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Saturday, November 10, 2007

Russia's Rich: Getting Out While the Getting is Good

Just as in Soviet times, Russia's wealthy are fleeing the country as they realize that property rights are about to be utterly destroyed by the neo-Soviet regime. The International Herald Tribune reports:

Roman Abramovich is Russia's richest man, with an estimated fortune of more than US$20 billion (13.8 billion euros). But if you want to see his money, visit London. Abramovich owns the Chelsea soccer club, one of Britain's most famous. He also has bought several homes in the British capital and countryside, including a 400-acre (162-hectare) country estate that once belonged to the late King Hussein of Jordan.

Russian businessmen have flourished under President Vladimir Putin, with the number of millionaires rising sharply every year. But despite Russia's growing economy and Putin's firm grip on the government, many of the country's wealthiest still have little faith that their money or their families are safe. London has become their refuge. Russians have been sinking billions into property to establish a foothold in Britain, seen as more important now than ever as Putin's second term winds down and uncertainty rises over who will be president after elections next spring. "With 2008 approaching, anyone now who has money wants to put it in a safe place," said Grace Margolies, a real estate agent who is half Russian and works exclusively with the Knight Frank agency's Russian clients.

Most of the Russians in London keep a low profile, but their growing presence is felt. Russians bought 316 properties last year worth at least US$2 million (€1.4 million) each, a survey by the agency showed. They bought 65 in 2000, the year Putin became president. In all, an estimated 300,000 Russians, including about a dozen of Russia's new billionaires, have homes in the British capital. The Russians find in London a financial climate that has long attracted wealthy foreigners, including Arab royalty with their oil billions. Under Britain's favorable tax regime, their assets are secure.

When Russians shop for a London residence, security is high on their list of requirements, Margolies said. They want a doorman, alarm systems and closed-circuit television surveillance. Security also is among the reasons an increasing number of Russians send their children to Britain's private schools and universities, said Hilary Moriarty, director of the national Boarding Schools Association. Two years ago, Elizaveta Slesareva, 15, was newly enrolled at St. Peters, a boarding school in the medieval city of York. At the midterm break, she was going back to Moscow to visit her parents and was worried about the trip, headmaster Richard Smyth said. Shortly after returning home, she was killed along with her parents when their Mercedes was sprayed with bullets. Her father, Alexander Slesarev, was the owner of Sodbiznesbank, which had been at the heart of a banking crisis in 2004. The Central Bank pulled its license, accusing Sodbiznesbank of money laundering, and not all of the depositors received their money back.

The wealthy Russians in London maintain an element of secrecy to their lives, a sign of the Soviet culture of fear that has returned under Putin. They do not stand out as Russian and are drawn to quintessentially British neighborhoods, such as Mayfair and Knightsbridge. But they were thrown into the spotlight last year when former KGB officer Alexander Litvinenko was poisoned in London with a nuclear substance. His family and friends have blamed Putin, who has denied any involvement. The British and Russian governments have traded charges of cover-up. Britain has criticized Russia's refusal to hand over the main suspect in Litvinenko's death, also a former KGB officer. Putin, meanwhile, has accused Britain of harboring Russian "criminals and terrorists."

Britain has refused to extradite Boris Berezovsky, a billionaire tycoon and fierce Kremlin foe who was Litvinenko's patron. Russian prosecutors say Britain also has refused to turn over two of Berezovsky's associates and three other Russians who once worked for Mikhail Khodorkovsky, the jailed founder of what was once Russia's largest oil company. The three had fled to London to avoid arrest in the politically charged case. Khodorkovsky chose to stay and fight the Kremlin for control over his oil company, but in the end he was imprisoned and his company, Yukos, which was taken over by state-controlled oil company Rosneft. The lesson was not lost on Mikhail Gutseriyev, the billionaire owner of another Russian oil company. After resisting for months what he called "unprecedented bullying" by the state to give up his company, he fled Russia in August when a warrant was issued for his arrest. He is reported to be in London.

Numerous other Russian businessmen in recent years have had their companies stripped from them by the state or more politically powerful rivals. It is the weak protection of property rights in Russia that drives Russians to buy property in London or put their money in Swiss bank accounts, said Andrei Illarionov, Putin's former economic adviser who was fired in late 2005 after becoming increasingly critical of Kremlin policies. "The political regime that has been formed over the past eight years deprives property owners of any guarantees on Russian territory," he said recently on Ekho Moskvy radio.

The Russians who have parked their money in Britain include both those who oppose Putin and those who remain in his good graces, such as Abramovich. Another Kremlin-friendly Russian billionaire, Alisher Usmanov, recently bought a stake in another leading English soccer club, Arsenal. Abramovich is Russia's richest man, but Russia now has 53 billionaires, 19 more than last year, according to the annual list compiled by Forbes magazine. Most made their fortunes in oil, steel, mining and metals. The number of millionaires also has jumped, reaching 119,000 in 2006, up 15.5 percent from the year before, according to a study by Merrill Lynch and the consultancy Capgemini. The numbers were up 17 percent in 2005.

Russians are now the biggest foreign buyers of homes priced at more than US $8 million to $10 million, said Liam Bailey, head of residential research at Knight Frank. One in five properties in this category is sold to Russians, or roughly 200 properties per year, he said. Many of the properties are bought with children in mind, according to Margolies, the real estate agent. In some cases, a businessman is providing a safe and comfortable home for his family, while he commutes to Moscow, a four-hour flight away. In others, the London apartment serves as a base for parents visiting their children or is purchased for children who are attending university in London or starting professional careers here.

Most of the Russian children come for the final two years of school and then stay for university. There were 383 new Russian pupils at the beginning of the 2006-07 school year, showing a steady increase over past years, said a census by the Independent Schools Council. More than 2,000 Russians are enrolled in British universities.

1 comment:

elmer said...

Does it occur to anyone that these Russian oligarchs are actually Jewish?

And that is the reason why they are escaping from Vlad Dracul's Russia?

Well, except for the ones that have been jailed.