Bailing out Russian oligarchs
Posted by Guy Faulconbridge
Not all of Russia’s rich businessmen are queuing up for a loan under a government rescue package offering billions of dollars in state funds to bail out oligarchs who have been badly hit by the global financial crisis.
Russian billionaires Oleg Deripaska and Mikhail Fridman this week got a total of $6.5 billion in loans from a state-owned bank to help them cover foreign debts secured against stakes in major Russian companies, according to industry sources.
But Alexander Lebedev says there is no reason state money should be used to save oligarchs, the name given to a small group of well connected businessmen who made fortunes in the chaos following the fall of the Soviet Union.
“Why is profit private but the losses put on everyone else? I don’t understand that at all. Why should the rich government save rich citizens. It is not right,” Lebedev told Reuters on the sidelines of an investor conference in Moscow.
“The task of the government is affordable housing, to subsidise mortgages, health and so on but not handing out billions of dollars to certain people,” said Lebedev, a former spy who made a fortune through banking deals in the 1990s.
Some of Russia’s richest men, many of whom borrowed heavily for expansion over recent years, have faced margin calls from banks on loans they took out secured against large stakes in Russian companies.
Wealth cold now be redistributed among Russia’s richest men as the state steps in to save selected businessmen from default.
Moscow stepped in this week to help some businessmen, a bitter-sweet reversal of the asset sales of the 1990s when the near-bankrupt state sold off some of the biggest raw materials companies to the oligarchs at huge discounts.
Deripaska, 40, was one of the businessmen blessed with a state bailout this week. He was ranked in May as Russia’s richest man by Forbes with an estimated fortune of $28.6 billion.
United Company RUSAL, majority owned by Deripaska, received $4.5 billion from state bank VEB to pay back debt to foreign banks, which it amassed to buy a stake in mining giant Norilsk Nickel, banking sources said.
The 25 percent-plus-two shares stake in Norilsk was used as collateral for the loan and UC RUSAL was at risk of losing it if it failed to pay back the debt.
VEB has also agreed to disburse $2 billion to Fridman’s Alfa Group to help it pay back a loan to Deutsche Bank and rescue Alfa’s large stake in Russia’s No. 2 mobile phone firm, Vimpelcom which was used as collateral with the bank.
“Why did Deripaska get the money? Why did he get $4.5 billion?” said Lebedev.
Russia’s richest men — who say they risked their lives to build private business empires — are viewed with hostility in their own country for buying some of Russia’s biggest companies at a deep discount from the state in the chaos of the 1990s.
Lebedev said a better way to manage a bailout would be to nationalise the stakes and then sell them off at a later date.
“You should just tell the population: ‘You got cheated in the 1990s. They gave it all to some chaps who have now brought it back again,'” he said. “Then you could then privatise these assets in a few years, but privatise them in the proper way, transparently.”
Lebedev also said he was opposed to the government’s use of VEB to invest directly in Russian stocks, a measure to calm Russia’s equity markets which have lost two thirds of their value this year.
“Why are they we so worried? Who gets hurt from the stock market? There are 800,000 people on that market and 500,000 of them are officials who bet their own money and a few dozen oligarchs.”