EDITOR’S LETTER: PRIVATE DUMA

“One” with nine zeroes – or “nine zeroed one”. That’s the person’s fortune in rubles that gives him the chance to get place in billionaires’ rating of “Finans.” magazine (pages 10-39). I’ll show you main differences between a new rating and the previous one that’s been published on February 16, 2004.

First, the number of billionaires increased to 468 (last year there were 154 of them). Representatives of construction industry, food industry, commercial organizations and information technologies that have never been included into list before are added now. Because nowadays public gains more information considering those companies.

Second, we changed rating method drastically. We included into fortune rate not only the estimated cost of businessman’s property but the large scale incomes gained from business activity. Considering big companies’ inclination for huge dividends (liable to a tax by low tax rate) it’s a serious “plus” of our new rating.

Third, at the “tail part” of the list were placed rich men whose fortunes are hard to estimate because of the lack of information. Those businessmen are charted from 423 to 468, their fortunes are considered to be no less than 1 billion rubles per person. “One billion in rubles” is a minimal estimation for them. In fact, their capitals could be much bigger.

Rating covers 468 billionaires whose total fortune is equal to $175 billions. It’s a third of Russia’ gross domestic product, at the same time it exceeds federal budget planned expenditures for 2005 by 60%. The Governor of Chukotka Roman Abramovich tops the list with $11,5 billions. His fortune is 36 times more than this year Chukotka’s budget incomes. 39 billionaires whose fortunes are estimated in US dollars and 429 “ruble billionaires” are included into the rating list. Total fortune of Top 10 billionaires has been estimated as $66 billions, the same of Top 100 – as $144 billions.

I want to make it clear: businessmen’s fortune estimation couldn’t be considered as ultimate authority. It is an estimation although made by quite proper method. Everybody knows that “two by two” in business could differ from “four”. Sometimes it is five or even zero. One may posses a plant and to have personal fortune estimated as $400 millions, but at the same time the same person does not get incomes – and more than that, this plant’s owner could be in a position when he/she puts up money into unprofitable business. Or to be an owner of a big construction company that depends upon “credit needle”. One may own a company with $50 millions profit, and one may sell it for $200 millions - while convincing potential buyer of optimistic business’ prospects.

The estimation is not necessary has an application study character, because many of list’s personages will never sell their property. In view of many reasons: some of them promised do not sell their nominal shares (Lukoil managers Mr. Vagit Alikperov,# 11, and Mr. Leonid Fedun,# 18), some because of unconquerable feelings to their plants (Mr. Gia Gvichiya,# 286), some because of the lack of direct ownership (Mr. Vladimir Bogdanov,# 7) or it could be partners’ disagreement to sell share holding or some informal arrangements. Finally, any property could be lost. A year and a half ago Mr. Mikhail Khodorkovsky was considered to be the richest man in Russia, but because of political ambitions he resides only the 109th place now.

To the prognosis. Standard & Poor’s Agency granted an investment rating to Russia, it means Russian business will rise in price. Next year “Finans.” will compile the list of 600 billionaires at least. Incomes of Russian people grow, that’s why any company that operates in consumer market (foodstuff and beverage, agriculture, information technologies, financial services, household goods, trade) will develop rather fast, including companies aimed at domestic goods and import. Business that is called “small-scale” now could become quite “enough” to give its masters places in “billionaires club” next year.

Everything depends on you. Dig information on how people become rich and do it yourselves!

Oleg Anisimov, Editor-in-chief

The main text: 450 RUSSIAN BILLIONAIRES

Rating. In 2005 the “Finans.” billionaires list became three times longer. Its “tail part” increased at the expense of representatives of non-resource industries. There are qualitative changes on the top as well.

“F.” changed rating compile method slightly (compiling the last year rating we took just the first step by introducing revenue earned for previous period into fortune’s estimation). We see a new method as more adequate for the XXI century, it allows to estimate person’s fortune more precise than classic technique based on stock price in a businessman ownership. Detailed rating method see on page 22.

