posted September 17, 2008 10:01 AM            

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Russia's mega-wealthy industrialists are leaving Moscow for London.

Among them are famous Russians Viktor Vekselberg, Mikhail Fridman, and Leonid Blavatnik, who collectively control a fortune worth more than $40 billion, according to the most recent Forbes magazine list of billionaires.

According to The Telegraph, "Russia is the last source of new money" for London.

Vekselberg, Fridman, and Blavatnik are the three oligarchs behind AAR, a consortium that owns 50 percent of TNK-BP, an oil joint venture with the British corporate giant BP.

Between 1998 to 2004, more than $100 billion flowed from Russia, according to Forbes magazine. A significant percentage of that is now being spent in the boutiques and estate agents of London, thought to be home to more than 300,000 Russians.

The Russian investments are also helping the London real estate market avoid a collapse. The Russian expatriates have been investing in high-end properties in neighborhoods like Chelsea.

Where's all their money coming from? Gas and oil wealth are not the only sources of money for the nouveau rich from Russia. There are also monied people from the banking, retail, and even food sectors of the Russian economy.

And analysts do not expect the flow of funds to decline anytime soon. Rather, they see Russian firms increasing their presence in the U.K., and adding to the listing of their firms on the London stock exchange.

Right now, there are some 100 Russian firms listed on the FTSE index. Three of the companies are in the FTSE 100 Index.

"Russians have been in London for some time because it's close to Moscow, and it's very international, and you have seen them active in the property market," says Steven O'Sullivan, head of research at Deutsche Bank.

"London is an attractive market to them."

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posted September 17, 2008 09:30 PM            

Panic as Russian market suspended

RUSSIA'S main stock market suspended trading today after plummeting more than 11 per cent, having lost more than half its value since May, as failing Wall Street banks caused panic on global markets.

The benchmark RTS index halted trade after a fall of 11.47 left it 54 per cent below its record close on May 19. The ruble-denominated Micex was also suspended for an hour after dropping 16.6 per cent.

"Panic has gripped the Russian stock market," read a headline on the Interfax news agency.

Those hardest hit on the RTS were energy companies, with state-controlled gas giant Gazprom falling 17.2 per cent and oil firm Rosneft losing 19.12 per cent.

"The turmoil on Wall Street and worries about fall in the oil price are keeping buyers away despite the cheap prices," said analyst Chris Weafer in a note from Moscow-based investment bank Uralsib.

"The only feeling is one of numbness, shock," he said. "The hope is that this is the final clear-out, that this week we will find a floor."

The fall came after repeated attempts by Russian President Dmitry Medvedev to calm market fears.

Yesterday he told a meeting of top businessmen that "we do not have a crisis", and ordered the government to pump money into the markets.

Before the latest wave of turmoil on Wall Street, investors were selling Russian stocks on falling commodity prices, turmoil in international markets and political uncertainty, analysts said.

Increasing tensions with the West stoked by Moscow's military intervention in Georgia last month have also hit prices - the RTS has fallen more than a third since the conflict began.

President Medvedev estimated last week that a quarter of the market's losses were due to the war, in part due to fears a stand-off with the West would hurt business.

The market collapse has so far had little impact on tens of millions of Russians whose lives have been transformed by a five-year economic boom.

The fall has revived uncomfortable memories of the August 1998 financial crisis, which cut short an earlier boom exactly 10 years ago.

But Mr Weafer said the market turmoil appeared unlikely to spread into the wider economy.

"There is a risk that if this persists, it could spread into consumer confidence, but so far it is being seen as a market event."

But traders on the Internet site quote.ru, many of whom have seen their investments fall in value by half, found it hard to see the bright side. "This isn't Black Tuesday. This is worse," said one forum contributor.

"There's only one kind of paper that can be sold now. Toilet paper," wrote another.

posted September 17, 2008 09:40 PM            

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Billionaires Flee Putin's Russia

Jul 2 2007

A cadre of 50 or so Russian businessmen struck it rich when the USSR's state-owned industries went up for grabs. But most of these billionaire oligarchs are now in prison or have fled, hounded and hectored by the KGB-style tactics of president Putin. The Guardian profiles 7 deposed plutocrats, who've made their bones in oil, aluminum and everything in between.

