Roman Abramovich: The billionaire whose future is tied to Russia’s invasion of Ukraine
Abramovich has been sanctioned by the UK government and is in the process of selling Chelsea football club. He has also appeared at peace talks in Turkey and is said to have suffered symptoms of suspected poisoning after a meeting earlier this month, writes Sean O’Grady
Had things been a little different for Roman Arkadyevich Abramovich he might now still be a rubber duck salesman. That’s not some exotic euphemism, by the way. The multi-billionaire ($8bn, give or take a sanctioned football club) made his first modest pile by trading the jolly little plastic bathtime toys as a young man in the then Soviet Union, a place where very little in the way of entrepreneurship was permitted. The commanding heights of the Soviet economy were firmly in the hands of the Marxist-Leninist state, and comical rubber ducks waddled under the threshold for permitted private enterprise, probably, but even if they didn’t Abramovich would have found ways to float his particular enterprise – as indeed he has throughout his career.
In his twenties, and notwithstanding the inconvenience of compulsory service in the Red Army (a conscript just like some of those currently in Ukraine), he graduated from selling ducks and other plastic novelties from his flat in Moscow.
Funded by a gift of 2,000 roubles from his fiancée’s parents when he married his first wife, Olga, in 1987, he moved into the more lucrative trade in western perfumes and deodorants. Actually, a few years later, in around 1992, the 25-year old Abramovich acquired the fragrance of diesel about him, over an allegation that a rail consignment of tanks of diesel fuel was "emptied and appropriated" using falsified documents. Abramovich was arrested, but later released and never charged and has denied any accusation of falsifying documents.
By the time Mikhail Gorbachev had finished liberalising the economy in the late 1980s, Abramovich owned a national chain selling Lada cars, had a pig farm and had got into the oil trading business, via a course at the Gubkin Institute of Oil and Gas in Moscow. It was around this time that he met his oligarchical mentor, Boris Berezovsky. a media mogul with links to the Kremlin.
Never the most orderly of places, funnily enough under any of the radically different economic systems it’s tried, Russia after the collapse of the Soviet Union in 1991 was a confused, lawless place, “the wild east” as some said. For those with an eye to making lots of money quickly, there were once-in-a-lifetime opportunities for those with the right connections, a little capital, and an eye for the main chance. The stars had aligned in ideal fashion for Roman.
This is how this exceptionally ordinary-seeming bloke made his real money. It’s a long but in essence a very simple story. He used a rigged “auction” to buy most of the vast Russian oil industry, Sibneft, from the Russian state in 1995 for either $100m or $250m (figures vary but don’t matter as you’re about to find out). He then sold it back to the Russian state in 2005 for $13bn. He did improve the company, and commodity prices underlying a corporate valuation can be volatile, but still, he likely made a handy net profit of at least $12bn. Beats rubber ducks.
How did he do this? The BBC’s Panorama programme claims to have a copy of an official file on Abramovich that purports to show he used unorthodox techniques. Not long after the deal, Abramovich was being pursued for fraud, after the event. The Abramovich file states: “The Dept. of Economic Crimes investigators came to the conclusion that if Abramovich could be brought to trial he would have faced accusations of fraud… by an organised criminal group.”
This claim is backed by Russia's former chief prosecutor, who investigated the deal, Yuri Skuratov: “Basically, it was a fraudulent scheme, where those who took part in the privatisation formed one criminal group that allowed Abramovich and Berezovsky to trick the government and not pay the money that this company was really worth.”
The document also suggests Mr Abramovich was protected by the then president, Boris Yeltsin: “Skuratov was preparing a criminal case for the confiscation of Sibneft on the basis of the investigation of its privatisation. The investigation was stopped by President Yeltsin … Skuratov was dismissed from his office.”
But where would Abramovich, hardly poor by then but still small fry, find the initial stake? According to the Panaroma document, a loan was organised by the Russian government to our rubber duck and Lada merchant: “Shortly before the auction a minister deposited $137.1 million of the budget money” in a bank, which then lent Abramovich the money to participate in the rigged auction.