“One” with nine zeroes. One billion rubles is necessary and sufficient condition for a person to be included into the “F.” list of the richest Russian people. One billion US dollars is considered to be a dream for the most part of business community. It’s a dollar definition for the word “a billionaire” that takes on special weighty and unachievable significance.

The number of “dollar billionaires” increased from 25 to 39 for one year. One could figure on increasing it twice but Yukos’ stockholders rolled down to the second Top 100 now – but last year part of them has been included into “fond” list, other part has approached to it closely.

As a year before on top of the chart is the Governor of Chukotka Roman Abramovich with his $11,5 billions fortune. His fortune decreased by 4%. It could be explained by depreciation of Yukos share holdings which are in possession of Sibneft owners now (see details on page 34). Today the second place belongs to Mr. Oleg Deripaska, who is Roman Abramovich’s former partner in aluminum and motor-car markets. Secret for his material well-being is a very simple one: Oleg Deripaska is the only proprietor of Bazovyi Element holding and of Russian Aluminum.

The last place in the Top 3 is for the chairman of Alpha Group Mr. Mikhail Fridman. Besides him, the list of “dollar billionaires” covers other Alpha Group co-owners Mr. German Khan and Mr. Aleksey Kuzmitchev. All of them are the graduates from Moscow Institute of steel and alloys.

Metallurgy yields a good harvest. Oil industry workers are considered to be Russia richest people. It is not true: a half of the first Top 10 consists of co-owners of metallurgical companies. Mr. Viktor Vekselberg pushes metallurgists through because he made his $6,3 billions fortune in oil market (TNK-VR) as well in metallurgical one (SUAL-holding).

A step before him walks Mr. Vladimir Lisin, the owner of the Novolipetsk Metallurgical Industrial Complex (NLMK). For a long time the NLMK declared itself as a privately owned enterprise and it’s owner Vladimir Lisin refused all proposals of stock floatation. He was sure that metallurgical companies were seriously unappreciated. But last autumn the businessman changed his opinion. The company is planning to get a data-sheet at foreign brokers’ boards and to increase a number of shares in free market. Vladimir Lisin believes that his company has 40-percent potential of capitalization growth at the least.

The state value of Mr. Aleksey Mordashov, the General Director of the Severstal Group, increased 53%. Against a background of quick fortune growth of the most part of the metallurgists we see fortune diminution of the co-owners of the Norilsk Nickel Mr. Mikhail Prokhorov and Mr. Vladimir Potanin. In percentage ratio this decrease is not drastic, only 8%, but it moved Mr. Mikhail Prokhorov from the 2nd position to the 9th, and Mr. Vladimir Potanin from the 3rd position to the 10th.

The decline of shares of the Nornickel is to blame for that. At the beginning of 2004 the price of stock certificate was about $70, in spring it went up to $80, but after that it streamed down. By the middle of summer it crashed down to $45. After that there was growth to $70 and another fall to $45. And if there were not partial rehabilitation of shares in January Vladimir Potanin would leave the Top 10 and give his place to the NK "Lukoil" President Mr. Vagit Alekperov.

During 2004 the considerable part of metallurgical assets changed it’s owners. Vladimir Lisin, the principal owner of the NLMK, obtained the control over the Stoilenskiy GOK (ore mining and processing industrial complex). Mr. Alisher Usmanov and Mr. Vasiliy Anisimov obtained the Mikhailovskiy GOK and a share holding of the Tulachermet. Owing to lucky bargains Alisher Usmanov literally rushed into the magnificent dozen whose fortune is more than $2 billions according to the “F.” estimation.

In December 2004 another considerable event took place. The governing body of the Magnitogorsk Metallurgical Industrial Complex (MMK) bought out the parcel of the Mechel steel group and state owned share holding. And nowadays the top-managers control almost 99% of the MMK, they are going to float stocks. Evidently only after that the MMK owners structure could be exposed. According to the “F.” sources Victor Rashnikov, Vyacheslav Egorov and Andrey Morozov are among the MMK governing stockholders. Victor Rashnikov became the MMK General Director and after that Vyacheslav Egorov took the position of the Chairman of the Board of Directors. Andrey Morozov is the First Deputy General Director of the MMK and being a first assistant of Victor Rashnikov he is responsible for financial and economic alignment. Each of them fortune could be estimated of more than $1 billion pro tanto.