Most are Jews who translated their Soviet-era black market acumen into a post-Cold War advantage; but in a country teeming with anti-Semitism, Jewish entrepreneurs have had to tread lightly. Some—like Russia's richest man, Roman Abramovich—have managed to ingratiate themselves with Putin, but many are behind bars or abroad.

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Can Russia's oligarchs keep their billions - and their freedom? By Luke Harding

Today Boris Berezovsky, Vladimir Putin's most implacable enemy, goes on trial in Russia for corruption, accused of stealing millions of dollars from Russia's state airline, Aeroflot. If convicted, the former mathematics professor faces 10 years in jail. But he won't be in court to face his accusers, or to hear the verdict weeks from now. Berezovsky has dismissed the case as a Kremlin show trial and has said he won't turn up.

The charges against Berezovsky have their origins in the 90s, when a small, well-connected group of entrepreneurs made a killing from the privatisation of Russia's state assets. But what happened to the rest of them? A survey of the oligarchs, as they have become known, reveals an intriguing picture. Most of the first wave are now in prison or in exile, including Berezovsky, who has lived in Britain since 2001, the year he fell out with Putin, and has enjoyed asylum since 2003. Only a handful, led by Roman Abramovich, Russia's richest man, have managed to succeed under both Boris Yeltsin and Putin, his successor.

Few ordinary Russians will feel much sympathy for the losers. Any admiration for the gusto with which the country's 50-odd billionaires live their lives is more than outweighed by outrage at the way many of them made their money. And in a country where anti-semitism is still rife and openly expressed, nationalist rabble-rousers have made much of the fact that of the seven oligarchs who controlled 50% of Russia's economy during the 1990s, six were Jewish: Berezovsky, Vladimir Guzinsky, Alexander Smolensky, Mikhail Khodorkovsky, Mikhail Friedman and Valery Malkin. That fact is incontestable - but it is the result not of some grand conspiracy, but of the way the Soviet Union restricted Jews' ability to assimilate and rise up in society. While ethnic Slavs dominated all the best career slots in the highly bureaucratised official society, Jews who wanted to get ahead were forced into the black market economy. When communism collapsed and the black market was legalised as free market capitalism, the Jewish entrepreneurs had a head start.

All this changed when Putin became president in 2000. Putin's previous employer was the KGB - a notorious Slavs-only club. Since he took power, most of the original Jewish oligarchs have fled. But this probably has more to do with their failure to observe the new rules in Putin's Russia than their religion. During his time in office, Putin - who is due to step down next year - has established a new law: leave politics to the Kremlin. Or else.

Who made how much - and how

Roman Abramovich

Age 40

Who is he? Russia's richest tycoon, as well as the owner of a small football club somewhere in west London. Abramovich's fortune is now estimated at a whopping $19.2bn, according to Forbes' 2007 list of Russia's top 100 businessmen (which reckons that there are 52 other Russian billionaires). That is some $2.4bn more than the nest-egg of his former business partner, Oleg Deripaska, who comes second (see below). Shy, media-phobic, and with still-boyish features, Abramovich has managed to navigate the transition between the Yeltsin and Putin eras. He has maintained good relations with both Kremlins. He has thus hung on to his fortune, acquired in the 1990s when Abramovich was an oil trader. He has also adopted the new Putin-era mantra of social responsibility, ploughing millions back into Chukotka, a province of reindeer farmers and polar bears in Russia's frozen and generally knackered far east. Abramovich is still the governor there, despite several attempts to resign. His recent divorce from his wife Irina - and his alleged romance with 24-year-old Daria Zhukova - have propelled him uncomfortably back into the tabloid limelight.

Relationship with Putin Chummy. During a recent one-on-one meeting in the Kremlin, the president told Abramovich that he had to soldier on as Chukotka's governor. Wisely, Abramovich agreed.

Place of residence Knightsbridge, London, and a 440-acre estate in Fyning Hill, West Sussex. It has its own go-kart track, apparently.

