The Russia billionaires.
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For most of the decade, the country’s billionaires spent hundreds of millions of dollars on boats, jets, expensive art and the occasional football team. But, despite strained bank accounts and public outrage, the tycoons have been loath to part with their expensive trinkets, choosing instead to hunker down and wait for better days.
To be sure, these are not happy days for the country’s superrich. In Forbes magazine’s latest ranking of the world’s wealthiest people, Russia’s billionaires had an estimated collective loss of $369 billion last year, and two-thirds fell from the list altogether. Moscow, which had 74 billionaires a year ago, more than any other city in the world, now finds itself with only 27.
Even those who have managed to hang on have not had an easy time of it. Oleg Deripaska, owner of RusAl, the world’s largest aluminum company, has seen his net worth tumble from $40 billion to about $4 billion, and he ceded his spot as Russia’s richest man to investor Mikhail Prokhorov, who himself is worth half of what he was in 2008.
The country’s tabloids, trade unions and politicians have expressed outrage that the billionaires have been so reluctant to part with personal assets, especially as jobs and wages are being cut.
Deripaska’s companies, for example, have received billions of dollars in government bailout money, but the metals magnate has not been in any rush to sell the Queen K, his 73-meter, $117 million megayacht. He did, however, agree to cede stakes in builder Hochtief and auto-parts maker Magna International to banks last year to help him hang on to his core assets.
Another boat lover, Roman Abramovich, has sold none of his four yachts, which have been collectively dubbed the “Abramovich navy,” and he has said work continues on the fifth: the 168-meter, $290 million Eclipse, which reportedly will have a missile detection system and a detachable submarine to carry the billionaire to safety in case of attack.
Abramovich, who owns a large stake in the Evraz Group steelmaker that got an $800 million loan from state bank VEB to refinance short-term debt in December, has also said he remains fully committed to what is perhaps his best-known toy: the Chelsea football club, which he bought in 2003 for ?140 million (now $205 million).
And while Portsmouth owner Alexander Gaidamak, the son of Russian-Israeli billionaire Arkady Gaidamak, said he was in the market to sell his football team if the price were right, other football club owners are doing more than holding on. Metalloinvest owner Alisher Usmanov has been quietly building up the 15 percent stake he bought in Arsenal last year and became the team’s largest shareholder in February, with a 25 percent blocking stake.
Uzbek-born billionaire Lev Leviev, whose Africa Israel Investments holding company has been badly hurt by its exposure to the Russian and U.S. real estate markets, did sell his private Bombardier jet — reportedly for about $50 million, or $10 million less than he paid for it. A company representative, while not confirming the price, said the sale had less to do with liquidity than market timing.
“The market for private jets is falling, and [Leviev] simply wanted to sell it so he could buy it back at a better price,” said company spokesperson Natalya Ivanova.
She said the price being quoted in the media was “quite small” when considering the scale of the company’s global operations. “The shopping center we’re building on Tverskaya Ulitsa alone costs $250 million, and that’s just one of many projects,” she said.
Leviev is not the only billionaire you might now spot in an airport VIP lounge. Alexander Lebedev, a banking and property mogul who also owns about 30 percent of Aeroflot, sold his private jet and an Italian villa before buying London’s Evening Standard newspaper in January for a nominal fee.
While the English daily could hardly be considered a toy, the maintenance costs aren’t unlike that of a yacht or plane. The Times has reported that the paper is losing ?1 million per month.
Some of Russia’s wealthiest had also been showing a growing taste for more highbrow pursuits, turning Moscow into a hot spot for the world’s top auction houses.
When he wasn’t busy with his fleet or football club last year, Abramovich was brushing up on his knowledge of contemporary art — the tycoon was widely reported to be the mystery buyer behind a $120 million splurge at Sotheby’s and Christie’s in New York last May. The new interest could have been motivated by girlfriend Daria Zhukova, who in September opened the Garage Center for Contemporary Culture in Moscow, Russia’s largest exhibition of contemporary art.
In September, a Sotheby’s exhibition of work by British artist Damien Hirst drew several big-name buyers from Russia and the CIS, including property magnate Vladimir Doronin and Kazakh mining tycoon Alexander Machkevich, who acquired two diamond cabinets, three butterfly paintings and a gold spot canvas for a total of ?11.7 million, The Economist reported. Another buyer at the auction was Ukrainian steel mogul Viktor Pinchuk, whose eponymous art center in Kiev is scheduled to show a Hirst retrospective featuring 100 works by the artist next month.
Sotheby’s declined to comment on the auction.
Despite the strain on their businesses and bank accounts, art collectors are not exactly stampeding for the exits, said Maria Baibakova, a curator at the Krasny Oktabr Chocolate Factory gallery who also collects art with her father, Oleg, president of Prokhorov’s Onexim-Development.
Baibakova, who estimates that there are about 30 “serious collectors” in the country, said a recent 25 percent drop in the art market was caused by a dearth of buyers, rather than a rush to sell.
“Most collectors do not collect as a business, and art is not their primary asset, so they do not need to sell into a low market,” she said.
But while the country’s elite are not selling their toys, the lavish purchases of the last few years have been curtailed, said Ellen Verbeek, editorial director of Robb Report Russia, a lifestyle magazine for jet-setters.
“Nobody’s selling, and nobody’s buying,” she said. “Everyone is just trying to spend less. [Thriftiness] is even becoming fashionable, although nobody would ever have imagined that six months ago.”
Perhaps in keeping with this trend, Prokhorov in February denied a report in The London Times that he backed out of a deal to buy the world’s most expensive property, a French Riviera mansion that reportedly cost $633 million, leaving his lawyers to seek the return of a 39 million euro deposit.
Prokhorov’s representatives have repeatedly said he will not invest in France until the government apologizes for arresting him in 2007 on suspicion of flying in a plane full of prostitutes for a party in Courchevel.
At least one prominent businessman appears conflicted about what to do with his personal assets.
In January, Mirax Group chairman Sergei Polonsky wrote in his LiveJournal blog that he was selling his yachts, a mansion on the Cote d’Azure and his Sungate Port Royal Hotel in Turkey and putting the money into his struggling developer, which like other big Moscow builders has been having trouble selling apartments and paying down debt.
When contacted by The Moscow Times, however, a Mirax representative said Polonsky still owned the Sungate Port Hotel and had never owned a yacht or a house on the Cote d’Azure.
The blog post, she said, was “only a joke.”