Russian billionaires from aluminum magnate Oleg Deripaska to football club owner Roman Abramovich lost more than $230 billion in five months during the nation's worst financial crisis since the 1998 default on its debt.
The combined wealth of Forbes magazine's 25 richest Russians tumbled 62 percent from May 19 to Oct. 6, based on declines in the equity value of traded companies and analysts' estimates of closely held assets they own. The loss is four times larger than the fortune of the world's wealthiest man, Warren Buffett.
Moscow's benchmark MICEX stock index declined 61 percent since its peak in May. The global credit seizure, war with Georgia and falling commodity prices led foreign investors to pull $74 billion out of Russia since the start of August, according to BNP Paribas. While Russia's 1998 default and devaluation of the ruble eradicated savings for most of the population, this year's losses are wiping out the fortunes of its richest citizens.
"There was a massive transfer of wealth into the hands of the oligarchs in 1998," said Mark Mobius, executive chairman of Templeton Asset Management, which has about $30 billion in emerging market stocks. "Now it's going the other way."
United Company RusAl's Deripaska, the richest Russian on the list, lost more than $16 billion and this month has ceded stakes in construction firm Hochtief and car parts maker Magna International. Chelsea Football Club owner and Evraz Group shareholder Abramovich lost $20 billion, based on assets excluding property and cash.
The biggest loser has been Vladimir Lisin, an avid hunter and head of Russia's Shooting Club, whose 85 percent stake in Novolipetsk Steel lost $22 billion in value in the period.
Novolipetsk rival Evraz declined 83 percent, shrinking founder Alexander Ambramov's fortune to $2.2 billion from $13.4 billion. The country's biggest steelmaker, Severstal, also fell, cutting the wealth of chief executive and majority owner Alexei Mordashov to $5.3 billion.
"They should take us all off the Forbes list," said Alexander Lebedev, ranked 39th by the magazine in May with an estimated fortune of $3.1 billion. Lebedev, who owns 30 percent of Aeroflot, said in a Sept. 23 interview that "silly" rhetoric by the Kremlin over the conflict in Georgia was responsible for 40 percent of the stock market's drop in August.
LUKoil chief executive Vagit Alekperov saw his 20 percent stake in the country's second-biggest oil producer decline to $7.2 billion from $19.5 billion. The fortune of Alekperov deputy Leonid Fedun declined to $3 billion from $8.4 billion. Both men have said they will continue to buy more LUKoil shares.
Dmitry Rybolovlev, who controls Uralkali and owns 20 percent of Silvinit, the country's only potash producers, lost about $12.8 billion, leaving him with $4.1 billion.
Alfa Group partners Mikhail Fridman, German Khan and Alexei Kousmichoff ranked seventh, 10th and 17th, respectively, lost at least a combined $12.1 billion.
Alfa's shareholdings include stakes in TNK-BP, mobile phone operators VimpelCom and Turkcell, supermarket chain X5 Retail Group and television broadcaster CTC Media.
Spokespeople for companies including Deripaska's Basic Element, Evraz, Nikolai Tsvetkov's UralSib and Rybolovlev's Uralkali declined to comment on the losses.
But at least one of Russia's wealthiest got out in time.
Mikhail Prokhorov sold his 25 percent stake in Norilsk Nickel to Deripaska's RusAl for an undisclosed amount in April, just before nickel prices began to slump. The value of that stake plummeted from $13 billion on April 24 to $3.38 billion on Oct. 6.
Prokhorov received $7 billion in cash as part of the Norilsk transaction, Kommersant and Vedomosti reported at the time, citing sources familiar with the deal.
"Are you criticizing me for feasting amid the Black Death?" Prokhorov joked with reporters in Moscow on Sept. 30, after buying half of Renaissance Capital for $500 million. That was less than a quarter of the value the investment bank had a year ago when VTB Group sought to take it over, according to a Vedomosti report. "Crisis time is a peak for opportunities," Prokhorov said. "An absolute peak."
The unprecedented loss of wealth may set the stage for a new round of asset redistribution, said Pavel Teplukhin, president of Troika Dialog Asset Management.
"We've seen quite a significant inflow of fresh money from our wealthy individuals to acquire these at very attractive levels that we haven't seen since 2003, 2004," Teplukhin said in an interview Thursday, a day the MICEX climbed 9.8 percent.
The next round of wealth building may be the most intense yet, according to Renaissance Capital. The first came between 1995 and 1998 as President Boris Yeltsin agreed to sell stakes in the nation's biggest industrial assets in return for loans from bankers including Potanin, who helped organize the state bailout.
"It will be a game with bigger stakes than in early 1990s privatizations and the redistribution after the 1998 crisis," said David Aserkoff, chief strategist for Russia at Renaissance Capital.
"Oligarchs with cash will be able to use their knowledge of the business and political landscape to find the next billions," Aserkoff said in a research report Oct. 6.
"The market will grow back," billionaire Viktor Vekselberg, one of BP's four partners in TNK-BP and founder of Renova Group, told reporters Thursday. "The only issue is when. I don't think it will be soon."
