Shnaider putting big money into F1 startup

Updated: October 8, 2004, 4:18 PM ET

LONDON -- Russia stepped closer to a starring role in Formula One on Friday with the announcement of a new team to begin competing in 2006.

But while the cars will be built by Italian manufacturer Dallara, frequent winners of the landmark Indy 500 in the United States, the backers of Midland F1 are unfamiliar faces new to motorsport.

Few people in Formula One, with the exception of the sport's commercial supremo Bernie Ecclestone, have heard of 36-year-old Russian-born businessman Alexander Shnaider.

His privately-owned Midland Group is little known even to ordinary Russians.

A company statement said the chairman and co-founder was a naturalized Canadian citizen, who moved to the West as a child after being born in St Petersburg.

The venture is likely to cost his company at least $100 million a year, not including the $48 million bond that any new team has to lodge with the sport's governing body, but he accepted that.

"Midland is prepared to fund the development of the team entirely, but our unique position will help us attract sponsors," said Shnaider.

"Of course the team will have a Russian flavor and in time we hope to bring a Russian driver into Formula One," he said.

"Russia would get very positive exposure from staging a Formula One race and it would be a pleasure for me to be instrumental in making that happen," he added.

Shnaider's move will inevitably draw comparisons with Roman Abramovich, the Russian billionaire who has ploughed more than $450 million into football through his purchase of English Premier League club Chelsea.

Abramovich, 37, has however steered clear of a direct involvement in Formula One, despite being a guest of Ecclestone at grands prix.

The sport, fuelled by an incessant thirst for money, has been making overtures to Russia since the post-Soviet era made overnight billionaires of businessmen able to acquire state companies on the cheap.

Midland is registered in Guernsey and headquartered in Toronto, where the company recently joined forces with U.S. casino magnate Donald Trump in building a luxury hotel and residential complex in the business district.

There is little glamor to be found elsewhere in their business empire, however.

Midland's extensive interests across Russia, the former Soviet Union and Eastern Europe are mainly in old-fashioned heavy industries, manufacturing, construction, agriculture and scrap metal dealing.

The group's core business is iron and steel but they bought Armenia's state electricity distributor in 2002 and also have a plant in Serbia making rubber and plastic seals for the automotive industry.

"The group's core business is the global trade and distribution of ferrous products," the company says on its Web site.

"Diversification is limited to businesses which provide basic essentials, or are deemed to be largely unaffected by economic cycles. These include food and agriculture, construction, shipping and electricity distribution."