JANUARY 5, 2004
Just who is Roman Abramovich?
Roman Abramovich is one of the world's wealthiest men but he is surrounded by mystery. He is only 37 years old but it is estimated that the man from Komi, in the eastern part of Russia near the Urals, has built up a fortune of more than $6bn in the last eight years.
The death of both of his parents when he was still a child meant that Abramovich was brought up by his uncle, who worked in the oil business in Siberia. After completing his military service he studied the oil industry and then started working as an oil trader in Omsk. When the Soviet Union collapsed in the early 1990s Abramovich saw an opportunity and made a fortune buying oil at official prices from Soviet oil companies and then selling it on the world market for US dollars.
His success drew him to the attention of Russia's top oil baron Boris Berezovsky, who introduced him to the inner circle of Russian president Boris Yeltsin. By 1995 Yeltsin was in trouble and under electoral threat from the former Communist rulers. He needed money and he went to Berezovsky for help, not just in funding but also with the media, as Berezkovsky owned a major TV station. Berezovsky, Abramovich and other businessmen (who became known as the oligarchs) backed Yeltsin in exchange for shares in government companies. In 1995 Abramovich and Berezovsky bought the huge Sibneft oil company for just $100m, at a time when the firm was estimated to be worth about $1bn.
The oil men were not affected when the rouble collapsed in 1998 but with Yeltsin on the way out and the threat of a return to Communism as the alternative, Berezovsky and Abramovich backed former KGB chief Vladimir Putin to establish a new political party called United Russia.
In March 2000 Putin was elected president and soon afterwards Berezovsky fell from favour with the new government and following a criminal investigation into fraud charges went into exile in Britain. Abramovich bought out his old partner and then made the wise move of giving the government the ORT TV station and leaving Moscow to become governor of Chukotka, a desolate and underdeveloped province in northeastern Russia. Using his own money he built a large of amount of new infrastructure and kept out of trouble as other oligarchs ran into difficulties. Putin went after Russia's richest man Mikhail Khodorkovsky, the head of the Yukos oil company, who had been funding a number of rival political parties and was trying to create a huge $35bn Russian oil company by merging Yukos with Sibneft. Abramovich sold some of his shares in Sibneft and agreed to become a shareholder in the new company. At the same time he also divested his stakes in Aeroflot and the aluminium company Russky Aluminii. When he announced that he would not be seeking re-election in Chutotka it looked like he was getting out of Russia. He then hit the headlines when he bought the Chelsea football club for $90m, agreed to spend another $120m to pay off the club's debts and then spent $160m buying new players for the team. Abramovich added a $40m London house to his 450-acre estate at Fyning Hill in West Sussex.
In Russia Putin continued his attacks on the oligarchs and in October last year Khodorkovsky was arrested. His shareholding in Yukos was frozen, leaving Abramovich as the biggest active shareholder and he immediately called off the merger. Reports from Russia suggest that Putin backed Abramovich's plan to get management control of Yukos but when this was rejected by the shareholders, the deal was axed. The attack on the oligarchs was, however, popular and the United Russia party increased its majority in parliament in recent elections.
In recent press interviews Berezkovsky has said that Abramovich is working with Putin and enjoys a special relationship with The Kremlin. It is even suggested that once a deal is worked out between Yukos and Sibneft Abramovich will give a share of the company to the Russian nation, partly to improve his reputation at home where many think he should have invested his money and partly to ensure that there are no future attacks on him.
The Russian Interior Ministry however says that there is no evidence that Abramovich has done anything wrong.
One way that Abramovich may improve his standing in Russia is to fund the construction of a Formula 1 race track in Russia and to field a Russian-flavoured F1 team in the World Championship. Having spent $370m in football, the purchase and running of a Formula 1 team will not be a great drain on his resources. A race track in Russia will cost him around $100m.
Buying Jordan would involve moving aside team boss Eddie Jordan and the Irishman is known to want to sell his team but does not want to stop running the team. He owns only half the shares but it seems that the recent deal with Irish businessmen was probably a short-term investment designed to keep Jordan running while the Abramovich deal was discussed. If it goes ahead the Irish investors will make a huge profit on the deal.
Jordan may stay on to manage the team for Abramovich. Eddie would then be able to start buying the best people he can get and building up the infrastructure of the team. It will not be as easy to buy success as it has been in soccer because success in F1 takes time and money but as neither time nor money appear to be that important to Abramovich the future of Jordan could be spectacular.
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