How he got his money In the 1990s he and his fellow oligarchs took advantage of the privatisation of Russia's state assets. In 1995 he hit the big time - when Abramovich, together with Boris Berezovsky, acquired a controlling interest in a large oil company, Sibneft. Critics say the company was worth billions more than the pair paid for it. The bidding process was rigged, they add. Sibneft employees also allege that they were later forced to sell their shares for food when Sibneft failed to pay their wages. By 2001, Abramovich's empire - held by his investment vehicle, Millhouse Capital - included not just Sibneft, but stakes in Aeroflot, aluminium, insurance, cars and hydroelectrics. Since then he has sold many of his Russian assets.

Family Two ex-wives: Olga - they divorced in 1990 - and Irina, a former Aeroflot stewardess, with whom he has four children. Last autumn Abramovich denied rumours that his marriage to Irina was in trouble. In April he confirmed that he and Mrs A had split. She is believed to have got a derisory $300m. She was spotted in Moscow last month opening a new hotel.

Hobbies Football? Did anyone mention this? Abramovich bought Chelsea FC in 2003, beginning a trend of foreign multimillionaires snapping up English clubs. Despite a galaxy of overhyped stars, Chelsea failed this season to win the Premiership or the Champions League - though they did make off with the FA Cup.

Prospects Good. Abramovich is likely to maintain good relations with Putin's successor, while continuing his oxymoronic dual identity as London-based emigre and Russian patriot. Putin may even drop in to Chukotka this week

posted September 17, 2008 09:45 PM            

Sept. 17 2008(Bloomberg) -- Russian markets stopped trading for a second day after emergency funding measures by the government failed to halt the biggest stock rout since the country's debt default and currency devaluation a decade ago.

The ruble-denominated Micex Stock Exchange suspended trading indefinitely at 12:10 p.m. after its index erased a 7.6 percent gain and plunged as much as 10 percent within an hour. The benchmark fell 17 percent yesterday, the biggest drop since Bloomberg started tracking the gauge in May 2001. The dollar- denominated RTS halted trading after similar declines.

The government yesterday injected $20 billion into the interbank lending market via central bank and Finance Ministry auctions in a bid to contain soaring borrowing rates as credit dried up in the wake of the Lehman Brothers Holdings Inc. bankruptcy. The one-day MosPrime overnight rate, a gauge for monitoring liquidity demand, leapt 25 basis points to a record 11.08 percent today.

The Finance Ministry attempted to stop the selloff by offering 1.13 trillion rubles ($44 billion) of budget funds to the country's three biggest banks, OAO Sberbank, VTB Group and OAO Gazprombank, for at least three months. That measure came as KIT Finance, a Russian brokerage, said it's in talks to find a buyer after failing to meet some financial obligations related to repurchase agreements.

Bond Market `Closed'

``The bond market remains effectively closed and banks are reluctant to lend to one another,'' said Julian Rimmer, head of sales trading at UralSib Financial Corp. in London. ``The problems experienced by KIT Finance have heightened counterparty risk and reduced liquidity further.''

Finance Ministry Minister Alexei Kudrin said on state television that the decision to increase the amount of budget funds available to three state-controlled banks would ``smooth over the shock changes'' in the markets and enable the banks to make loans to smaller competitors.

``We must soften such shock changes connected with the market falling,'' Kudrin said. ``With foreign borrowing stopping, we must soften the impact with additional funds, then the situation will stabilize.''

Sberbank, eastern Europe's biggest bank, can borrow as much as 754 billion rubles, VTB has a limit of 268.5 billion rubles and Gazprombank can get 103.9 billion rubles. About 400 billion rubles more of unspent budget funds is available to other banks.

``These are market-making banks capable of insuring the liquidity of the banking system,'' the Finance Ministry said in a statement today. The government and central bank will take more measures to improve liquidity this week, the ministry said.

Sberbank dropped 2.1 rubles, or 6.1 percent, to 32.55 rubles. VTB sank 0.44 kopek, or 14 percent, to 2.73 rubles, a record low.

``The primary objective of these measures is to inject liquidity to calm nervousness,'' Alexander Morozov, chief economist at HSBC Bank in Moscow, said by telephone. ``Hopefully other banks will be able to get this money via the interbank market and this should prevent the rise of rates,'' he said.