Michael Calvey was one of the biggest promoters of investment in Russia in the West, even after security officials threw him into a cell in Kremlin Central, the VIP wing of a notorious Moscow prison.
Now, the founder of private equity firm Baring Vostok is happy to retire.
The 57-year-old Oklahoman was arrested after his company, which was Russia’s largest Western investor, pulled out of the country in April and his suspended sentence for fraud expired in 2021. I have recovered from the trials of the year.
The surreal experience of being convicted forced Calvey to fight for his innocence, believing that the Kremlin had already decided the outcome. At his trial, state prosecutors argued that the documents their team produced to exonerate Mr. Calvey merely demonstrated how well he covered up his supposed crimes. “It was straight out of Kafka,” Calvey recalls.
He admitted that he thought his years of experience defending Russia would protect him from the dark direction that Russia was beginning to take under President Vladimir Putin, and that he ultimately believed that Ukraine’s 2022 This led to a full-scale invasion of
“I had never really seen the brutal face of the Russian security services until I was arrested,” he told the Financial Times in its London office in his first interview since his probation ended this summer. “If only people like me could do a lot of good things for Russia… And I persuaded many investors to share my beliefs in this country. If it can happen to anyone, it can literally happen to anyone.”
Baring Vostok is one of about 1,800 Western companies that have pulled out of Russia since the start of the war, after selling assets to local partners in April. Calvey says he wishes he had condemned the war sooner, but was worried the Kremlin would punish his investors and former Russian colleagues.
“I feel like at some point I needed to speak up,” Calvey says. “I don’t think it’s safe to go back to Russia. . . . And if you plan to wait out the war and its aftermath, sooner or later do it without making some kind of positive statement about the war.” That would be impossible. I don’t feel morally comfortable with that.”
Calvey started investing in Russia almost by chance. Raised in Oklahoma, he originally planned to go into politics and had ambitions to become governor of his home state. Instead, he spent several years after college on Wall Street, working as an analyst at Salomon Brothers in the late 1980s, immortalized in Michael Lewis’ book Liar’s Poker; He took a job financing energy projects in the Soviet Union. European Bank for Reconstruction and Development. A week before he was scheduled to depart, he set out to climb the Matterhorn in the Alps, just as a faction of hardliners staged a coup against Mikhail Gorbachev. When I descended the mountain three days later, I saw a photo of Russia’s first president, Boris Yeltsin, rebelling against the conspirators from atop a tank.
That fateful moment precipitated the collapse of the Soviet Union, and Calvey’s career began in earnest. “It was fun and adventurous, just like the Wild West,” he recalls. He moved to Moscow in 1994 and founded Baring Vostok, raising money from Western institutional investors and hiring a local team to invest in Russian companies.
It was not for the faint of heart. Successful investments attracted hostile attention from greedy oligarchs. Russia defaulted on its debt in 1998, forcing many Western investors to leave. Calvey remembers getting a call from his bank to confirm that Baring Vostok wanted to send the money home rather than withdraw it. By then, Calvey had married a Russian woman and had formed an inseparable team of Russian partners. They discovered early-stage startups like search pioneer Yandex and online bank Tinkoff, which generated huge profits for Baring Vostok when they went public.
As President Putin consolidated his power and lashed out at the West, Calvey learned that Russia had a dark side. The annexation of Crimea from Ukraine in 2014 made this clear. “We found that there was a fertile ground for nationalism, pent-up frustration and anger. There was a very ugly face of Russia that we saw up close. It was unsettling. Perhaps we saw it as a more fundamental risk. “I probably should have,” he says.
But Calvey believed Russia’s investment case was still too strong and traveled the world to reassure investors.
However, for a full-scale invasion, these two Russias began to join together. Baring Vostok has agreed to a bank merger with an up-and-coming businessman close to Andrei Belosov, who was appointed Russia’s defense minister this year, securing President Vladimir Putin’s approval of the deal. Shortly thereafter, Baring Vostok and the central bank discovered that Calvey’s new partner had entered into a series of transactions after the transaction’s due diligence had been terminated, but the transactions quickly deteriorated.
