Rouble Trouble For Russia's Rich

Sun Herald

Sunday October 12, 2008

By YURIY HUMBER

RUSSIAN billionaires from aluminum magnate Oleg Deripaska to Chelsea soccer-club owner Roman Abramovich have lost more than $US230 billion ($363 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 per cent between May 19 and October 6. The loss is four times larger than the fortune of the world's wealthiest man, Warren Buffett.

Moscow's benchmark MICEX stock index has fallen 61 per cent since its peak in May. The global credit crisis, war with Georgia and falling commodity prices led foreign investors to pull $US74 billion out of Russia since early August, BNP Paribas said. While Russia's 1998 default and devaluation of the rouble eradicated savings for most of the population, this year's losses are wiping out its richest citizens' fortunes.

"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 $US30 billion in emerging market stocks. "Now it's going the other way."

UC Rusal's Deripaska, 40, the richest Russian on the list, lost more than $16 billion. Chelsea FC owner and Evraz Group shareholder Abramovich, 41, lost $US20 billion.

The biggest loser has been Vladimir Lisin, 52, head of Russia's Shooting Club, whose 85 percent stake in Novolipetsk Steel has fallen by $US22 billion.

"They should take us all off the Forbes list," said Alexander Lebedev, ranked 39th by the magazine in May with wealth of $US3.1 billion. Lebedev, 49, who owns 30 per cent of state-run airline Aeroflot, said in an interview on September 23 that "silly" rhetoric by the Kremlin over the conflict in Georgia was responsible for 40 per cent of the stockmarket's drop in August.

"You can now buy the free float of the entire Russian energy sector with the market cap of Coca-Cola, and still have change to buy all the Russian banks," Merrill Lynch emerging markets equity strategist Michael Hartnett said in a note to clients yesterday.

© 2008 Sun Herald

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