Russia’s ultra-rich count cost of $83bn wealth wipeout

Market declines have been so extreme that Russia’s central bank halted local trading on Monday, meaning some of the losses are understated.
Image: Vagit Alekperov

Russia’s billionaires are starting to feel the heat.

The broadside to their fortunes has been swift since President Vladimir Putin’s decision to invade Ukraine. Russia’s ultra-rich who rank among the world’s 500 wealthiest people have now lost a combined $83 billion this year, according to the Bloomberg Billionaires Index.

Market declines have been so extreme that Russia’s central bank halted local trading on Monday, meaning some of the losses are understated. Shares of London-listed Russian companies, from gas producer Novatek to steelmaker Severstal, tumbled by more than 50% on Monday after the US, UK, European Union and other countries ratcheted up sanctions.

On top of the paper losses, penalties are starting to hit closer to home.

Roaming the skies in their Boeing, Gulfstream and Bombardier jets is now trickier after the EU joined the UK on Sunday in banning Russian-owned private planes from its airspace. Their discreet purchases of high-end London real estate may get more difficult, too, with the UK fast-tracking legislation that would require foreign property owners to disclose their identities, rather than hiding behind holding companies.

The EU on Monday adopted sanctions on some of Russia’s ultra-wealthy, including metals tycoon Alisher Usmanov, Alfa Group owners Mikhail Fridman and Petr Aven, and steel magnate Alexei Mordashov. The measures also impact Putin’s longtime spokesman Dmitry Peskov, state-media figures and senior military officials. Also on Monday, Switzerland implemented travel bans on five oligarchs close to the Russian leader and said it will close its airspace to all flights from Russia, including private jets.

Combined with the sanctions already in place in the US and UK, the latest round of targeted penalties suggest governments may be viewing Russia’s rich elite as another key pressure point as Putin continues his invasion of Ukraine.

Russia’s $1.5 trillion economy is already reeling from sanctions that targeted key banks and may prevent Putin from accessing the bulk of more than $640 billion in central bank reserves. Those restrictions have roiled the nation’s markets and are having a knock-on effect on some of the country’s largest fortunes.

Lukoil PJSC chairman Vagit Alekperov has seen his net worth tumble by about $13 billion this year, the biggest drop among the 22 Russian billionaires on Bloomberg’s wealth index. The oil company’s London-traded shares slumped 62.8% on Monday.

Gennady Timchenko, one of the first oligarchs to be sanctioned by the UK, has lost almost half of his net worth this year, with his fortune plunging $10.6 billion. Fellow Novatek shareholder Leonid Mikhelson has seen $10.2 billion erased from his wealth in 2022.

The Ukraine crisis has also sharpened the focus on Roman Abramovich, one of the most high-profile billionaires with assets including a stake in steelmaker Evraz Plc and Chelsea Football Club.

Abramovich handed control of Chelsea FC to the trustees of the Premier League soccer club’s charitable foundation on Saturday. A spokeswoman said he’s also been approached by Ukraine to help broker a peace with Russia.

Aside from the football club, which could be worth more than $2 billion, many of his other assets are also outside of Russia or listed on foreign exchanges. His stake in Evraz is listed in London, as are holdings in energy firms Velocys Plc and AFC Energy Plc, while his position in tech company Yandex is listed in the US.

His real estate holdings range from Israel — where he’s a citizen — and France to a mansion near Kensington Palace in London’s billionaires row. New York property records show he transferred a mega-mansion on the Upper East Side to his ex-wife in 2018.

Abramovich, 55, who is not currently on the UK’s sanctions list, has a net worth of about $13.9 billion, down by about $5 billion this year, according to Bloomberg’s wealth index.

As for those who might be subject to EU sanctions, their private jets are on the move. Usmanov’s Airbus A340 left Munich on Monday and departed EU airspace. As of 3:23 p.m. New York time, it was flying over the Black Sea, destination unknown.

© 2022 Bloomberg

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