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Global economic crisis affects Russia's wealthy.



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RN PM Global economic crisis affects Russia's wealthy

03/12/2008

MARK COLVIN: Until a few months ago, Russia's richest people were enjoying a gilded ride to ever-greater wealth. Booming stock markets and soaring oil and gas prices saw more and more becoming billionaires. Those who were already billionaires became multi-billionaires.

Now many wealthy Russians are on a wild ride downwards, as the financial crisis bites huge chunks out of their fortunes. But some analysts say what's proving a pain for the wealthy could be a powerful gain for the Russian Government.

Moscow correspondent Scott Bevan reports.

(Sound of music blaring)

SCOTT BEVAN: In a vast pavilion in Moscow, the beat of the music drives fur coat-adorned women and tuxedo-clad men towards rich pickings.

This is the Millionaire Fair, a trade show where the well-heeled can buy just about anything, from rare books to sports cars and helicopters.

And the rich are the kind of clientele this exhibitor loves.

EXHIBITOR 1: A lot of people have a lot of money and they want to buy everything very expensive.

SCOTT BEVAN: In that case, they've come to the right place. The Millionaire Fair's founder is Yves Gijrath.

YVES GIJRATH: The value is more than a billion Euros, which is here.

SCOTT BEVAN: That's about $2-billion. And that's not counting the value of the real estate on offer to those who never have to ask "How much?" Well clearly, an ABC journalist doesn't quite fit that category, as I stand in front of a display model of a Moscow apartment development.

SCOTT BEVAN: Three room apartment, how much?

EXHIBITOR 2: Three room apartment- $3-million, $3.5-million.

SCOTT BEVAN: Dollars or roubles?

EXHIBITOR 2: (Laughs) Dollars. Still dollars. I hope. What will be tomorrow, I don't know.

SCOTT BEVAN: When it comes to money, many at the fair give the impression of not even having to think about tomorrow or the tumultuous past couple of months, for that matter

The Millionaire Fair's Yves Gijrath again.

YVES GIJRATH: The funny thing is everybody wants to know about the crisis. I think if you look around, my question is, is there really a crisis here? You know, I think it's also a media thing.

SCOTT BEVAN: Maybe there's not a crisis at the Millionaire Fair, but many of Russia's wealthiest people are feeling the effects of the global financial woes.

Russia's stock markets have plunged by more than 60 per cent since May, and oil prices, which have been a source of huge wealth for both the country and some of its billionaires, have dropped sharply.

Maxim Kashlinsky is the editor-in-chief of Forbes Russia magazine, which collates an annual rich list.

MAXIM KASHLINSKY: This year we had 87 billionaires. And of course, not all of them will make the list next year. Probably just 30 or 40, I don't know. We are still re-evaluating their fortunes.

SCOTT BEVAN: The Bloomberg news agency recently looked at the assets of the wealthiest 25 Russians on the Forbes list.

Based on how much share prices had dropped, Bloomberg estimated those 25 Russians had lost a combined $US230-billion.

ANDREY KORTUNOV: If you take very rough numbers, I think most of them have lost 50, 60, some of them 70 per cent of their money. Of course, it's paper money, but definitely these losses are very serious.

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Andrey Kortunov is the president of a non-government organisation called the New Eurasia Foundation.

SCOTT BEVAN: He says the crisis has revealed that many of Russia's wealthiest people have built their business empires on borrowed money, which now has to be repaid as their empires' value shrinks.

Some business leaders have turned to the Government for for help and it's obliged with some big promises.

Russia's Finance Minister Alexei Kudrin has estimated that by next year, about $55-billion will have been dished out from the country's Reserve Fund to help the economy and some of its leading players, through the crisis.

Andrey Kortunov again.

ANDREY KORTUNOV: It's becomes clear that our state dominates not just the political field but the economic field.

SCOTT BEVAN: It's a far cry from a decade ago during the era of the oligarch as a few made fortunes from former state assets and had a say in how the country under Boris Yelstin was run.

Yelstin's successor, Vladimir Putin, turned that around during his eight year presidency, cracking down on the oligarchs and their influence.

Andrey Kortunov says this financial crisis will help the state strengthen its dominance of Russia's rich as the bailout money can be used to exert even more control.

ANDREY KORTUNOV: Right now big businesses have become hostages to the State, in the sense that the State decides who is going to survive, who is going to prosper, and on what terms.

Maxim Kashlinsky from Forbes Russia magazine says he can't exclude the possibility of some billionaires being financially wiped out by the crisis.

But he's confident that Russia's rich like the country itself will quickly bounce back.

MAXIM KASHLINSKY: It's actually in Russian DNA to reorganise fast, to think fast, to cope with crisis, so probably Russian economy and Russians are more immune from crisis than others.

(Sound of music blaring)

SCOTT BEVAN: At the Millionaire Fair, the beat and the buying go on. Just as the champagne flows, so does the optimism, as founder Yves Gijrath makes clear.

YVES GIJRATH: There is also Louis Vuitton shops and there are still Ferraris, and all the hotels are still full, also in Australia my friend, so life goes on.

SCOTT BEVAN: But whether it's the life many of Russia's rich have become accustomed to, who would know. For the one thing that didn't seem to be on sale at the fair was a financial crystal ball.

(Sount of music blaring)

This is Scott Bevan in Moscow for PM.

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