Within a year of meeting the two Borises, Abramovich had moved into an apartment inside the Kremlin. Thus it was Berezovsky who helped introduce him to the people who mattered, and in particular Yeltsin’s head of personal protection and his confidant. In return for a bribe of about $10m, Berezovsky and Abramovich got themselves into pole position for the Sibneft privatisation auction. (The bribe was admitted in court much later by Abramovich in a civil suit brought by Berezovsky, but denied by the head guard. In the words of the British judge: “It was Mr Abramovich’s case that the lobbying activities of Mr Berezovsky were inherently corrupt”).
Abramovich it was who had the bright idea of welding together many of Russia’s still state owned but disparate oil interests into the Sibneft group, in preparation for a coherent privatisation, western-style. Except that they went for a pre-agreed knock down price to a pre-arranged bidder.
Abramovich's lawyers have said allegations of corruption are false, and he denies he was protected by Yeltsin.
Abramovich had some luck, then, but he still needed to cultivate connections. He had no natural advantages beyond what seems to be considerable nous and a talent for survival. He was born in 1966 in southern Russia, not far from Ukraine, to middle class parents, Irina (a musician) and Arkady (an economist), and both passed away through unrelated accidents before he was four years of age. Going back a little, the family had links to Ukraine and Lithuania. Some died during Stalin-era compulsory deportations to labour camps.
As an orphan, Roman was brought up by his grandmother and uncle, and they moved around the country quite a bit, including its frozen north. He wasn’t rich by any means, but not unhappy either. Of his childhood he once remarked: “To tell the truth I cannot call my childhood bad. In your childhood you can't compare things: one eats carrots, one eats candy, both taste good. As a child you cannot tell the difference.” He was in indifferent college student - a drop-out in fact - and not much of an asset to the artillery regiment he was conscripted into. But he knew how to make connections.
The common assumption is that there are, or rather were, two types of oligarch in Russia. The first type agreed the informal, tacit contract that as long as they did what Putin wanted after he became president, both for himself personally and for the sake of Russia, they could keep their ill-gotten money, remain unmolested by the state, and indeed enjoy official perks and protection – easy contracts and the like. The other type ended up in jail, dead or exiled.
Abramovich would be the most spectacularly successful of the first group. He is reputed – he denies it – to have helped to build Putin’s ridiculously grandiose mansion and his absurdly big yacht. Using parliamentary privilege, David Davis, the Tory MP, expressed his own views about Abramovich in January: “It is worth reminding people of Mr Abramovich’s background and the character of the man. We are speaking here of the man who manages President Putin’s private economic affairs, according to the Spanish national intelligence committee. This is a man who was refused a Swiss residency permit, due to suspected involvement in money laundering and contacts with criminal organisations. Abramovich was also deemed a danger to public security and a reputational risk to Switzerland.”
Again, it is only fair to add that Abramovich and his representatives have hotly denied that he has any sort of special relationship with Putin, the Russian state, the Kremlin or the like. It is also reported, though, for example, the defence ministry places contracts with Abramovich’s steel works.
When it comes to Abramovich's famous purchase of Chelsea in 2003, some claim that those around Putin were actually annoyed that Abramovich was spending such a large sum – £140m – in Britain rather than in Russia. Then again, Abramovich spent about $700m (£530m) on new schools and hospitals in the remote and neglected Chukotka province while he served as governor at Putin’s behest between 1999 and 2006. That might have looked as if it was a bit of a punishment assignment from Putin – an opportunity to put something back. What our own Boris, Johnson, would call levelling up. Chukotka, where winter temperatures drop to -60C, basically makes Siberia look like Vegas.
According to Abramovich, though, he went there on his own mission: “Everyone’s got their own reason. Some believe it’s because I spent some of my childhood in the far north that I helped Chukotka, some believe it’s because I had a difficult childhood that I helped Chukotka, some believe it’s because I stole money that I helped Chukotka. None of these is real. When you come out and you see a situation and there are 50,000 people [the total population of the area], you want to do something. I haven’t seen anything worse than what I saw there in my life.”
