He Was the Penniless Orphan
Who rose to the ranks of Russia’s wealthiest oligarchs, the former plastic toy seller who interviewed Putin’s future Cabinet. Roman Abramovich holds as much sway in Russia as he does in the UK, where he is the country’s second wealthiest man. But what defines him? Loyalty and Power, Oil and Mines, or the wives, yachts [...]
Who rose to the ranks of Russia’s wealthiest oligarchs, the former plastic toy seller who interviewed Putin’s future Cabinet. Roman Abramovich holds as much sway in Russia as he does in the UK, where he is the country’s second wealthiest man.
But what defines him? Loyalty and Power, Oil and Mines, or the wives, yachts and fine artworks? Dominic Midgley throws light on the shadowy billionaire
IF YOU WANT to catch the attention of waiters in a restaurant, it doesn’t hurt to order a magnum of vintage Dom Perignon the moment you sit down. Likewise, if you want to be taken seriously in the art world, the thing to do is to buy big. Record-breakingly big. And that’s exactly what Roman Abramovich,
the Russian oligarch who owns Chelsea football club, did in May, when he splashed out a total of $120 million (around £61.4 million) on Francis Bacon’s Triptych and Lucien Freud’s Benefits Supervisor Sleeping. This was a serious statement purchase. The Freud painting fetched $33.6 million (£17.2 million) at Christies, which broke the world auction record for a living artist.
Recently I asked one of Abramovich’s closest lieutenants why he was such a big spender on his equally recordbreaking luxury yachts. He shrugged and told me: “He
takes the view you can’t take it with you.”
alt="With three superyachts, a private Boeing 737 and a portfolio of dazzling homes">
This latest display of extravagance, however, was as much motivated by recognising investment potential as the new phase in his personal life. Since the 41-year-old left his wife Irina last year for Daria (known as Dasha) Zhukova, 27, the daughter of another billionaire oligarch, she has been widely credited for introducing her boyfriend to one of the most sophisticated and refined markets in the world: the international art scene.
It’s a world in which she is increasingly playing a more visible role, following her sponsorship of London’s prestigious Serpentine Gallery party earlier this autumn.
And within weeks of the record-breaking purchases in New York, the couple were back in Moscow hosting a lavish party at her art gallery, the Garage Centre for
Contemporary Culture. Never before can a former bus depot have staged such an extravagant event. The entertainment was provided by Amy Winehouse, rumoured
to have been paid £1 million to perform, but the star of the evening was an installation by Mexican artist Rafael Lozano-Hemmer. It was described by one party-goer as “aninteractive tree made up of 1,000 lights, which pulsates in time to the beating of your heart”. And, in an ironic twist, the premium champagne being served was Ruinart.
The guests included art stars such as Jeff Koons, aristos like Charlotte Casiraghi, daughter of Princess Caroline of Monaco, and a smattering of the Russian jet set.
There was no sign of president-turned-prime minister Vladimir Putin, but it is the closeness of Abramovich’s relationship with him that would have allowed the
billionaire to feel comfortable hosting such a high-profile event on Russian soil in the first place. When Putin became president, it was Abramovich who – in an unprecedented move – interviewed the would-be candidates for the cabinet.
In our biography of Abramovich, Chris Hutchins and I described his purchase of Chelsea FC as “the cheapest insurance policy in history”, on the basis that, should the Kremlin turn against him, no British prime minister would ever dare risk the wrath of so many Chelsea-supporting voters by deporting one of the few men who was willing to spend enough to keep the club not only afloat but doing well in the league tables.
alt="Abramovich is close to Russian leader Vladimir Putin,">
After all, Abramovich had already seen Putin turn against the man with whom he had acquired the cornerstone of his wealth, the Russian oil giant Sibneft. It was as the protegé of Boris Berezovsky that Abramovich gained his entrée into the world of politics. Berezovsky had fled abroad in fear of arrest some years earlier and sold his share in the company to Abramovich for £1.3 billion in 2000. Berezovsky later told me that he had only sold at such a discount because his former partner had told him that Putin had said he would “destroy” Sibneft if the sale did not go through.
Proof that this was not an empty threat came in 2003, when Russia’s then richest man Mikhail Khodorkovsky was arrested after landing at a remote Siberian airport to refuel. Abramovich was reportedly “stunned and nonplussed” by the news. Only weeks earlier Abramovich and Khodorkovsky had agreed to merge their respective oil companies, Sibneft and Yukos, and they were in regular contact over the mechanics of the link-up.
alt="collects paintings such as Francis Bacon’s Triptych">
Today, Yukos no longer exists, having been largely acquired by a state-owned competitor and its former owner languishes in primitive conditions in a remote prison
camp not far from the border with China. Meanwhile, the oligarch who escaped Putin’s wrath by escaping first to France, then to London, has turned on his former protégé.
When we spoke in the boardroom of his offices in Mayfair, Berezovsky said he did not intend to sue Abramovich over the sale of his shares because he felt
he would not get a fair hearing in Russia. But this year he decided to take action in the UK and served his writ on Abramovich in circumstances that were almost farcical.
alt="Roman Abramovich and his girlfriend Daria Zhukova at the UEFA Champions League final">
Berezovsky was browsing in Dolce & Gabbana on Sloane Street in Knightsbridge when he spotted Abramovich and his bodyguards two doors away in the Hermès shop. By this time, Berezovsky had taken to carrying a copy of his claim – which had now grown to £5 billion – wherever he went. Shortly before the encounter in Knightsbridge, he had intended to serve the writ to his former partner as he watched Chelsea’s match against Hull City at Stamford Bridge, but failed to get close enough to pull it off.
