russians learn "freedom" seppo style

  1. 3,439 Posts.
    ... and like Joe Gutnick, seek respectability buying a football club

    From Russia with £3.4bn

    The £140m Roman Abramovich is using to bail out Chelsea FC is loose change to Russia's second-richest man. But how did he get it? And how did he come to own so much of his country's oil at the tender age of 36? James Meek tries to unravel the mystery of the man who could buy not only Chelsea, but Manchester United, Real Madrid and Juventus

    Thursday July 3, 2003
    The Guardian

    In Anadyr, capital of Chukotka, the walls are plastered with pathetic hand-written adverts from people wanting to sell their flats. The sellers write their phone numbers on little strips which buyers are supposed to tear off. There is little tearing off, although the sellers are realistic. A few hundred dollars is a typical price for a small flat. Anadyr is the first bit of Russia you would come to if you crossed the Bering Strait from Alaska and it is a desperately cold, bleak, tumbledown place, its people afflicted by disease and alcoholism. Many would do anything to be able to leave.
    Fourteen hours flying time to the west, in Fulham, home of Chelsea Football Club, the residents do not need to paste their for-sale signs on the walls. For the price of a one-room apartment in Fulham you could buy entire quarters of Anadyr.

    Roman Arkadyevich Abramovich, the second-richest man in Russia and one of the wealthiest men in Europe, is now in the unique position of owning property in both districts. He is governor of Chukotka, and new owner of Chelsea Football Club. In taking control of Chelsea, he has affected a breathtaking transfer of cash from his impoverished native country to one of the richest parts of a rich country. His bid for the club is not illegal; the amount involved, £140m, is small change to a billionaire. But that money is money earned from businesses privatised in opaque deals in the Yeltsin era, deals which make Britain's privatisation fat cats look like lean models of self-denial by comparison.

    Abramovich is a powerful and mysterious figure in Russia; the power and the mystery feed off each other. Little is known about his personal life, his origins, his motives, or his likes and dislikes. He rarely gives interviews. Scarcely any TV footage exists of him. Courageous Russian journalists have written highly critical articles raising a series of questions about his labyrinthine business activities, yet, as so often in the strange limbo of post-Soviet press freedom, their outrage echoes and fades. Abramovich knows that, like all the most powerful Russian businessmen, the "oligarchs", he is untouchable - unless he angers President Vladimir Putin, in which case he could find himself in prison the next day.

    The new owner of the Blues was born on October 24 1966 in Saratov, a city on the Volga. When he was still a baby, his parents died and he was adopted by his paternal uncle, a senior official in the Soviet oil industry. The boy grew up with his new family in Komi, an oil-bearing region in Siberia.

    As the Soviet monolith began to tremble in the mid-80s, Abramovich went to study at the Gubkin oil and gas institute in Moscow. What course he followed next is unknown, but two things seem certain: he used his hometown contacts to the full, and he saw early on how it was possible to become extremely rich extremely fast by exploiting the hybrid laws of the Gorbachev-Yeltsin transition, which allowed companies to trade on the huge difference between Soviet and western prices for raw materials. Most Russians were too naive or too fastidious to try to understand what was going on; the field was open for the bold few.

    According to Alexei Mukhin's Oligarchs of Russia, a kind of bird-spotters guide to tycoons, Abramovich made his first money in the early 90s with a tyre business in Moscow. In 1992, a criminal case was opened against him over the fact that 55 rail cars full of diesel fuel, ordered by a firm for delivery to the Russian capital, somehow ended up in Latvia. The criminal investigation was transferred from Moscow to Abramovich's home town of Ukhta where it was later dropped.

    Having mastered the art of forming companies and dealing with cross-border trade, Abramovich's businesses grew in number and complexity. He began to operate internationally, setting up a company in Switzerland, Runicom. His mentor was Boris Berezovsky, the former mathematician who wormed his way into the confidences of the Yeltsin family and its inner circle through his gossiping skills, his ability to find well-paid jobs for his friends, and his style of coming up with imaginative financial ideas - like selling Russian state TV to Yeltsin's allies - to make political problems go away.