Whatever, Abramovich has rarely if ever criticised Putin in public, and even now, with the Chelsea sale, pledges to give the proceeds to a fund “for the benefit of all victims of the war in Ukraine”. At least he said “war” rather than the preferred “special military operation”. As far as can be judged, the pair go back a long way, and are bound up with mutual dependence. Even so, Abramovich speaks to Putin in the more polite Russian form of “you”, rather than the more familiar chummy version reserved for close friends or family. Putin, Abramovich says, is “more senior”.
Abramovich's lawyers have previously stated that he “is someone who is distant from Putin” but in the eyes of the British government he qualifies for sanctions. In that announcement Liz Truss, the foreign secretary, suggested he and the other sanctioned oligarchs have “blood on their hands”.
Abramovich, to the surprise of many, has played an informal role in Ukraine-Russia peace talks. Having said that, his involvement has lapsed into a couple of mysteries. One was how he came to apparently suffer symptoms of a suspected poisoning, along with some of the Ukrainian team at informal peace talks on the Ukraine-Belarus border. American officials have suggested that he wasn’t actually poisoned but the victim of “environmental factors”, while Russia also says he wasn’t poisoned. In the initial reports there was blame directed towards Russian hardliners seemingly intent on scuppering negotiations.
He has lived comfortably for a very long time, despite the odd unexplained incident of potential poisoning. Even as the appointed governor of Chukotka he was allowed to retain the oligarch lifestyle and he kept all his toys, which by then rather put the rubber ducks in the shade. Until he was sanctioned, his assets reportedly included, in no particular order: business interests, mostly in Russia, in steel, pharmaceuticals, property, food processing and magazines; an investment vehicle called Millhouse; Chelsea FC; two mega-yachts; a Boeing 787 Dreamliner converted into a private jet; loads of cars and paintings; a £150m mansion in Kensington Park Gardens, plus an estate in West Sussex; some pads in San Tropez, New York… and so on.
To an extent, Abramovich's ownership of such a high-profile western asset as Chelsea FC also offered a little protection if he fell out of favour in Moscow. He certainly took great personal interest in the club – he was famously impatient if failure persisted, saying: “The fact that there is no set formula for winning football matches – a coach and his or her squad have to consider many factors when approaching each match. It’s like every few days is a new exam and the work you have put in gets evaluated. I enjoyed, and still enjoy, the unpredictability and seeing how each game plays out.” Chelsea FC was a favourite plaything; one he took very seriously.
Three of his most valuable possessions are/were intangible: his citizenship of Israel (under Israeli law anyone with a Jewish background enjoys the “right to return”); his Portuguese/EU citizenship (again granted under a scheme for people of Jewish heritage); and his British “golden visa” granted automatically because of his significant investments in the UK. He is a proud Russian, but he has, or had, options.
Abramovich is a living god of modern materialism; and for a while an acceptable face of Russia, through his association with Chelsea and the transformation of English football into the preeminent force in sport. To others he is a symbol of all that has been bad about Britain’s relationship with Russia. The outspoken Labour MP Chris Bryant argues that “we prostituted ourselves as a nation because we were mesmerised by Russian bling”. Abramovich says only that money “cannot buy you happiness. Some independence, yes.” With so much to spare, it would be difficult for him to avoid being a philanthropist, and he has been a generous supporter of causes in Siberia, Chukotka and various Jewish charities (his heritage is Ashkenazi Jewish).
Gentle, clever, a little introverted, slight of build, with striking clear blue eyes and his own grey-reddish-brownish hair, he is one of life’s survivors, at least up until this crisis. He’s been through countless business deals, three marriages, and divorces, and has seven children, but we don’t know that much about his private life, and he rarely gives interviews.
We do know he turned 2,000 roubles (ie not much) into more than $10bn, at the peak of his wealth, and he must wonder what his future might be in a world with sanctions but without Putin. One thing he said to The Observer back in 2006 is worth noting: “There is a Russian proverb: ‘You never say that you’ll never be in jail or never be poor.’” Da to that.