Dominic Midgley on how Britain’s service industries are busy separating London’s free-spending New Russians from their cash
A senior member of the Chamber of Commerce in Moscow once said that any mention of the word ‘oligarch’ had the average Russian reaching for a gun. That’s because much of the population is furious at the way the national wealth was passed to a handful of hustlers in a series of sweetheart deals with Boris Yeltsin. In London, however, the word ‘oligarch’ produces a very different reaction, inspiring an enterprising collection of opportunists to reach for the telephone.
Like the impoverished heirs to dukedoms who married the daughters of rich Americans in the 19th century, some of London’s most blueblooded and blue-chip bankers, lawyers, art dealers and estate agents are willing to trade their standing for cash. And the news that Roman Abramovich, the multibillionaire owner of Chelsea FC, has realised billions more from the sale of his oil company, Sibneft, late last month has added to the feeding frenzy.
But Abramovich is by no means the only oligarch in town. London is a home from home to a number of the wealthiest New Russians. Abramovich’s right-hand man, Eugene Shvidler, spends much of his time here, and so do Tatyana Dyachenko, the daughter of former President Yeltsin, her husband Valentin ‘Valya’ Yumashev, and the aluminium magnates Oleg Deripaska, Viktor Vekselberg and Mikhail Chernoi. A couple of years ago, furthermore, Abramovich’s former partner Boris Berezovsky was granted asylum here in the face of an extradition attempt by President Vladimir Putin.
These people prefer England to the United States partly because the London banking scene is less tightly regulated than that of the US — but also because we tend to be less prejudiced against Russians with wealth. One minor Russian oligarch who went on holiday to Aspen reports how the American with whom he was sharing a ski-lift almost jumped off in shock and fear when he mentioned where he came from. In America, Russia spells mafia.
Not here. Sharp-witted Brits are more than happy to help separate these free-spending New Russian billionaires from their cash. Such is the wealth of these oligarchs that the combined cost of a Belgravia mansion, a country estate and a private jet barely dents their current accounts. So they move on to yachts, art, polo ponies….
One man who has done very well out of his association with Abramovich is Roddie Fleming, a merchant banker. After negotiating the sale of the family bank, Robert Fleming Holdings, to Chase Manhattan in 2000, he set up Fleming Family & Partners and began investing in the Russian minerals sector. A few years ago he put together a group of investors including Lord Daresbury, the Earl of Derby and Christopher Palmer-Tomkinson, uncle of Tara, to invest in a Siberian goldmine called Highland Gold.
They were initially approached by a man who worked for Highland’s then owner, Oil Finance, a company linked to Sibneft. He was keen to mount a management buy-out and was looking for capital. Fleming and his aristocratic partners duly took a 34 per cent stake and in the first 18 months of their ownership the market capitalisation of the company rose from £40 million to £200 million, multiplying their stakes by a factor of five.
The simple explanation for this state of affairs is that the normally sure-footed Abramovich misjudged the market and got out at exactly the wrong time. More cynical observers, however, suggest he was prepared to lose cash to gain social cachet. If so, he appears not to have capitalised on it. Fleming once said, ‘We invited him in and that’s the only time I’ve met him. But he is a very nice man. He’s a shy man, a contemplative man, a canny man. I’ve never met him socially.’
The legal profession — a group of people who have even fewer scruples about the nature of their clients than the banking community — is cashing in too. Given the number and scale of the squabbles that divide the oligarchs, and their willingness to throw money at lawyers in an attempt to obtain satisfaction, they are clients made in heaven. As they often conduct their battles in London rather than in Moscow, where political pressure can be as significant as learned argument in winning cases, it’s happy days for our lawyers. Perhaps the biggest beneficiary of oligarchical largesse in this area is the wonderfully named Skadden, Arps, Slate, Meagher and Flom. Bruce Buck, the American head of its European arm, had been a Chelsea fan for more than 20 years when Abramovich came calling, and he ended up being made club chairman. Now Buck’s company handles much of Abramovich’s legal work including the preparation for Sibneft’s defence in a $1 billion battle with the AIM-listed Sibir Energy that has been rumbling on for months in courts as far afield as London, Moscow and the British Virgin Islands.
It takes two to do the courtroom tango, of course, and Ashursts, who act for Sibir and its oligarch, Chalva Tchigirinski, are also racking up handsome fees. So are the translators working for both sides, who, in a nice cloak-and-dagger touch, are never permitted to translate any entire document for fear that they will learn too much.
Peter Carter-Ruck & Partners are getting a look in, too, thanks to Boris Berezovsky’s determination to sue Abramovich for billions following his sale of Sibneft to Gazprom for £7.4 billion. Berezovsky and his friend Badri Patarkatsishvili were offered just £735 million for their 50 per cent stake in the business less than five years ago and were told that Putin would ‘destroy’ Sibneft if they didn’t take it. At the end of September, those same shares were valued at £3.7 billion and so Carter-Ruck’s Andrew Stephenson is running the rule over his chances of mounting a plausible case.
