Russian Power: It's not just about football. Now Russians are making 'Londongrad' the centre of a new worldwide empire

Click to follow
The Independent Online

White festive lights still hang from the trees outside 15a Kensington Palace Gardens, burning bright. The house is worth £41m but looks ordinary among the embassies in this wide, leafy avenue with roadblocks at both ends. No car enters without the correct pass, no pedestrian comes near without being watched.

The owner is one of a dozen Russian oil billionaires who have set up base here, bringing with them lawyers, accountants and advisers; and in their wake thousands of other less rich but highly skilled Russians with specialist knowledge to sell in the city they now call "Londongrad". But they celebrated the Russian Orthodox Christmas yesterday knowing what the rest of Europe has just found out: that even here, the Russian President could put their lights out any time he likes.

The Russians are not coming. Not any more; that is the language of the Cold War. The Russians are here already, living in Georgian town houses, shopping for jewellery in Bond Street, watching football. Roman Abramovich is the most famous, since he took over Chelsea FC and bought the Premiership title. But football is only a game. The real prize for the super-rich of Moscow is a safe place to keep their families and all the money they made when their country sold off its greatest assets on the cheap during the Nineties. They made enemies at a time when Russia was like the Wild West, so frequently did business disputes end in death. While the oligarchs may have all the cash and the bodyguards now, their President still has the power.

Vladimir Putin has put one of their friends, formerly the richest man in Russia, in a prison in Siberia. And even as the Russian leader was inheriting the presidency of the G8 group of world economic leaders last week, he was also using the state power company Gazprom to flex his muscles on the world stage.

The government of Ukraine has been getting a little too friendly with the European Union, so Russia demanded that it pay five times more for its gas. Ukraine refused. Gazprom stopped sending gas. The trouble is that Russia also supplies a quarter of all the gas used in western Europe - and the main pipeline runs through Ukraine. During the blockade supplies to France, Germany and Italy fell by a third. European customers realised that Russia could plunge them into cold and darkness on a whim (although some still dismiss the idea of being held to ransom, seeing the latest skirmish as childish sabre-rattling).

And what has any of this got to do with Mr Abramovich, the handsome, smiling face of the oligarchy? Just before Christmas he sold his oil company, Sibneft, for £7.3bn to Gazprom - boosting the President's ability to swagger like the head of an old-fashioned superpower. Moscow is bullish again and has reached a bristly understanding with the remaining oligarchs, who are using Londongrad as a base from which to buy companies across the world. Russian influence is greater than it has been since the fall of the Iron Curtain.

Meanwhile, the Christmas lights are on in Kensington Palace Gardens. Leonard Blavatnik can afford the bill, being worth an estimated £2.6bn from oil. Mr Blavatnik outbid his friend Mr Abramovich for his home, paying £41m to live just across the road from the Russian Embassy residence and a short step from Kensington Palace, home of Prince Michael of Kent, who is admired in the "Motherland" for looking like his grandfather, Tsar Nicholas II. The Prince, who operates a charitable trust, is at the centre of the most select Russian social circles in London.

Other leading lights are close by: Mr Abramovich has a town house in Belgravia; his mentor Boris Berezovsky, worth £2bn, has a house in Chelsea; Oleg Deripaska, 36, who made £4.3bn from aluminium, owns a place in Belgravia; even Alexandre Gaydamak, the 30-year-old who said last week that he was buying half of Portsmouth FC, has a flat in Mayfair - although it is still not clear whether he is one of Russia's 36 dollar billionaires or just one of its 88,000 millionaires.

So where did they get their money from, and why are they here? Some left the Soviet Union, such as Leonard Blavatnik, who pitched up penniless in New York in 1978. He worked his way through Harvard and made money in American industry before realising that the fall of Communism was a business opportunity too good to be missed.

Others saw that, too. As Russia struggled to adjust to free-market capitalism, those who knew how it worked were able to buy up assets cheaply from people who either did not understand what they were selling or were prepared to turn a blind eye to its real value in return for political support. All had good contacts with the Kremlin. Then, when the fledgling Russian Federation was hit by a financial crisis, these newly rich businessmen (they were all men, that is how it is in Russia) lent money to the state in return for shares. The terms were massively in favour of the "golden horde", as they were called by critics who believed they were fleecing their own country.

Mr Berezovsky, a doctor of mathematics who made money from cars and banking, became part of the inner circle around the new president, Boris Yeltsin. He spotted the talent of a Siberian oil trader called Abramovich and together they bought Sibneft. But when Mr Putin came to office in 2000, Mr Berezovsky was investigated. He was granted asylum in London, where he has protested against the "political persecution of business leaders" by sending 100 silver limos to the Russian Embassy.

