Who are the next Abramoviches?

Fabulously decadent, dangerously powerful: Russia's super-rich entrepreneurs are on the rise. But financial scandal - and the murder of a journalist - has brought them unwelcome attention. Kim Sengupta meets the new oligarchs
Click to follow
The Independent Online

The chandeliers shimmer in the mirrored walls of Catherine the Great's golden throne room. In between sampling the caviar, truffles and champagne, we applaud the stars of the Kirov Ballet and Opera. Vladimir Putin strolls in late.

The chandeliers shimmer in the mirrored walls of Catherine the Great's golden throne room. In between sampling the caviar, truffles and champagne, we applaud the stars of the Kirov Ballet and Opera. Vladimir Putin strolls in late.

This is the White Nights Ball in St Petersburg, once the most glittering occasion in the Tsarist social calendar, and now, again, a fabulous attraction. Tickets cost £700, but they're not exactly on general sale. Among those present are Valentina Matvianko, the governor of St Petersburg, who is tipped to be the first female president of Russia, plus cabinet ministers from the Kremlin, ambassadors, artists - and Prince Michael of Kent, who, thanks to his resemblance to the last Tsar, has iconic status in Russia.

And then there are the oligarchs. As the dancing begins, the billionaires are the first to take the floor, diamonds, sapphires and emeralds glowing against the St-Tropez tans of their wives and girlfriends. At 3.30am, they and their entourages are waving the waiters serving cognac and Stolichnaya blue-label vodka towards the guests watching the spectacular fireworks.

As the sky lightens, the tycoons leave in convoys of armour-plated Mercedes and BMW saloons, some for their private jets at the airport, and some for the exclusive gaming tables and breakfast at the Taleon Club, the best restaurant in St Petersburg.

Two weeks later, Paul Klebnikov, the New York-born editor of the Russian edition of Forbes magazine, is shot four times at point-blank range as he leaves his office in central Moscow. Police say that at least two gunmen were involved, and that it looked like a contract killing.

Klebnikov, 41, a persistent critic of the means by which many of Russia's oligarchs made their huge fortunes, had written a highly uncomplimentary book, Godfather of the Kremlin: The Decline of Russia in the Age of Gangster Capitalism, about Boris Berezovsky, the oligarch granted asylum in Britain by Tony Blair's government. He was writing another exposé of the incestuous, allegedly corrupt relationship between commerce and politics in Russia when he was shot.

Berezovsky, who had been in litigation with Klebnikov for six years, said in London: "In Russia, if you publish a list of the country's richest people, it's like informing on them to the prosecutors. Somebody clearly did not like the way he operated and decided to sort it out with him, Russian style, not through the English courts, as I did."

Klebnikov had written in Forbes about how Moscow now has more billionaires than any world city. The combined wealth of Russia's 36 richest people equates to one-quarter of its gross domestic product. This is the "golden horde" - hustlers, financiers, former Party apparatchiks - who took over huge swathes of the Russian economy in the wholesale privatisations of the 1990s.

There have been casualties. Berezovsky is in exile. Mikhail Khodorkovsky is in jail, on trial for alleged tax offences. The assets of his company, Yukos, Russia's second-largest conglomerate, are frozen. Khodorkovsky is in jail because, it is claimed, he offended President Putin by straying from the economic into the political sphere.

The Khodorkovsky prosecution, and the pursuit of Berezovsky, brought international criticism of the president and unease among multinationals about investment. But domestically, it has done Putin no harm at all. Polls show that most people approve of his tough stance towards those perceived to have looted the nation's assets.

With Khodorkovsky incarcerated, Business Week claims that Vladimir Potanin is now the richest man in Russia, with a $32bn business empire and personal wealth of $3bn. His holding company, Interros, accounts for 1.5 per cent of Russia's GDP. Others say that Roman Abramovich, the owner of Chelsea Football Club, is richer. There have been reports that Potanin, too, will buy an English Premiership football club, perhaps the champions Arsenal.

