YOU ARE HERE: LAT HomeCollections

Russians take their wealth to Britain

December 02, 2007|Lynn Berry | Associated Press

LONDON — Roman Abramovich is Russia's richest man, with an estimated fortune of more than $20 billion. But if you want to see his money, visit London.

Abramovich owns the Chelsea soccer club, one of Britain's most famous. He has bought several homes in the British capital and countryside, including a 400-acre country estate.

Russian businessmen have flourished under President Vladimir V. Putin, with the number of millionaires rising sharply every year. But despite Russia's growing economy and Putin's firm grip on the government, many of the country's wealthiest have little faith that their money or their families are safe.

London has become their refuge. Russians are sinking billions into property to establish a foothold in Britain, seen as even more important now that Putin's second term is winding down and uncertainty is rising over who will be president after elections next spring.

"With 2008 approaching, anyone now who has money wants to put it in a safe place," said Grace Margolies, a real estate agent who is half Russian and works exclusively with the Knight Frank agency's Russian clients.

Most of the Russians in London keep a low profile, but their growing presence is felt. Russians last year bought 316 properties worth at least $2 million each, a survey by the agency found. They bought 65 in 2000, the year Putin became president. In all, an estimated 300,000 Russians, including about a dozen of Russia's new billionaires, have homes in London.

The Russians find in London a financial climate that has long attracted wealthy foreigners. Under Britain's favorable tax regime, their assets are secure.

When Russians shop for a London residence, security is high on their list of requirements, Margolies said. They want a doorman, alarm systems and closed-circuit television surveillance.

Security also is among the reasons an increasing number of Russians send their children to Britain's private schools and universities, said Hilary Moriarty, director of the national Boarding Schools Assn.

Two years ago, Elizaveta Slesareva, 15, was newly enrolled at St. Peters, a boarding school in the city of York. At the midterm break, went to Moscow to visit her parents. Shortly after returning home, she and her parents were killed when their car was sprayed with bullets.

Her father, Alexander Slesarev, was the owner of Sodbiznesbank, which had been at the heart of a banking crisis in 2004. The Central Bank pulled its license, accusing Sodbiznesbank of money-laundering, and some depositors did not get their money back.

The wealthy Russians in London maintain an element of secrecy, a sign of the Soviet culture of fear that has returned. They do not stand out as Russian and are drawn to quintessentially British neighborhoods, such as Mayfair and Knightsbridge.

But they were thrown into the spotlight last year when former KGB officer Alexander Litvinenko was poisoned in London with polonium-210, a radioactive substance. His family and friends have blamed Putin, who has denied involvement.

The British and Russian governments have traded charges of cover-up. Britain has criticized Russia for its refusal to hand over the main suspect in Litvinenko's death, also a former KGB officer. Putin has accused Britain of harboring Russian "criminals and terrorists."

Britain has refused to extradite Boris Berezovsky, a billionaire tycoon and fierce Kremlin foe who was Litvinenko's patron. Russian prosecutors say Britain also has refused to turn over two of Berezovsky's associates and three other Russians who once worked for Mikhail Khodorkovsky, the jailed founder of what was once Russia's largest oil company. The three had fled to London to avoid arrest in the politically charged case.

Khodorkovsky chose to stay and fight the Kremlin for control of Yukos Oil Co., but in the end he was imprisoned and his company was taken over by state-controlled oil company Rosneft.

The lesson was not lost on Mikhail Gutseriyev, the billionaire owner of another Russian oil company. After resisting for months what he called "unprecedented bullying" by the state to give up his company, he fled Russia in August when a warrant was issued for his arrest. He is reported to be in London.

The companies of numerous other Russian businessmen have been taken over by the state or more politically powerful rivals.

It is the weak protection of property rights in Russia that drives Russians to buy property in London or put their money in Swiss banks, said Andrei Illarionov, Putin's former economic advisor who was fired in late 2005 after becoming increasingly critical of Kremlin policies.

"The political regime that has been formed over the past eight years deprives property owners of any guarantees on Russian territory," he said recently on Ekho Moskvy radio.

Russians who have parked their money in Britain include both those who oppose Putin and those who remain in his good graces, such as Abramovich, Russia's richest man.

Russia now has 53 billionaires, 19 more than last year, according to the annual list compiled by Forbes magazine. Most made their fortunes in oil, steel, mining and metals.

The number of millionaires also has jumped, reaching 119,000 in 2006, up 15.5% from the year before, according to a study by Merrill Lynch and the consultant Capgemini. The number was up 17% in 2005.

Russians are the buyers of 20% of homes sold for $8 million to $10 million, said Liam Bailey, head of residential research at Knight Frank.

Many of the properties are bought with children in mind, said Margolies, the real estate agent. In some cases, a businessman is providing a safe and comfortable home for his family, while he commutes to Moscow, a four-hour flight away. In others, the London apartment serves as a base for parents visiting their children or is purchased for children who are attending university in London or starting professional careers here.

Los Angeles Times Articles