pravoye Delo in June.

Prokhorov said today he’s not afraid of suffering the same fate as imprisoned former Yukos Oil Co. owner Mikhail Khodorkovsky. Once Russia’s richest man, Khodorkovsky was convicted of fraud and tax evasion in 2005 and oil embezzlement in December 2010, charges he says were linked to his financing of opposition parties.

Business Activities

While the billionaire has steered clear of criticizing Putin or his successor as president, Dmitry Medvedev, his open attack on the political system may affect his business activities, Masha Lipman, an analyst at the Carnegie Moscow Center research group, said today in a phone interview.

“I don’t think he risks ending up in jail but he’s still got business in Russia and he may find some obstacles,” Lipman said. “Something that was smooth before could become difficult,”.

Prokhorov is one of the owners of Polyus Gold International Ltd., Russia’s top producer of the precious metal, and the second-largest investor in United Rusal Co., the world’s biggest aluminum producer. The billionaire said in December that he planned to merge Polyus with a global rival as early as in 2011 to join the world’s top three miners of the commodity.

‘Tight Leash’

After securing Kremlin backing for his political project, Prokhorov ran up against efforts to keep him on a tight leash, according to Lipman.

“He complied, he never criticized Putin or Medvedev, he said he wasn’t an opposition force, but apparently as the game went on, he acted more independently and he defied some of their recommendations and gradually antagonized those who thought they were his minders, that is how the scandal ensued.”

The Kremlin press service declined to comment when contacted today by phone.

Prokhorov, who had said he was seeking to become prime minister and may also run for president next March, committed to spend 2.7 billion rubles ($89 million) of his personal wealth on campaigning for December legislative elections. Right Cause was seeking to win more than the 7 percent of votes needed to gain seats in the lower house of parliament, or State Duma.

‘Soviet Parody’

The billionaire said Aug. 26 that Russia is becoming a “farce and parody of the Soviet Union,” stifled by bureaucracy and authoritarian rule.

Putin, 58, a former officer in the Soviet-era KGB, hasn’t ruled out returning to the presidency next year, which could give him a quarter of a century in power under new six-year mandates. Putin handed the president’s job to his protégé, Medvedev, 46, in 2008, after serving the maximum two consecutive terms allowed by the constitution.

“I call on people who are not indifferent to this country, who want to live here, who want it to develop,” Prokhorov said. “I propose to create a new political movement and win in honest and fair elections.” He said he would seek a meeting with Medvedev to discuss this.

The authorities won’t allow Prokhorov to register a new party, said Dmitry Oreshkin, an independent political analyst.

“This affair is just another confirmation that Russia has an imitation of democracy in which the parliament is not a means to balance various political interests but an instrument for the ruling elite,” Moscow-based Oreshkin said today by phone.

Yaroslav Grekov, a Pravoye Delo official in Moscow, said today that the party elected Andrei Bogdanov, a former member of United Russia who ran on a pro-government ticket as a presidential candidate in 2008, as its new head. Pravoye Delo will compete in the December elections, he added.

Mikhail Kasyanov, a prime minister under Putin who is now an opposition figure, said he felt “genuinely sorry” for Prokhorov.

“He agreed to be a puppet and at last realized that he can’t go through with it and is now getting out of a very unpleasant situation,” Kasyanov said today by phone.

--Editors: Andrew Langley, Andrew Atkinson

To contact the reporters on this story: Henry Meyer in Moscow at hmeyer4@bloomberg.net; Lyubov Pronina in Moscow at lpronina@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net.

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