Now, he realised, he had a golden opportunity. A bodyguard was despatched to his armoured Mercedes Maybach to fetch the relevant document from the glove
compartment and Berezovsky and his men moved in on the handbag shop. What followed was described by Berezovsky as being “like a scene from The Godfather”. But who took the roles of the mafia patron and who was the boy wonder is anyone’s guess. Unfortunately for Berezovsky’s men, they were spotted by Abramovich’s heavy handlers before they could get in. A face-off ensued at the entrance. An undignified bout of pushing and shoving ensued before Berezovsky succeeded in battling his way between them and thrust the writ at his former partner. Abramovich refused to take the papers, but, under English law, it is sufficient to tap a recipient with a writ to claim that service has been completed.
The action did go to the High Court, where Berezovsky’s claim was refused in June. That litigation over, the sales of all his main assets complete – Sibneft was sold to the state-controlled Gazprom for $13 billion in September 2005 – and his decree absolute in the bag, Abramovich can look forward to enjoying the fruits of years of hard struggle.
Born in the town of Saratov on the Volga, he was orphaned by the age of two-and-a-half after first losing his mother, who died of complications after a backstreet
abortion the day before his first birthday, and then his father, who was killed in an industrial accident. His uncle Leib took in the boy to live with his family in the town of Ukhta just south of the Arctic Circle until the age of eight, when he was sent to live with his grandmother in a tiny one-bedroom flat in Moscow.
He did not excel at school but, following military service, he emerged as a born entrepreneur. After marrying his first wife, he used her parents’ dowry to invest in designer goods and plastic toys, which he went on to resell in provincial towns at a profit. Unfortunately for wife number one, love blossomed in the departure lounge between Abramovich and an attractive Aeroflot air hostess called Irina Malandina. His first divorce followed shortly thereafter.
The scale of Abramovich’s operation grew and he soon had enough seed capital to invest in one of the most lucrative commodities in the world: oil. One consequence
of the pace of economic reform under first Mikhail Gorbachev and then Boris Yeltsin was that legislators failed to keep up with the changing times and opportunities for switched-on entrepreneurs were many and varied.
alt="Abramovich used to sell plastic toys and designer clothes; now he collects silver – such as Chelsea’s Premiership trophy">
Abramovich is among those who quickly spotted the potential in oil trading. Under the Soviet system, locally drilled oil had been sold at a multiple discount on the world price and it was through the sale of domestically produced oil on the global market that the Soviet regime had made its petro-dollars. With the fall of communism, windfall profits of this type became available to private operators. Abramovich grasped that an export licence was effectively a licence to print money.
He was soon a wealthy man by Russian standards but it was a chance meeting in the summer of 1995 on the yacht of his friend Pyotr Aven – one of the ‘young reformers’ who had helped engineer Russia’s transition from communism to capitalism and then gone on to make it rich in the private sector – that was to prove pivotal in his rise from millionaire to billionaire. He bumped into Boris Berezovsky.
By then, Berezovsky was already one of Russia’s most successful tycoons, who’d had the ear of President Yeltsin and that was to prove a priceless asset. The meeting of minds that occurred between Abramovich and Berezovsky that day on Aven’s yacht was to flower into one of the most successful partnerships in Russian business.
In 1995, with a presidential election looming, Russia was in crisis. Share prices had plunged, inflation was running out of control and central government was short of cash to pay pensions and teachers. Yeltsin needed to restore confidence in his administration and build up a war chest with which to fight for re-election. His solution was to privatise the country’s mineral and industrial crown jewels in a ‘loans for shares’ scheme. This involved a charmed circle of wealthy individuals lending the government money in return for the right to manage various state enterprises. The government was never going to be in a position to repay the loans, so something that was being presented as a pawning of state assets effectively amounted to cut-price privatisation.
alt="Dominic Midgley">
Abramovich and Berezovsky’s target was Siberian Oil, or Sibneft, a company formed by the merger of Russia’s most modern refinery in Omsk and a production operation in western Siberia. In a two-stage process, Abramovich and Berezovsky duly bought an enterprise later valued at $13 billion for just $200 million. Abramovich went on to acquire a multi-billion dollar aluminium enterprise, and various other smaller assets but, by now, his commercial future was assured and he set about reaping the rewards.
In 2002, he bought a Boeing 737 to act as his private jet and had the interior reconfigured to his own specifications, including a giant bedroom with a mirror on the ceiling and an office with a “huge” mahogany desk. Three superyachts with helicopter pads and tenders longer than most ordinary yachts were bought for the use of him and his friends.
Then, of course, there were the houses. These included an estate in West Sussex called Fyning Hill, the magnificent Château de la Croë on the Riviera that once belonged to Edward and Mrs Simpson (believed to have gone to Irina, the mother of his four children, in the divorce), and a series of apartments on Lowndes Square in Knightsbridge that are in the process of being turned into one of London’s biggest private homes. His art collection means there is noshortage of pictures for the walls. In this year’s financial crisis, art is something that has held its value – which reminds us yet again of Abramovich’s Midas touch.