    It was Berezovsky who partnered Abramovich in the deal which was to catapult him from Komi into the ranks of the mega-rich. In 1995, Berezovsky persuaded the Yeltsin administration to create a new company from some of the choicest parts of the old Soviet oil industry and sell it to him and Abramovich - at that time, a name unknown to the public - in a cosy auction for a mere $110m.

    Within a few years, the company's real worth - billions - became apparent. In the late-90s, as Berezovsky's influence waned and Abramovich's waxed, Abramovich came to wield more power over the firm, and began to expand into the vacuum left by Berezovsky, snapping up stakes in Russian television, in Aeroflot and the Russian aluminium industry.

    The web of ownership behind which Abramovich sits is fantastically complex. Companies are nested within companies within companies, many of them outside Russia. At present his interests are largely controlled by a British-registered holding company, Millhouse.

    He has been skilled in avoiding dirtying his own hands despite taking over the reins of some extremely murky enterprises. His move into aluminium, for instance, was seen as closing the period of the "aluminium wars", which saw murders and arrests and countless accusations of corruption during the struggle for control of smelters. He took over ORT, the privatised Russian public television, long after the mysterious murder of its popular head, Vlad Listyev. But if Abramovich has flourished in Putin's Russia because he does not break the law, Putin has no problem with his favourites becoming rich.

    A single example shows the extent to which Abramovich has been able to legally and openly plunder the privatised oil industry. In May, Sibneft's board considered how it should divide up the company's massive profit of $1.1bn for 2002. How much should the shareholders get in dividends, and how much should be ploughed back into the business? The answer: all but a token $100m would go to the shareholders. Since Abramovich owns 44% of the company, he receives a cool $480m in dividends for past year, from a company he did little to create. He also stands to gain a huge slice of another $3bn being paid to Sibneft shareholders by a second oligarch-owned oil company, Yukos, which is buying Sibneft. It is not surprising Abramovich is buying Chelsea. It is surprising he is not buying Real Madrid, Manchester United and Juventus. This is not money Abramovich has borrowed; it is real money from his pocket, which could be spent in Russia, and will not be spent in Russia.

    Abramovich lives regally in a vast estate beyond Moscow's outer ring road. His compound lies in a heavily guarded area which used to be strictly off limits because Leonid Brezhnev and other senior party officials had their dachas there. Now it is in a heavily guarded area which is strictly off limits to the Russian public because the new wealthy live there.

    He lives with his second wife and their three children. In snippets gleaned from rare interviews it has emerged that he has two yachts, he likes Chinese food, films such as Straw Dogs and Pulp Fiction, and the music of a Russian band called Spleen.

    He is not associated with any particular Russian football club, although there has been a trend in the former Soviet Union for tycoons to pick up obscure Russian and Ukrainian clubs and create teams of expensive players who flare briefly and then disappear.

    It is easier to understand why Abramovich might want to buy Chelsea, as a going concern, than to understand why he became governor of Chukotka. Bisected by the Arctic Circle, Chukotka has little going for it except reindeer, some very hard-to-extract gold and an old nuclear power station.

    The Chukchis, the native inhabitants, have for decades been the subject of jokes in Russia as supposedly the most dimwitted of all the country's native peoples. One joke referred to how it was no longer politically correct to make jokes about the Chukchis, and in all future jokes "Chukchi" would be substituted by the phrase "a certain Jewish reindeer herder". When Abramovich, who is Jewish, appeared in their territory, scattering dollars in a series of well-judged Robin Hood-like stunts to win election, it is no wonder that he appeared to locals like some mythical character come to life.

    Londoners may be tempted to see Abramovich through the same distorted glass of their own preconceptions, as some street bruiser who muscled in on his billions. Yet the truth is probably more uncomfortable still; that despite page after page of unanswered questions about the origins and nature of his wealth, he cannot be pinned down as ever having done anything illegal, and that he has been able to take hundreds of millions of dollars out of Russia in full public view, with the blessing of his president. He will, with his shyness, probably prefer some discreet private box, but if they ever spot him on the terraces, fans of rival clubs might care to indulge in the following Russian chant: "At kooda dyengi?" "Where's the money from?"
arrow-down-2 Created with Sketch. arrow-down-2 Created with Sketch.