I meet Potanin at the gleaming Interros headquarters in central Moscow. The conduit is Prince Michael "Kentski", who is the patron of the Russo-British Chamber of Commerce: a purely voluntary role, he insists, and one he has undertaken because of his deep attachment to Russia. We're taken there in vehicles provided by Interros, with police outriders sweeping us through the "Zil routes", the special lanes once reserved for the Soviet hierarchy.

The penthouse dining-room has a panoramic view over Moscow. One can see Sparrow Hills, the suburb where Berezovsky, Potanin and other ambitious young merchant adventurers formed an exclusive club to meet and plan business and political tactics as they began their rise. To the east are the Kremlin domes.

Potanin once had political ambitions. He was deputy prime minister in a former administration, and he had bankrolled Boris Yeltsin's last, doomed election campaign. Potanin, it is whispered, could be Putin's next target unless he is very careful. Sipping brandy in the dining-room bar, Potanin is anxious to stress that he no longer has more than a passing interest in politics. Khodorkovsky had been the author of his own misfortune, Potanin says, jabbing his finger: he had tried to gatecrash the body politic and "no government was going to accept that... If John Brown from BP started acting this way in Britain, that would be strange. It is the same over here. People have invested in his company as a commercial proposition. They did not invest for his political ambitions".

Potanin, 42, has an $8m Moscow apartment in a complex with its own ski run. Short and muscular, with cropped hair, he's wearing a beige jacket with grey trousers, a yellow shirt with a frayed collar and a floral tie. As two bulky bodyguards try to fade into the background, Potanin protests that the oligarch's lot is not a happy one. They have learnt "not to be loved" by fellow-Russians: they feel "besieged". Instead of encouraging their enterprise, the politicians are using them as scapegoats for Russia's economic ills. They're picked on because they're rich.

"President Putin may know the true worth of the wealth creators, but if the majority of the people do not like us, then he has to be with the majority. I must understand why people don't like me. I must learn not to be loved. People live in difficult conditions. I should not blame them for their lack of love for me. Instead of being patient, working hard, they want an easy answer, and the politicians say, these are the people taking your money."

Potanin says that, as well as creating work, he gives back in other ways. He is fundraising co-ordinator for the Hermitage Museum in St Petersburg and, as a trustee of the Guggenheim Foundation in New York, he arranges reciprocal exhibitions. He gave $1m to keep a painting, Kazimir Malevich's Black Square, in Russia. And Arsenal? "Because Roman has a football club, they think we all want one. It is not true."

Later, another drive to another oligarch. Vladimir Yevtushenkov's Sistema is the largest non-energy group in Russia, and the biggest mobile phone operator, controlling the world's fourth-biggest network. It is also the major shareholder in the country's largest insurance company. Its headquarters is a 19th-century mansion. Yevtushenkov wears a severely cut, navy chalkstripe suit. His eyes, behind steel- framed glasses, are watchful, much more guarded than Potanin's.

Yes, he says, you are going to get cases such as Khodorkovsky. That is not unique to Russia: "Look at Enron, look at Parmalat, it happens in the West as well. What has happened is unfortunate, but it is bound to happen when a country is moving from one system to another." It is true, Yevtushenkov says, that there are working relationships between politicians and industrialists. But that, too, happens everywhere.

Next stop is the offices of the mayor of Moscow, Yuri Luzhkov, who is said to run the Russian capital the way Richard Daley once ran Chicago. After becoming mayor, Luzhkov became a regular visitor to Sparrow Hills. He struck up a friendship with Yevtushenkov, who was best man when he married his aide, Yelena Baturina, in 1988.

At one stage, Luzhkov was seen as the successor to Boris Yeltsin, but he was outmanoeuvred by Putin. Instead, he established a formidable power base in Moscow, where he is popular and hugely influential. Yelena, 41, is now immensely rich and the sole woman on the Forbes list of billionaires.

Once, Mrs Luzhkov was involved with a plastics company in which Yevtushenkov had sold her some shares. She had the foresight to move into the construction business just as her husband was ordering vast rebuilding works in the city. Now, she owns one of the biggest building firms, a cement company, and hotels at Black Sea resorts.

