(Bloomberg) — Tatyana Bakalchuk made billions selling everything from brooms to bridal gowns on her online marketplace. Now Russia’s richest woman is making a surprise pivot: to helping insulate the economy from sanctions by building an alternative to the global payment system major Russian banks were excluded from.
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Bakalchuk’s Wildberries — Russia’s answer to Amazon — is starting a venture with Russ Group, the nation’s biggest outdoor advertiser, to build a digital market to help small and medium-sized businesses promote and export their products, the company said this week. They also plan to create a payments platform that may offer a substitute for the dominant cross-border network, known as Swift, according to two people close to the Kremlin who declined to be identified.
The effort has been personally approved by President Vladimir Putin, who chose Maxim Oreshkin, deputy head of the Kremlin’s administration, to supervise it, the people said, asking not to be identified. There are no guarantees that the payment system will be successful, one of them said. Putin spokesman Dmitry Peskov said by text message that the president has ordered officials to consider Wildberries’ and Russ’s digital platform project, but that there aren’t any details yet.
Swift is the main messaging network through which international payments are initiated. Created in the 1970s, it links some 11,000 institutions across more than 200 countries and territories. The US and European Union sanctioned Russia’s key lenders after the Ukraine invasion, cutting them off from Swift and forcing Russia to use other payment options for imports and exports.
Wildberries declined to comment on its plan for a payments system.
Bakalchuk — who isn’t viewed as close to the Russian president — spoke at his flagship economic forum in St. Petersburg earlier this month and said she believed that private business in Russia has a future and is developing, although state support is required.
“Bakalchuk understands very well that the crisis is the time of opportunities,” said Alexandra Prokopenko, a fellow at Carnegie Russia Eurasia Center. “She’s seeking to expand the business to protect it, to become too big to fail and more visible to the Kremlin.”
Her own wealth has grown in the wake of the Ukraine invasion, swelling by around 40% to $8.1 billion, according to the Bloomberg Billionaires Index, as fiscal stimulus boosted consumer spending.
The value of products sold on Wildberries rose 50% to 2.5 trillion rubles ($28 billion) last year, with a growing ratio of domestic goods. In emailed comments, Wildberries’ press office credited the popularity of online shopping as well as the development of its platform, including its expanding infrastructure and discounting.
Western Exodus
The exodus of western retailers like Ikea, H&M and Levi’s also helped. While Russian producers stepped in, Wildberries and its rival Ozon also helped shoppers access US and European brands that had officially left. Moscow introduced legislation permitting products to be imported into Russia without the trademark holder’s agreement, enabling Wildberries and Ozon to sell nearly everything they could before the war.
“I often have no idea if a brand has left Russia or not,” said Elena, 35, an interior designer based in the Moscow region who asked that her last name not be used to protect her identity. “If I need something, I simply search for it on Wildberries and buy it.”
She can still find Ikea items on Wildberries, even though the company abandoned the market and its plants in 2022. Even her 79-year-old grandmother uses the service, she said.
The war has helped bolster consumer spending, as well. The Russian government’s annual budget outlays, including military and social, rose by a third last year compared with 2021, while mobilization, the flight of many Russians abroad and a drop in foreign workers have created a massive labor shortage.
That has spurred growth in wages at a pace last seen before the 2008 financial crisis, and increased consumers’ capacity to shop, said Sofya Donets, an economist at T-Investments. “This brought entire groups of people into a higher category of wealth and consumption.”
Online shopping has extended its Covid-era expansion, growing 45% last year to 8.3 trillion rubles, according to INFOLine research. Controlling more than half of the market, Wildberries and Ozon have been the winners.
“Wildberries was one of the pioneers of the Russian e-commerce market,” said Marat Ibragimov, an analyst at Gazprombank, adding that its strength was in offering good terms for suppliers and a wide range of products at low prices for customers.
Bakalchuk started the company in 2004 as a place for people on a limited budget with little time for shopping. She ordered clothes in bulk from a German mail-order catalog, scanned the pictures, and posted them on her website. She delivered products herself rather than using the postal service, which was unreliable.
Sanctioned by Ukraine
Unlike billionaires who made their fortunes in the chaotic privatizations of the nineties or flourished in the early 2000s under Putin, Bakalchuk has never had a one-on-one meeting with the Russian president, and hasn’t been sanctioned by Washington or Brussels.
She was sanctioned by Ukraine, however, before the Kremlin’s 2022 invasion, because Wildberries sold an array of Russian nationalist-themed products, such as military uniforms and t-shirts praising Putin. That forced her to wind down the Ukrainian business.
Bakalchuk’s project with Russ Group aims to widen her outreach to Russia-friendly neighbors and countries of the so-called Global South, including China and India, according to the statement from Wildberries. It may help boost Russian GDP by 1.5% a year, RBC media reported, citing unidentified people familiar with the plan.
Still, creating a payments system may increase Bakalchuk’s risk of coming under US or European sanctions as Ukraine’s western allies have targeted other Russian financial services, including the Mir payment system and the central bank’s Swift-equivalent, called SPFS.
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