The combined wealth of Forbes magazine's 25 richest Russians tumbled 62 percent from May 19 to Oct. 6, based on declines in the equity value of traded companies and analysts' estimates of closely held assets they own. The loss is four times larger than the fortune of the world's wealthiest man, Warren Buffett.
Moscow's benchmark MICEX stock index declined 61 percent since its peak in May. The global credit seizure, war with Georgia and falling commodity prices led foreign investors to pull $74 billion out of Russia since the start of August, according to BNP Paribas. While Russia's 1998 default and devaluation of the ruble eradicated savings for most of the population, this year's losses are wiping out the fortunes of its richest citizens.
"There was a massive transfer of wealth into the hands of the oligarchs in 1998," said Mark Mobius, executive chairman of Templeton Asset Management, which has about $30 billion in emerging market stocks. "Now it's going the other way."
United Company RusAl's Deripaska, the richest Russian on the list, lost more than $16 billion and this month has ceded stakes in construction firm Hochtief and car parts maker Magna International. Chelsea Football Club owner and Evraz Group shareholder Abramovich lost $20 billion, based on assets excluding property and cash.
The biggest loser has been Vladimir Lisin, an avid hunter and head of Russia's Shooting Club, whose 85 percent stake in Novolipetsk Steel lost $22 billion in value in the period.
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Novolipetsk rival Evraz declined 83 percent, shrinking founder Alexander Ambramov's fortune to $2.2 billion from $13.4 billion. The country's biggest steelmaker, Severstal, also fell, cutting the wealth of chief executive and majority owner Alexei Mordashov to $5.3 billion.
"They should take us all off the Forbes list," said Alexander Lebedev, ranked 39th by the magazine in May with an estimated fortune of $3.1 billion. Lebedev, who owns 30 percent of Aeroflot, said in a Sept. 23 interview that "silly" rhetoric by the Kremlin over the conflict in Georgia was responsible for 40 percent of the stock market's drop in August.
LUKoil chief executive Vagit Alekperov saw his 20 percent stake in the country's second-biggest oil producer decline to $7.2 billion from $19.5 billion. The fortune of Alekperov deputy Leonid Fedun declined to $3 billion from $8.4 billion. Both men have said they will continue to buy more LUKoil shares.
Dmitry Rybolovlev, who controls Uralkali and owns 20 percent of Silvinit, the country's only potash producers, lost about $12.8 billion, leaving him with $4.1 billion.
Alfa Group partners Mikhail Fridman, German Khan and Alexei Kousmichoff ranked seventh, 10th and 17th, respectively, lost at least a combined $12.1 billion.
Alfa's shareholdings include stakes in TNK-BP, mobile phone operators VimpelCom and Turkcell, supermarket chain X5 Retail Group and television broadcaster CTC Media.
Spokespeople for companies including Deripaska's Basic Element, Evraz, Nikolai Tsvetkov's UralSib and Rybolovlev's Uralkali declined to comment on the losses.
But at least one of Russia's wealthiest got out in time.
Mikhail Prokhorov sold his 25 percent stake in Norilsk Nickel to Deripaska's RusAl for an undisclosed amount in April, just before nickel prices began to slump. The value of that stake plummeted from $13 billion on April 24 to $3.38 billion on Oct. 6.
Prokhorov received $7 billion in cash as part of the Norilsk transaction, Kommersant and Vedomosti reported at the time, citing sources familiar with the deal.
"Are you criticizing me for feasting amid the Black Death?" Prokhorov joked with reporters in Moscow on Sept. 30, after buying half of Renaissance Capital for $500 million. That was less than a quarter of the value the investment bank had a year ago when VTB Group sought to take it over, according to a Vedomosti report. "Crisis time is a peak for opportunities," Prokhorov said. "An absolute peak."
The unprecedented loss of wealth may set the stage for a new round of asset redistribution, said Pavel Teplukhin, president of Troika Dialog Asset Management.
"We've seen quite a significant inflow of fresh money from our wealthy individuals to acquire these at very attractive levels that we haven't seen since 2003, 2004," Teplukhin said in an interview Thursday, a day the MICEX climbed 9.8 percent.
The next round of wealth building may be the most intense yet, according to Renaissance Capital. The first came between 1995 and 1998 as President Boris Yeltsin agreed to sell stakes in the nation's biggest industrial assets in return for loans from bankers including Potanin, who helped organize the state bailout.
"It will be a game with bigger stakes than in early 1990s privatizations and the redistribution after the 1998 crisis," said David Aserkoff, chief strategist for Russia at Renaissance Capital.
"Oligarchs with cash will be able to use their knowledge of the business and political landscape to find the next billions," Aserkoff said in a research report Oct. 6.
"The market will grow back," billionaire Viktor Vekselberg, one of BP's four partners in TNK-BP and founder of Renova Group, told reporters Thursday. "The only issue is when. I don't think it will be soon."
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