The last oligarch of the day is, at 38, the youngest. Alexander Khloponin used to work for Potanin's Interros, and became chief executive of Norelsk, a huge nickel-producing concern that Potanin acquired in one of the controversial privatisations. Like Abramovich, who tried to counter criticism that he had put nothing back into his native country by becoming governor of the Siberian region of Chukotka, Khloponin ran for and became governor of another Siberian region, Krasnoyarsk. He is a supporter of Putin's party, and is another man spoken of as a future president. Khloponin earnestly describes how he insisted on social programmes for workers at Norelsk, and talks of concerns about environmental issues. Asked whether this is simply an attempt to escape Putin's hit list, he looks pained. That is cynical, he says: "Go to Siberia, see for yourself, that is where the future lies."

Siberia is indeed a land of superlatives: bigger than Europe and the US combined, with the biggest gas reserves in the world, and oil, gold, aluminium and timber in abundance. Dostoevsky wrote: "In Siberia... the land is richly blessed and all that is needed is to make the most of it." Abramovich, Berezovsky, Khodorkovsky, Potanin and others did just that, buying up state enterprises worth billions for a few hundred millions. Luzhkov also made his mark here as a young man, in a Communist Party student brigade where he caught the eye of senior officials by standing up to a Politburo member.

My journey from Moscow to Krasnoyarsk, three time zones away, is by private flight in an old Tupolev aircraft. Stewardesses serve more caviar and vodka, and Georgian champagne. Abramovich, however, flies to Chukotka in his £56m Boeing 767 with its bedrooms and bathrooms - and missile-jamming technology. But "everything is not going well for Roman," Potanin says. "It is not turning out the way he wants." At Krasnoyarsk, I hear that state auditors have reported "mass financial abuse" in Chukotka. "Roman has a hobby, soccer, so let him continue with that. One should not conduct experiments on the region and the people," said Sergei Stepashin, the chief of the audit chamber. On the other hand, Khloponin assiduously cultivates his constituency, the officials insist. He, his wife Natalia and daughter Lyubov, seven, often visit their dacha near Krasnoyarsk city. It is modest by oligarch standards, although it has its own helipad.

Krasnoyarsk region is the size of Spain and France. Now, in the warm summer, the countryside is green and lush. It produces a quarter of Russia's aluminium, 99 per cent of its platinum ore and 65 per cent of its nickel, and it is the largest producer of gold jewellery. Its oil and gas reserves are the second-biggest in Russia.

But that is not all that is for sale. The gulags, synonymous with the worst terrors of Stalin's reign, are back in business - as tourist attractions. A 44-berth boat with the looks of a decaying gin-palace, the Anton Chekhov, is being refurbished for 950-mile trips up the muddy waters of the Yenesi river to some of the remotest labour camps. But this vast land is slowly emptying, with a million people migrating to the cities in the Russian west. And it's not easy for those who stay. Beside the burning vats of the Rusal aluminium smelting plant, the world's second-biggest, it is oppressively hot. Skimming ash from the embers is Andrei Baranov, black sweat running down his face. He says he is happy with his $800 a month pay. He's lucky: the company, 75 per cent-owned by Oleg Deripaska, a friend of Abramovich, has been ruthlessly restructuring. The workforce has been cut from 10,000 to 6,700, and will fall to 4,000.

Mikhail Kozlov, who lost his job, is bitter. "I worked there 12 years, and then was told to leave. The bosses now only think about money. It is said this is the way things are done in the West, but they have welfare systems and we don't. They say a lot of money is coming into Siberia, but whose pocket is it going into?" However, Khloponin says: "Siberia has a great future. But we must build new industries, new structures there. I certainly don't think some people should live in luxury and others in poverty, but you have got to create the wealth to share it."

Back in St Petersburg, in Catherine the Great's palace, Sergei Yastrzhembsky, Putin's adviser, says: "The oligarchs are part of our recent history. You can't make them disappear. They have an important part to play, but adjustments are needed. No one is beyond the law - whatever their wealth."

Comments