Calvey has maintained contact with Russian authorities and met President Vladimir Putin on several occasions (Vasily MAXIMOV )

Moscow (AFP) – US businessman Michael Calvey has navigated the political winds and diplomatic tensions in Russia for 25 years while building one of the country’s largest private equity firms. 

Despite his optimism regarding Russia’s economy, he is now behind bars.

A Moscow court on Thursday will decide whether to keep the US-born founder of Baring Vostok investment fund in custody ahead of his trial for alleged fraud or to allow him to serve house arrest.

The 51-year-old investor has maintained his innocence, claiming that the probe into alleged embezzlement of 2.5 billion rubles from Vostochny Bank is the result of a shareholder dispute.

His arrest shocked Russian financial circles, even though they are accustomed to the use of heavy-handed criminal proceedings against business.

An admirer of the novels of Leo Tolstoy, Calvey is married to a Russian woman and hails from the American Midwest. He stayed in Russia after many investors bowed out in recent years over the growing rift between Moscow and the West. 

He has maintained contact with Russian authorities and met President Vladimir Putin on several occasions.

“Michael is cheerful and doesn’t lose faith in the Russian economy, despite what is happening to him,” Russia’s business ombudsman Boris Titov wrote on Facebook after visiting Calvey in prison on Tuesday.

“He said he is innocent, he said he’s a Russian patriot,” prison monitor Yevgeny Yekinfeyev told Interfax news agency after speaking with him.

Calvey launched his firm after Russia made the transition to a market economy. Since then, he brought in foreign investment worth billions of dollars for Russian projects, despite frequent chaos.

“This was one of the big lessons over the last 20 years: periodic crises are inevitable in rapidly evolving emerging markets,” Calvey said in a 2013 interview to EMPEA, a industry association specialising in emerging markets.

He concluded however that these periods “often present the best opportunities” for investors. 

“There is an irrational bias about Russia” based on “external politics,” he said. 

“It’s not a paradise, of course, but there isn’t an investment paradise anywhere in the world.”

– ‘No greater patriot’ –

Calvey was brought up in Oklahoma where his brother, an Iraq war veteran, is an active member of the Republican Party. 

A graduate of the prestigious London School of Economics, he worked in London and New York for the European Bank for Reconstruction and Development (EBRD), launched to transform the socialist bloc into a market economy.

He also worked for Salomon Brothers as a specialist on mergers and acquisitions in the oil and gas industry.

Russia’s enormous oil and gas reserves in the 1990s were an opportunity for investors following the breakup of the Soviet Union.

In 1994, he moved to Moscow and founded Baring Vostok as the country’s economy resembled that of the US Wild West. 

A handful of men set out to divvy up the Soviet Union’s industrial infrastructure, becoming Russia’s oligarchs.

“During the first four years of our firm’s existence, Russia’s GDP fell by about 40–50 percent,” Calvey said in 2013. 

Baring Vostok invested “about two-thirds of our first fund in former Soviet businesses that had been privatised and about one-third in new private companies.”

He said his most “memorable” project is Yandex, the Russian internet success story. Baring Vostok invested $5 million into the start-up, which is today worth $10 billion on the New York exchange.

Since his arrest, several high-profile Russians have praised Calvey’s professionalism and dedication to Russia.

“There is no greater patriot” in terms of attracting foreign investment to Russia, Titov said of Calvey.

He added that the American “hopes the issue will quickly be resolved and he will continue the same work, as a person who has worked (in Russia) for so long and loves Russia.”

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