FOR the handful of Moscow pensioners gathered beside Karl Marxs statue on October 19, there was, at last, something to be cheerful about: Russias Communists are these days a marginal and increasingly doddering force, but what the Soviet Union was unable to achieve in 70 years the overthrow of global capitalism is now happening, including in Russia.
The most prominent victim is Oleg Deripaska, until recently Russias richest man. In May, his fortune, according to Forbes magazine, was $28.6 billion. His empire encompassed aluminium, construction, car parts, and a Birmingham van factory. In April, Deripaska was bullish. His metals firm, Rusal, could soon float in either Hong Kong or London, he said.
Six months later, Deripaska has hit the new economic reality with a crunch. Like many Russian oligarchs, he aggressively expanded his business by borrowing billions against the value of his companys assets. Since May, however, these have shrunk. Russias stock market has tanked losing a whopping 71 per cent of its value.
Spooked foreign investors have fled, because of the global credit crisis but also because of the war in Georgia and the Kremlins interventions in the market. Earlier in October, Deripaska was forced to sell his 9.99 per cent 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. On October 20, the Financial Times reported that Deripaska was trying to borrow $2 billion, which he needs by the end of October to repay part of a $4.5-billion-loan from Western banks that he used to buy a 25 per cent stake in the worlds biggest nickel miner. Suddenly, Russias richest man is out of money.
It is, perhaps, too early to talk about the demise of Russias oligarchs or the return of communism. But experts agree that Russias super-rich have taken an unprecedented hit. In May, Russia boasted 87 billionaires second only to the United States. At least half were likely to lose their billionaire status in 2009, according to the editor of Forbes Russia, Maxim Kalushinky.
Its still unclear whats going to happen. But we are in a mess, he said. People have borrowed millions of dollars using their shares as collateral. Its just the same as borrowing money to buy an apartment. Now they have to sell everything to repay the credit.
However, some of Russias fun-loving elite are insisting that all is well. Stands at Novembers Moscow millionaires fair, where you can pick up a jet or a space-age piano, are all booked out. In mid-October, however, the financial news agency Bloomberg estimated Russias top 25 individuals had collectively lost $230 billion over the past five months with Deripaska dropping $16 billion. The caviar counters of Moscows up-market supermarkets are deserted and Moscows snooty nightclubs have relaxed their vigorous system of face control.
So far, the Kremlin has refused to acknowledge that the global economic crisis has affected Russia. Russian TV says it is an American problem, and Vladimir Putin, the Russian Prime Minister, declared that the U.S. leading role in economic affairs was over. The Russian government has offered $50 billion in loans to help the oligarchs, but there is not enough money to go around, analysts suggest.
On October 20, Deripaskas investment company Basic Element conceded times were tough. There are no companies in the world today that are immune from the consequences of this crisis, it said. But what about rumours that the oligarch had sacked all his private staff to save roubles? Basic Element does not comment on Mr. Deripaskas private matters, the company said.
Guardian News & Media 2008COMMents
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