Not all billionaires do that. The 6th position belongs to the first representative of non-recourse sectors Mr. Vladimir Evtushenkov. When MTS shares went up, his fortune had grown by a half, up to $6 billions. In a month the AFK Sistema intends to install IPO, from then on the Russian businessman will be the direct owner of shares with summary cost of a few billion dollars. Today the fortune of Mr. Vladimir Evtushenkov consists of indirect ownership (through the AFK Sistema) of share holdings in MTS, MGTS, Nauchniy Centr Concern and others.

The next non-resource businessman is holding only the 41st position. It’s Mr. Rustam Tariko, the owner of Russian Standard vodka brand and of the bank of the same name. Last summer he came to agreement with French BNP Paribas bank concerning selling 50% of his bank for $200-300 millions. But the French have not got shares one of the leaders of consumer credit market. Getting information on preliminary financial results of the bank for 2004 Rustam Tariko decided he could sell too cheap. There was gossip in the market that by Rustam Tariko’s estimation a new price of Russian Standard is considered to be $1 billion.

The lower we go down the list we meet more people who made their fortunes in consumer markets: through trading, construction, foods and beverage.

Surgut’s enigma. Mr Vladimir Bogdanov, the head of Surgutneftegaz is a special figure in “dollar billionaires” list. As a person he owns lesser than 0,4% of company’s shares with cost of $94 millions. But company’s management controls more than 60% of Surgutneftegaz shares. The scheme of cross-ownership between associated company and its subsidiary has its advantages (management paid nothing for the control over the oil giant) and its imperfections. The administrative staff doesn’t have any owner’s right to the shares. Any manager who quits the company (retired or due to the illness, for example) will keep only those shares that belong to him/her personally.

At the same time management always has good chances to convert part of controlled shares into its own property. As an example one should recall the situation in the market in spring of 2003 when outside investors had carried out the mass buying up of Surgutneftegaz shares. The oil company management decided to raise security level of control over shares and begun transformation of Surgutneftegaz public corporation into the Leasing Production Ltd. But during about six months of 2003 shares of “mother company” owned by oil company Surgutneftegaz have been passed from hand to hand through some unknown “structures” (reports of that period revealed that Surgutneftegaz public corporation had lost its shareholding in oil company Surgutneftegaz and vice versa). Because of that the estimation of Vladimir Bogdanov’s fortune was carried on base of shareholding’s price – by taking into account that shareholding were controlled by the Leasing Production.

Moreover, we included into rating two more managers of Surgutneftegaz who have serious influence on decision making including operations with shares. They could be found in billionaires’ supplementary list. This list covers billionaires whose fortunes are impossible to estimate precisely. So then rating’s rookies are Sergey Ananiev and Vladimir Ashikhmin. Sergey Ananiev is being called “potential successor” to Vladimir Bogdanov. At the moment he is the head of one of the subsidiary oil producing companies; he’s the part of the lobby for Surgutneftegaz in a regional Legislative Assembly. Vladimir Ashikhmin is the Director General of the Leasing Production. Usually to hold such a key post one has to be a part of inner circle.

Gas tycoons. The control packet of Gazprom shares belongs to the state and other floaters are scattered widely. That is why the biggest Russian company is not a proper provider of billionaires for the “M.” rating. But private gas companies take their share.