The controversy further escalated. Two hours before a difficult dinner negotiation with a business partner, Calvey’s apartment mysteriously catches fire. Then, early one morning in February 2019, security services arrested him on charges that, as Calvey later learned, Putin had personally supported him.
Convinced of his innocence, Calvey was confident that the Kremlin would realize its mistake. “My arrest would cost Russia billions of dollars in investment losses. And I thought Russia had enough rational people involved in high-level decision-making who could understand that right away. ” Instead, he found himself sharing a cell with a deputy culture minister, a Russian military general, a computer hacker, a drug dealer, and three construction tycoons.
Mr. Calvey was one of the first high-profile Western executives to be arrested in Russia, which made him something of a celebrity while also making him a target of abuse from security guards. When asked for a second mattress to alleviate back pain from sleeping on concrete slabs, one guard responded, “No one gets a second mattress at Guantanamo!”
Ultimately, as Calvey later learned, a series of influential figures connected to the Kremlin, as well as the U.S. and French governments, lobbied Putin to withdraw the incident. However, although Calvey and his co-defendants were released under house arrest, security officials refused to dismiss the charges.
“The system is like a car that has six gears in forward and one gear in reverse. Their core organizing principle is to never admit mistakes,” he says. Masu. A Russian court handed them suspended sentences, and friends in the West sent messages of condolence. Congratulations also came from Russians who knew it was best to avoid further prison sentences.
In January 2022, Calvey left Russia for Switzerland, where his family lives, with the intention of returning home. “Although I had very bitter feelings towards those who were in control of the system, I still believed in the Russian people, especially those who did everything in their power to help me,” he said. say. Despite Calvey’s deep disillusionment with Russian investment deals, his trying years were the most profitable in Baring Vostok’s history. He still had to appear in court for parole to protect his Russian colleagues. And even with tanks massing on the border with Ukraine, Putin did not think he would push through with an invasion.
“I overestimated Putin’s rationality. I did not expect him to make such an obviously catastrophic decision for Russia itself. Of course, this is first and foremost a tragedy for Ukraine, but for Russia “It’s a very strategic and human disaster,” he says.
Mr Calvey, speaking again since the US presidential election, acknowledged that Mr Trump’s victory “hopefully means an early end to the war”, believing it had been a “disaster for everyone, but especially for Ukraine”. He said that “But I also expect Trump’s team to seek not just a cease-fire, but a larger agreement that permanently ends the war between the two independent nations, which will require complex negotiations.” And it won’t be easy.”
Calvey believes Western sanctions have had unintended consequences. “If the goal was to impose costs, that’s over. But some people who wanted to live outside Russia are forced to return to Russia and invest all their money in Russia because they have nowhere else to go. ”
He believes the West should have embraced people sooner, such as the founders of Baring Vostok’s two most successful investments, Oleg Tinkov of Tinkov and Arkady Volosh of Yandex. They left the country and expressed their opposition to the war, but worked under sanctions for more than a year. “The Russian regime used it as a way to intimidate others from doing the same thing,” Calvey said.
Calvey is now focusing on his main non-Russian asset, Kazakh fintech company Kaspi, as well as start-ups run by Russian exiles, including Mexican online bank Plata, founded by former Tinkoff staff. He is open to the possibility of investing in Ukraine if the fighting subsides. But he believes Western countries should do more to encourage the entrepreneurial talent of Russian exiles. “Any rational country that understands modern economics would go down on its knees and hire these valuable people. And yet it gets snubbed. That’s a huge own goal for the West.”
Baring Vostok’s withdrawal from Russia resulted in billions of dollars in losses on the country’s assets. “In hindsight, we should have stopped investing 10 years earlier,” Calvey admits. But he hopes the company he helped create will help change Russia for the better.
“I’m still optimistic about the Russians, but I’m very pessimistic about Russia itself,” he added. “Sometime in the future there will be an opportunity to re-engage with Russia. It could be 10, 15, 20 years. … I think Russia is a better place because of the work we’ve done.” I feel it.”