At least he did not end up in prison. Mikhail Khodorkovsky built up Yukos to be the biggest oil producer in the country. He also opposed Mr Putin. Arrested for tax evasion and fraud, he was recently sent to penal colony YaG 14/10 in a region of Siberia polluted with uranium.

When Mr Khodorkovsky went down two years ago, his friends and rivals looked for a new base, away from the reach of the Kremlin, the law, their enemies and tax collectors. The flow of Russian money into London became a flood. British tax regulations on offshore accounts mean the very rich can set up here but pay little to the Treasury. In the first six months of last year, Russian companies raised $2.5bn (£1.4bn) in the City. Gordon Brown apparently thought about changing the law but decided not to - presumably after counting the huge amounts rich Russians, their families and hangers-on spend in bars, restaurants and shops; not to mention the salaries of their butlers, cooks, cleaners, gardeners and drivers. So while Russians see the tax haven of Cyprus as a good place to register a company, it is London they regard as the base for their new global financial empire, their "Moscow-on-the-Thames".

"The Russians are to this decade what the Japanese were to the Nineties and the Arabs were to the Eighties," Richard Gray, of Harvey Nichols, which employs Russian-speakers on its shop floor, said last year. With oligarchs come courtesans. There are an estimated 300,000 Russians in London, and one of them is standing on the pavement in New Bond Street, wearing scruffy, but expensive, country clothes and the sort of cap you might wear to track boar at a dacha. He is outside Lucie Campbell, where a card under a diamond ring in the window reads 6500. It does not stipulate the currency, but then the "internally flawless" diamond in the window of Graff has no price attached either. His young wife or girlfriend emerges from the shop wearing Burberry ear muffs. They cross the street to where a Chrysler Grand Voyager with blacked out windows has been parked on yellow lines, before being driven off to that other planet on which they live.

Life is not like that for Boris Gofman, owner of a shop in Queensway called Kalinka, the name of a folk song. He sells jars of sour cream, black bread and Georgian "Borzhomi" mineral water, and business is good. "Most of our customers are Russian speaking," he says. "The shop is a place where they can escape back to that food, language and people."

There are at least 40 shops like his in London. Among Mr Gofman's regulars is Stanislav, 45, from St Petersburg, who came 10 years ago to study medicine and took British citizenship five years later. "I know a great deal of Russian immigrants here, and they all love it," he says. "London is a beautiful place, and everything just works - the city runs well. The people are very considerate, and there are good opportunities for work."

Trafalgar Square will host its second Russian Winter Festival on Saturday. There will be music, dancing and endless speeches. And at least 50,000 people. The Russians are not coming, nyet, they are here in great numbers and enjoying themselves. Rich or not, on the run or trying to earn an honest living, they all think it's better than Moscow. Dosvedaniya!

Additional reporting by Robin Stringer

RICH RUSSIANS IN THE UK

Roman Abramovich, 38

Worth: £15.9bn

Where the money comes from: Oil, food, pharmaceuticals. Bought Sibneft oil company with mentor Berezovsky for less than £100m in 1995. Took full control, then sold it to Russian government in the autumn for £7.4bn.

How he spends it: £350m on Chelsea FC since 2003. Georgian town house in Belgravia, Sussex estate, villa in St Tropez. Four yachts and two Boeing jets

Oleg Deripaska, 36

Worth: £4.3bn

Where the money comes from: Aluminium, cars, aircraft, insurance. Survived gangster wars in Russian aluminium industry during the Nineties. Controls Rusal, which has 63,000 employees and is one of the largest private companies on the planet.

How he spends it: Has a £25m Regency house near his friend Abramovich in Belgravia. Bought Stalin's old dacha in a Black Sea resort for £6m.

Leonard Blavatnik, 47

Worth: £2.6bn

Where the money comes from: Oil, gas, metals. Left Russia for New York in 1978, arriving penniless but worked his way through Harvard. Invested in US industry, then returned to Russia after the fall of Communism. In 2003 he formed TNK-BP, third-largest oil company in Russia.

How he spends it: Outbid Abramovich to buy mansion in Kensington Park Gardens for £41m in 2004

Boris Berezovsky, 57

Worth: At least £1.5bn

Where the money comes from: Oil, cars, travel, broadcasting, advertising, newspapers. A doctor of mathematics, Berezovsky was involved in cars and banking before he bought Sibneft with Abramovich. Became a political exile in London after President Putin turned against him in 2000.

How he spends it: Properties in Belgravia, Chelsea and Kensington, at Wentworth Park and £10m estate near Godalming in Surrey.

Comments