(Bloomberg) — Tatyana Bakalchuk has made billions selling everything from brooms to wedding dresses on her online marketplace. Now Russia’s richest woman is making a surprising move: helping protect the economy from sanctions by creating an alternative to the global payments system from which Russia’s major banks were excluded.
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Bakalchuk’s Wildberries – Russia’s answer to Amazon – is launching a venture with Russ Group, the country’s largest outdoor advertiser, to build a digital marketplace to help small and medium-sized businesses promote and export their products, the company announced this week . They are also considering creating a payments platform that could replace the dominant cross-border network, known as Swift, according to two people close to the Kremlin who spoke on condition of anonymity.
The effort was personally approved by President Vladimir Putin, who chose Maxim Oreshkin, deputy head of the Kremlin administration, to oversee it, the sources said, speaking on condition of anonymity. There is no guarantee the payment system will succeed, one of them said. Putin’s spokesman Dmitry Peskov said via text message that the president had ordered officials to review Wildberries and Russ’ digital platform project, but there were no details yet.
Swift is the primary messaging network through which international payments are initiated. Created in the 1970s, it links some 11,000 institutions in more than 200 countries and territories. The United States and European Union sanctioned Russia’s main lenders after Ukraine’s invasion, cutting them off from Swift and forcing Russia to use other payment options for imports and exports.
Wildberries declined to comment on its proposed payment system.
Bakalchuk – who is not considered close to the Russian president – spoke at her flagship economic forum in St. Petersburg earlier this month and said she believed private business in Russia had a future and were developing, even if state support was necessary.
“Bakalchuk understands very well that the crisis is a time of opportunity,” said Alexandra Prokopenko, a researcher at the Carnegie Russia Eurasia Center. “It is looking to expand its business to protect it, so that it becomes too big to fail and more visible to the Kremlin.”
His own wealth rose following the invasion of Ukraine, rising about 40% to $8.1 billion, according to the Bloomberg Billionaires Index, as fiscal stimulus boosted spending of consumption.
The value of products sold on Wildberries increased by 50% to 2.5 trillion rubles ($28 billion) last year, with a growing proportion of domestic products. 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 discounts.
Western Exodus
The exodus of Western retailers like Ikea, H&M and Levi’s has also contributed to this situation. While Russian producers were stepping in, Wildberries and rival Ozon were also helping buyers access officially departed U.S. and European brands. Moscow introduced legislation allowing products to be imported into Russia without the brand owner’s consent, allowing Wildberries and Ozon to sell almost everything they could before the war.
“Often I don’t know whether 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 his identity. “If I need something, I just look it up on Wildberries and buy it.”
She can still find Ikea items on Wildberries, even though the company abandoned the market and its factories in 2022. Even her 79-year-old grandmother uses the service, she says.
The war also helped spur consumer spending. The Russian government’s annual budget spending, including military and social spending, increased by a third last year compared to 2021, while mobilization, the flight of many Russians abroad and the decline in the number of workers foreigners created a massive labor shortage.
That spurred wage growth at a pace not seen before the 2008 financial crisis and increased consumers’ ability to shop, said Sofya Donets, an economist at T-Investments. “This has brought entire groups of people into a higher category of wealth and consumption. »
Online shopping has extended its expansion in the Covid era, increasing 45% last year to 8.3 trillion rubles, according to a study by INFOLine. Controlling more than half the market, Wildberries and Ozon were 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 lay in offering good conditions to suppliers and a wide range of low-cost products. price for customers.
Bakalchuk started the business in 2004 to cater to people on a budget with little time to shop. She ordered clothes in bulk from a German mail-order catalog, scanned the photos and posted them on her website. She delivered the products herself rather than using the postal service, which was unreliable.
Sanctioned by Ukraine
Unlike the billionaires who made their fortunes during the chaotic privatizations of the 1990s or who prospered in the early 2000s under Putin, Bakalchuk has never had a one-on-one meeting with the Russian president and has not been sanctioned by Washington or Brussels.
It was, however, sanctioned by Ukraine ahead of the Kremlin invasion in 2022 because Wildberries sold a range of Russian nationalist-themed products, such as military uniforms and T-shirts praising Putin. This forced it to end its activities in Ukraine.
Bakalchuk’s project with Russ Group aims to expand its reach to Russia’s friendly neighbors and countries in the Global South, including China and India, according to the Wildberries statement. This could help increase Russian GDP by 1.5% per year, RBC media reported, citing unidentified people familiar with the plan.
Still, creating a payment system could increase Bakalchuk’s risk of U.S. or European sanctions, as Ukraine’s Western allies have targeted other Russian financial services, including the Mir payment system and the Swift equivalent of the central bank, called SPFS.
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