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#13 - JRL 7254
International Herald Tribune
July 17, 2003
Meanwhile: Russian oligarch turns big-time soccer fan
By Marshall I. Goldman

CAMBRIDGE, Mass. Roman Abramovich's purchase of the Chelsea Football Club caught London soccer fans by surprise. Who is this billionaire from nowhere? The governor of Chukotka-what? Are there any more out there like him? After all, there are other football clubs that could use a few hundred million pounds.

For those with football clubs there are indeed other Russian oligarchs out there who are increasingly eager to ship their money outside of Russia. Forbes Magazine now lists 17 Russians on its roster of the world's richest. Not bad, considering that only 15 years ago no Russian was worth more than a few thousand dollars.

This eagerness to invest outside of Russian may be related to the fact that the Putin government just put one of the oligarchs in jail for what it calls the illegal takeover of a fertilizer plant in 1994. An associate was arrested on charges of murder. Two others from the same company, Yukos - including the chairman, Mikhail Khodorkovsky, worth over $8 billion - have been called in for questioning about the same deal as well as tax evasion. Khodorkovsky has been disbursing tens of millions of dollars to various political parties to help them challenge Putin and his party in the forthcoming elections.

Two other one-time oligarchs who got into politics, Vladimir Gusinsky and Boris Berezovsky, both are in exile, while Putin has control of their former TV networks.

Abramovich has so far avoided a similar run-in with Putin. Even though he was originally a Berezovsky prot?g?, Abramovich was the one who arranged for the transfer of Berezovsky's TV network to the state. He helped finance Putin's 2000 race for president. True, at one point he also took a seat in the Duma, representing Chukotka, and he later decided to upgrade his position to governor. But neither position threatens Putin.

Chelsea fans will be pleased to know that regardless of his carpetbagger status, Abramovich has taken his job as governor seriously. Located on the Bering Strait near Alaska, Chukotka is desperately poor. To help it economically, he brought in staff members from his company, Sibneft, Russia's fifth largest oil company, to help develop the province economically. Besides, when Abramovich adds his income to that of the 74,000 impoverished residents of Chukotka, he brings up the per capita income of the region from near last among Russia's provinces to fourth, double that of the average for the entire country. But more importantly he has invested some of his own money to help develop tourism and drill for oil.

He is very likely to nurture his investment in Chelsea in much the same way, although in Chelsea's case, in all probability that will mean buying new players.

He can afford it. Forbes listed his net worth as $5.7 billion. Much of that has been shifted to Millhouse Capital, his London-based investment holding company. As best we can tell, between Milhouse and a variety of other entities, Abramovich owns or controls 80 percent of Sibneft. Until Khodorkovsky's run-in with Putin, his Yukos was due to merge with Sibneft to create a $35 billion conglomerate. Abramovich also owns 26 percent of the former state airline Aeroflot, which, along with Sibneft, he also took over from Berezovsky.

The games that Putin, the oligarchs, the tax authorities and the KGB are now playing concern not only soccer fans, but the foreign community as well, particularly the energy and business sector. Foreign investors who were just beginning to feel comfortable about investing in Russia now must have second thoughts. British Petroleum, which has just agreed to put in $6 billion, in particular must be watching carefully.

Putin has promised to double Russia's GDP within 10 years. To do this he must attract not only domestic but foreign investors. It is hard to see how he can reconcile his suspicion of anyone with power with his role as a national leader promising greater prosperity for the country at large.

The author is associate director of the Davis Center for Russian and Eurasian Studies at Harvard University and author of "The Piratization of Russia: Russian Reform Goes Awry."

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