For a long time Itera considered to be the gas company#2. But Gazprom changed its governing body as a consequence alignment of forces in the market changed too and Itera lost its positions. Unlike the Intera’s owner Igor Makarov the management of the Novatek company succeeded in obtaining warm relationships as with previous as with a new governing body of gas monopolist. Novatek has free access to “a tube” and nobody has legal proceedings with the company for gas pools. Last year the Novatek shareholders came to an agreement with the French Concern Total on selling 25% of shares for $850 millions. And on the grounds of this agreement with Total Leonid Simanovskiy, Leonid Mikhelson and Iosif Levinzon entered the “F.” billionaires list.

The Gazprom chief Aleksey Miller goes into all lists of influential businessmen but he cannot be included into the “F.” list because he doesn’t have the necessary 1 billion in rubles as his personal fortune (we don’t know anything about his secret property). In much the same way we did not include in this list the President of the RAO EES of Russia Anatoliy Chubais who officially owns only a few millions US dollars. But we could not but to refer to him because per se he is a co-author of the “F.” rating. His privatization schemes lie in the foundation of today business-landscape.

Achievements in sports. Business does not have a share in politics (have a look at Mikhail Khodorkovsky’s fate), business collaborates in sports. But billionaires’ passions are rather monotonous: they buy football clubs.

The Vice-president of the Lukoil Leonid Fedun has always been keen on Russian football – suffice is to recall his readiness to pay salary for a foreign coach for our national team of his own pocket. And last year Leonid Fedun and his partners bought Moscow club Spartak. And though the football club takes scanty share in Leonid Fedun’s personal fortune this deal allowed former Spartak President Andrey Chervichenko to take his position in billionaires’ rating. But only among ruble billionaires. There are more billionaires-owners of football clubs: Ivan Savvidi (Rostov), Oleg Deripaska (Cuban) and Roman Abramovich (Chelsea). Often the owners of clubs are the companies that are under the control of billionaires. For example Sibneft owns the hockey club Avangard, BD Sankt-Peterburg owns Senith, Norilskiy Nickel owns the basketball club CSKA and the football club Moscow etc.

But the billionaires are not alone: there is an oncoming traffic. Sportsmen turn to be billionaires. In December 2004 the “F.” presented the rating of 100 richest sportsmen in Russia. According to this rating the richest sportsmen were hockey players. And it’s small wander that the representatives of this kind of sport entered in our billionaires’ listing. Aleksey Yashin, Pavel Bure and Sergey Fedorov share with each other the 1st position in the richest sportsmen rating of passed year though by total revenue Pavel Bure excels his colleagues considerably.

Family traditions. There is no family business in a literal sense in Russia because none business ever been handed over children or grandchildren yet. Nevertheless the situation when alliance do business together is rather typical in Russia. For the most part “the family business” centre in trade and food industry. The richest among the families are the trio Mikhail Gutseriev-Sait Gutseriev-Mikhail Shishkhanov. Business interests of this family are rather diverse. Mikhail Gutseriev is engaged in oil (Russneft’), Sait Gutseriev specializes in real estate and trade (PFK BIN), interests of Mikhail Shishkhanov lie in financing (BIN bank).

Brothers Yakovlev, Igor’ and Oleg, created trading network El’dorado. Unlike other electronic goods retailers who accommodate their head-quarters in Moscow El’dorado began with developing it’s business in regions and only after that the network arrived in the metropolis. The triad of the richest families is closed by brothers Mikhail and Boris Zingarevich who are the shareholders of the timber industry holding Ilim Pulp.

The rush of Roman Abramovich into Big Business happened in the middle of the 90ies. At pawn auction he and his partner Boris Berezovskiy obtained control over the oil company Sibneft that was formed on the foundation of Noiabrskneftegas and Omsk petroleum refinery. He managed to do that for $100,3 millions only.

After the default of 1998 oil began to go up in price and it resulted in drastic improvement of oil companies financial index. Sibneft used taxation schemes in full scale and turned out to be a trendsetter in dividend policy. In 2000 the company paid out 1,4 billion rubles, in 2001 – 29 billions, in 2002 – 34,2 billions, in 2003 – 37,4 billions. And Roman Abramovich got the lion’s share of this payoff.

