Russian roulette in the auction rooms

Moscow's mafia is moving in on Russia's most valuable treasures and Western auction houses are nervous. But with legitimate Russian money returning to the world's salerooms, the auctioneers could be the ones to make a killing

A SPECTACULAR jewelled Easter egg made for the Russian Imperial family by Carl Faberg set a new auction price record for the jeweller's work when it sold for £3.6m in Geneva last month. The sale proved to be a watershed in more than financial terms: for the first time since 1917 Russian buyers were playing a prominent part in the auction.

The rebirth of capitalism in Russia is only a few years old but already a handful of people have managed to amass vast fortunes. In addition to buying jewels and fast cars, they are keen to surround themselves with artistic mementos of their nation's history. There is a roaring trade in Russia in the quaint, jewelled trifles created in Carl Faberg's workshops for the imperial court in St Petersburg at the turn of the century.

The so-called "Winter Egg" was commissioned in 1913 by Tsar Nicholas II as a gift for his mother, the Dowager Empress Maria Feodorovna. The 4in-high egg is made of rock crystal and its decoration was inspired by icy frosting on a window pane; the hollow interior is engraved with frost patterns which are repeated on the exterior by an encrustation of platinum-mounted rose diamonds - 1,300 diamonds in all. The egg sits on a melting block of crystal, platinum and diamond ice and opens to reveal a gold basket of spring flowers with white quartz petals, gold stems and green nephrite leaves.

In the event, the egg was bought by a jewell-ery dealer from St Louis, Missouri, called Gary Hansen, against fierce competition from Kenneth Snowman, the London dealer and Faberg expert. Snowman, who runs Wartski's in Grafton Street, has written one of the definitive reference books on Faberg. Both dealers were bidding on behalf of private clients.

Several Russians had shown interest in the egg before the sale, despite an estimate of £1.5m-£3m. "More than one looked very carefully at the egg out of its showcase and asked the kind of questions that indicated serious interest," says Franois Curiel, the head of Christie's Geneva office. "But the bidding went too fast for any of them to put a hand up."

He also admitted that one serious Russian contender for the egg, a private museum founded in 1993 called the "Russian National Museum of Arts", had been excluded because Christie's didn't trust its credit worthiness.

Three representatives of the museum started discussions with Christie's a week before the sale. Two lived in Russia and one was a Russian based in Germany. They said they were interested in bidding up to $7m (£4.7m) on the egg and asked what financial guarantees Christie's would require. The auctioneers asked for a bank guarantee and the Russians offered to deposit $1m (£670,000) for Christie's with the Bank of New York where they had an account. By the day of the sale they had produced a letter from the National Credit Bank of Moscow, a relatively new and little-known bank, stating that the museum had sufficient assets to buy the egg - but the $1m had not been deposited. When Christie's chief executive, Christopher Davidge, asked the museum's representatives how they meant to pay, they said the bill would be settled in cash the morning after the sale.

Even in Switzerland a payment of $7m in used notes has to be reported and the origin of the notes investigated. Ten minutes before the sale began Davidge decided, after consultation with the vendor, that the Russians' ability to pay was not sufficiently proven. He instructed the security staff to request the return of their bidding paddle (a numbered ping-pong bat used to signal bids to the auctioneer).

Christie's judgement may or may not have been right, but their experience highlights the problems posed by the new interest Russian nouveaux riches are attracting in the Western art market. In Russia, where inflation is rampant, investing in jewellery and works of art is a way of ensuring your wealth holds its value; several of the new Russian banks are forming art collections. Art can also be freely exchanged for hard currency; as a result there is now a very high volume of art thefts in Russia.

The Russians who are arriving in the West with huge fortunes pose a problem because no one knows how to tell the gangsters from the respectable millionaires. "We're all terrified," says Kenneth Snowman, the underbidder on the egg and a second-generation dealer in Russian art. "This new lot are ex-KGB and very corrupt - who knows how good their money is and where it comes from?" His father bought the Winter Egg from the Soviets for £450 in 1925 and sold it for £1,400 in 1934.

Scotland Yard is also taking an interest in the new Russian enthusiasm for art. Faberg collections were stolen from three British stately homes last summer - Luton Hoo in Bedfordshire, Floors Castle in the Scottish Borders and Bamburgh Castle in Northumberland. The possibility that the thefts were commissioned by Russian gangsters is being investigated by the art and antiques squad, according to Detective Inspector Dick Ellis - because of "the increasing Russian presence" in the West's art market. "We don't want organised crime squads from Russia getting a foothold over here," he says.

The danger is very real. Two dealers in Russian icons were murdered in Berlin last year and a Russian suspect has been arrested but not yet tried. He is alleged to have murdered five men, all involved in the illicit trade in icons between Russia and Germany. Icons began to be smuggled out of Russia in large quantities in the 1970s and the trade apparently continues.

Avraham Gleser, who had a smart gallery on the Kurfrstendamm in Berlin, was shot during the lunch hour when his staff were out; his son returned to find him dying and many icons stolen. Not surprisingly, this horrifying experience has turned his family against the icon trade and the remainder of Gleser's stock is to be auctioned at Christie's in London on 13 December.

Icons are not popular with Russia's new collectors, however. According to Chris Martin, who runs Iconastas in the Piccadilly Arcade, their principal interests are jewellery, Faberg items and 19th-century Russian paintings - particularly landscapes by artists like Ivan Ivano-vich Shishkin. "They also like Russian silver which copies the French Empire style," he says. "They love heavy silver - large tea sets, for instance - and silver-mounted glass." Most of his new Russian clients are resident in the West, he says, working for companies like Aeroflot.

Franois Curiel of Christie's says he first came across Russians as a major buying force in St Moritz last February. Once a year Christie's takes a sale of jewellery to the ski slopes. "The Russians told me they didn't come to St Moritz specially for it," says Curiel. "They were already staying for the skiing. But they must have bought about 8 per cent of our auction." He estimates about 5 per cent of Christie's jewellery and watch sales in Geneva last month went to Russian buyers.

Sotheby's London sale on 15 December is also one to watch, according to Peter Batkin, who handles the company's business in Russia. "A lot of Russians are coming," he says. The sale has a strong section of 19th- century paintings - including a 9ft-wide seascape by the top marine artist Ivan Konstantinovich Aivazovsky, estimated at £80,000-£120,000 - and a good smattering of Faberg, silver and other works of art. "The first thing the nouveaux riches collectors are doing is identifying with their own nationality," says Batkin. "In time, though, I expect an upsurge in buying across the board by individ-uals and banks."

Last month Batkin arranged the purchase of an 18th-century English painting - a view of Westminster Bridge by Samuel Scott - for £111,500 on behalf of the President of the Most Bank of Moscow. "It was the first direct purchase from Moscow at Sotheby's," he says. "The instructions came through by fax - and I'm going to have the fax framed and hung above my desk." !