Russian Rich Lose $10 Billion in Two Days as Ruble Drops

OAO Novatek Chief Executive Officer Leonid Mikhelson
OAO Novatek Chief Executive Officer Leonid Mikhelson has been the biggest loser in dollar terms among those remaining in Russia’s 20 richest, dropping $8.7 billion since the start of the year. Photographer: Andrey Rudakov/Bloomberg

Russia’s 20 richest people lost $10 billion this week as the central bank raised interest rates to counter western sanctions that have crushed the ruble and sent the country’s RTS Index to its lowest point since March 2009.

The billionaires have dropped a combined $62 billion in 2014, according to the Bloomberg Billionaires Index, and control a combined $174 billion. The European Union and U.S. limited Russian companies’ access to financing to punish President Vladimir Putin after he annexed Crimea in March. Russia’s troubles have been worsened by the corresponding plunge in the price of oil, a bedrock of the country’s economy.

The ruble has plummeted 50 percent since the end of June. Crude fell to a five-year low after the United Arab Emirates said OPEC won’t rein in production. In response, Russia’s central bank raised its benchmark interest rate to 17 percent from 10.5 percent in the middle of the night in Moscow on Dec. 15 as the ruble slid below 64 per dollar for the first time.

“The optimists who thought in March that everything would be all right in the end now understand that nothing will be OK,” Stanislav Belkovsky, a Kremlin adviser during Putin’s first term who now consults for Moscow’s Institute for National Strategy, a research firm. “Russia’s richest take this situation very negatively, but they do not have the tools to reverse it.”

Leonid Mikhelson has been the biggest loser in dollar terms among those remaining in the country’s 20 richest, dropping $8.7 billion since the start of the year. The 59-year-old is the chief executive officer of OAO Novatek, Russia’s second-largest natural gas producer. He has a $9.2 billion fortune, according to the Bloomberg ranking.

Putin Ties

Gennady Timchenko, 62, turned in the second-worst dollar drop, losing $7.8 billion this year. Timchenko, who has close ties with Putin, owns 23.5 percent of Novatek and was hit with individual sanctions by the U.S. in March and has a $3.2 billion net worth.

The third-biggest U.S. dollar drop was registered by Vladimir Lisin, 58, the chairman and largest shareholder of OAO Novolipetsk Steel. The steelmaker has slumped 42 percent this year, helping cut Lisin’s wealth by $7.5 billion.

The declines also knocked Alisher Usmanov from his perch as Russia’s richest person. The 61-year-old owns more than 20 percent of OAO MegaFon, Russia’s second-largest wireless operator, which has fallen 58 percent in 2014. Usmanov, whose Russian losses have been mitigated by gains in Chinese technology companies Alibaba Group Holding Ltd. and JD.Com Inc., has dropped $6.8 billion year-to-date.

Western Sanctions

Usmanov ceded the top spot to Viktor Vekselberg, who held the position for 17 days in late 2012, after he and four billionaire partners agreed to sell their half of the TNK-BP oil venture to state-controlled OAO Rosneft for $28 billion.

Vekselberg, 57, a former Soviet engineer who made his first fortune selling copper from used industrial power cables, founded closely held Renova Group in 1990 and profited from the Russian privatization program after the fall of the Soviet Union. He has a $13.6 billion fortune, $239 million more than Usmanov.

Nobody was hit harder in percentage terms than Vladimir Evtushenkov. Once Russia’s 14th-richest person, the 66-year-old has seen almost 90 percent of his wealth disappear, dropping him from the top 20. The billionaire was sentenced to house arrest by a Moscow court in September after a money-laundering investigation connected to the $2.5 billion purchase of shares in oil producer OAO Bashneft.

Lone Riser

The court also ruled in favor of nationalizing his stake in Bashneft, which he controlled through publicly traded AFK Sistema. Evtushenkov’s fortune has fallen $9 billion, the most of any Russian in 2014.

Arkady Rotenberg, another Putin ally sanctioned by the west, has lost $2.3 billion this year leaving him with a net worth of $898 million, a 72 percent drop.

Aluminum billionaire Oleg Deripaska, who owns a 48 percent stake in Hong Kong-listed United Co. Rusal, the world’s largest aluminum maker, is the only Russian billionaire whose fortune increased this year.

The 46-year-old has gained $855 million as the slumping ruble has lifted metal and mining companies that have costs in rubles and collect revenue in foreign currencies. United Co. Rusal has risen 101 percent this year. Rusal stock declined 4.9 percent to HK$4.62 in Hong Kong trading yesterday.

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