Hand in hand with these courtroom battles over cash and reputation go more public campaigns in the media. Abramovich once told Le Monde that the difference between a rat and a hamster was PR, and so the oligarchs are all big spenders on spin doctors. The daddy of them all, Lady Thatcher’s former communications director Lord Bell, acts for Berezovsky. Abramovich himself used Citigate Dewe Rogerson during the takeover of Chelsea in July 2003, but has subsequently relied on in-house spokesmen — the ubiquitous John Mann in Moscow and the former Evening Standard sports editor Simon Greenberg at Chelsea. Oleg Deripaska, the multibillionaire owner of RusAl, Russia’s biggest aluminium manufacturer, uses the City PR outfit Finsbury, while Mikhail Friedman retains the London end of US lobbyists Apco.
Among the society figures who have met Abramovich are the Marquess of Reading, who was introduced to him by Berezovsky in the south of France, and Jacob Rothschild and his son Nat, who run JNR, a financial services company that advises businesses on the Russian market.
In addition to his links to British society, there are signs that Abramovich intends to acquire some expertise in appropriate sporting pursuits. When an oligarch wants to reach for a gun, he heads for Holland and Holland, purveyors of shotguns and tweed plus-fours to the gentry and the nouveaux riches, and Abramovich has been spotted there. He has also taken an interest in polo and once hired Alan Kent, captain of the English polo team, to tutor him. He appears to have given up, however, after realising that the time delay involved in having an interpreter translate Kent’s shouted instructions made the whole enterprise something of a farce.
In the 1970s it was oil-rich Arabs who kept buoyant the market in Belgravia town-houses and Home Counties estates, but today it is the Russians. Knight Frank have been finding suitable residences for Abramovich for years now. Since overseeing his purchase of Kerry Packer’s former estate at Fynin g Hill, West Sussex, for £12 million in 1999, they are believed to have handled all his property dealings. Deripaska has been even more profligate than his former partner in RusAl. Apart from a mansion in St George’s Hill, Weybridge — where the chef produces printed menus at mealtimes — he owns a £25 million mansion in Belgrave Square.
How to fill those grand houses? One visitor to Abramovich’s dacha outside Moscow gleefully told friends that the books which lined the oligarch’s study were empty spines installed by an interior designer. But Abramovich’s wife Irina is on a journey of self-improvement, having taken a degree in fine art at the University of Moscow, and may well be one of the contributors to a counter-cyclical boom in the price of Russian masters. The bellwether auction was Sotheby’s Russian sale of 21 May 2003, which pulled in almost £5 million. The most valuable lot of all was a big-bottomed nude by Stalin’s favourite artist, Boris Kustodiev. Expected to go for less than £300,000, it eventually went for £845,000.
There is more frivolous shopping to be done, however, and London’s retailers are the beneficiaries. When Irina Abramovich wants to buy a new dinner set for the private jet, she goes to the Mayfair china shop Thomas Goode. She has also befriended Mohamed Fayed who, like her husband, owns a Premiership football team and whose wife is a Russian-speaking Finn. This has ensured her lock-in tours of the store.
When it comes to eating out, the Japanese restaurants Nobu and Ubon, Zuma, and the River Café are popular haunts. One of Abramovich’s aides once ordered £1,200 of sushi from Ubon in Canary Wharf. From there it was picked up by limo and driven to Luton airport, where it was loaded on to a private jet and flown 3,000 miles to Baku in Azerbaijan.
The trappings of wealth in the bag, issues of manners, style and class have to be considered. This is good news for the country’s beleaguered public schools. One Russian remarks, ‘People would rather say, “My son is studying at an English public school” than say, “I own a Porsche.”’ Millfield, once described by unkind critics as the ‘double cream school’ on the grounds that its pupils were ‘thick and rich’, has done particularly well in attracting the oligarchs’ young. London-based Tatyana Dyachenko, Yeltsin’s unfeasibly wealthy daughter, and her third husband Valentin Yumashev, the man who penned her father’s memoirs before becoming a senior Kremlin aide, have sent their son Gleb to Millfield. Meanwhile Yumashev’s daughter Polina, who attended Millfield as a girl, is now married to RusAl’s Deripaska.
Like their parents, the oligarchs’ children have learnt to live with levels of security that border on the paranoid. No one is more careful in this area than Berezovsky, who narrowly escaped death in Moscow in 1994 when a remote-controlled car bomb decapitated his driver. On at least one occasion he has hired six identical limousines, which passed through the gates of his house in Egham, split into three pairs and headed off in different directions to confuse would-be tails. In addition to the fleets of cars with blacked-out windows, all the oligarchs hire teams of bodyguards, many of them provided by Kroll Associates, the leading name in international security.
There can be a downside to dealing with the New Russians, however, as the Rolls-Royce dealership in Berkeley Square discovered after taking delivery of a customised Phantom V in December last year. The customer, a minor oligarch called Alex Kirzhnev, had paid a £70,000 deposit on a car priced at £210,000 and had ordered £85,000 of extras, including extra-large wheels and armchair seats in the back. While the Rolls-Royce salesmen were making increasingly anxious calls to staff at his Home Counties mansion earlier this year, their esteemed customer was locked in a Moscow jail, having been arrested for attempting to bribe a government official with a £60,000 Mercedes saloon.
Dominic Midgley is co-author of Abramovich: the Billionaire from Nowhere (HarperCollins) and associate editor of City AM.
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