Pay-out of dividends coincided with the diversification of his business interests. With oil money Roman Abramovich began to buy aluminium assets. Oleg Deripaska who forced out the TWG group and dreamed of predomination in the aluminium market concluded an alliance with this rich oil industry worker. The mutual assets became a basis for the Russian Aluminium Holding that entered the Top 3 of the world biggest aluminium corporations.

Later Roman Abramovich and Oleg Deripaska developed their partnership in the Rusprpomavto project. But their union lived only 4 years. Roman Abramovich sold his share in the Russian Aluminium to Oleg Deripaska in two lots. Bazovyi element obtained control over auto-industry assets even earlier and those two deals brought Roman Abramovich more than $2 billions.

At the same time he tried to sell his share of the Sibneft. Both tries of consolidation with the oil company Yukos failed. According to another scenario the owners of the Sibneft in addition to stock exchange had to obtain dollar adjustment of $3 billions. Money was paid off before the state attacked Yukos and the structures that belong to Roman Abramovich still keep it. It means that Roman Abramovich could be considered a winner and the owners of Yukos became big losers.

The lame amalgamation of two oil companies is the best illustration of Roman Abramovich’s business mode. It could be expressed as following: “He makes money of air”. And only one businessman is as lucky in his projects as Roman Abramovich – this is Mikhail Fridman. But one of his latest projects – the purchase of blocking share holding of Megafon – doesn’t bring profit as yet.

Romancing over Chukotka. Five years ago the situation seemed to be a good joke: a Ukrainian who looks as a Jew and resides in Britain is the Governor of Chukotka. The real reason for “walking into Chukotka political power” is known only to Roman Abramovich and it hardly has anything in common with the official slogan: “I feel sorry for Chukchi people”. However Chukotka became another milestone in his life: before that Roman Abramovich has been a strictly closed person, after that he became a public figure.

Nobody knows why he needed public attention before 1999 elections to Gosduma when belonged to Vladimir Gusinskiy NTV unleashed media war against the so called Family. During this war Roman Abramovich was automatically demonized. A person who went into public politics in such situation either failed to think over his strategy or longed unconsciously for public attention. Roman Abramovich doesn’t correspond to the first type as all his ins and outs are mathematically calculated.

Chukotka endowed Roman Abramovich not only publicity – he became a folklore character also. People began to exchange jokes on “chukchi people and Abramovich”, he gained the title of “the main Russian chukchi” and his football club Chelsea gained the title of “cukchi team” in the British premiere-league.

But he wasn’t Roman Abramovich if he did not derive profits of his governing position though in Chukotka. The Audit Chamber check-ups showed that in 2001-2003 Sibneft, Russian Aluminium and other Roman Abramovich related companies got 28 billions rubles as tax bonanza. But the presence in Chukotka big companies and consequently big tax payers turned good for this region budget and its population existence. In fact Roman Abramovich activity in the eastern frontier of Russia reduced to humanitarian aspects, to secure chukchi vital functions and his overall objective to convert economically collapsing Chukotka into “new Alaska” was not achieved. But may be he never intended to pose such an aim.

By the way there were a funny story with Roman Abramovich’s plane and to blame for this is the British press. The Times published a brief article on the billionaire’s purchasing of Boeing 767-300ER for 560 millions pounds, i.e. more than $1 billion. After the competent British newspaper this news was published in other British and Russian papers. Previous Roman Abramovich’s purchases made journalists and readers to believe that the Governor of Chukotka buys only the best and the most expensive items and nobody pondered over the fact that the air-liner that costs $1 billion does not exist at all. In a day the British newspaper has to publish a disclaimer and to name a real price of 56 millions pounds.

But Roman Abramovich air fleet still costs less than his navy. The Governor of Chukotka owns the yachts Le Grand Blue, Pelorus and Extasea. According to Lloyd’s List summary value of this fleet is more than $370 millions. The businessman’s favorite yacht Extasea costs $130 millions. During European football championship in Portugal Roman Abramovich’s yachts became a kind of Russian enclave and different high society events took place on board.