Russia’s rich out of money

For the Moscow pensioners gathered next to Karl Marx’s statue on Sunday there was, at last, something to be cheerful about.

Russia’s communists are a marginal and increasingly doddering force these days, but what the Soviet Union was unable to achieve in 70 years — the overthrow of global capitalism — is now happening.

The most prominent victim is Oleg Deripaska, Russia’s richest man until recently. In May his fortune, according to Forbes magazine, was $28,6-billion.

His empire consisted of aluminium, construction, car parts and a Birmingham van factory. In April, Deripaska was bullish. His metals firm, Rusal, could soon float in Hong Kong or London, he said.

Six months later, Deripaska has hit the new economic reality with a crunch. Like many Russian oligarchs, he expanded his business by borrowing billions against the value of his company’s assets.

Since May, however, these have shrunk. Russia’s stock market has tanked — losing 71% of its value.

Foreign investors have fled because of the global credit crisis, the war in Georgia and the Kremlin’s interventions in the market.

In early October Deripaska sold his 9,99% stake in the German construction giant Hochtief and a $1,4-billion stake in the Canadian auto-parts maker Magna. But it may not satisfy his creditors.

This week the Financial Times reported that Deripaska was trying to borrow $2-billion, which he needs by the end of this month to repay part of a $4,5-billion loan from Western banks that he used to buy a 25% stake in the world’s biggest nickel miner. Suddenly, Russia’s richest man is out of money.

It is too early to talk about the demise of Russia’s oligarchs or the return of communism. But experts agree that Russia’s super-rich have taken an unprecedented hit.

In May, Russia had 87 billionaires — second to the United States. At least half are likely to lose their billionaire status in 2009, according to the editor of Forbes Russia, Maxim Kalushinky.

“It’s still unclear what’s going to happen. But we are in a mess. People have borrowed millions of dollars using their shares as collateral. It’s just the same as borrowing money to buy an apartment. Now they have to sell everything to repay the credit,” he said.

But some of Russia’s fun-loving elite insist that all is well.

Stands at next month’s Moscow millionaires’ fair, where you can buy a jet or space-age piano, are booked out.

Last week, however, the financial news agency Bloomberg estimated Russia’s top 25 individuals had collectively lost $230-billion over the past five months — with Deripaska losing $16-billion.

The caviar counters of Moscow’s upmarket supermarkets are deserted and Moscow’s snooty nightclubs have relaxed their “face control” system.

The Kremlin refuses to acknowledge that the crisis has affected Russia. Russian TV says it is an American problem and Vladimir Putin, the Russian prime minister, said the US’s leading role in economic affairs is over.

The Russian government offered $50-billion in loans to help the oligarchs, but there isn’t enough money to go round, analysts suggest.

Deripaska’s investment company, Basic Element, conceded that times are tough.

“There are no companies in the world today that are immune from this crisis,” a company statement read. But what about rumours that the oligarch sacked all his private staff to save roubles?

“Basic Element does not comment on Mr Deripaska’s private matters,” a company spokesperson said. —

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