Roman Arkadyevich Abramovich

Roman Abramovich

Roman Arkadyevich Abramovich (Рома́н Арка́дьевич Абрамо́вич; born on 24 October 1966 in Saratov, Russian SFSR, USSR) is a Russian billionaire and the main owner of private investment company Millhouse LLC. According to the 2008 Forbes magazine, as of 5 March 2008, he had a net worth of US$23.5 billion. Forbes magazine ranked him as the fifteenth richest person in the world. He was considered to be the second richest person currently living within the United Kingdom in 2008.

In 2003, Abramovich was named Person of the Year by Expert, a Russian business magazine. He shared this title with Mikhail Khodorkovsky. He is known outside Russia as the owner of Chelsea Football Club, an English Premier League football team, and for his wider involvement in European football.

Early life and education

Born into a Jewish family, Roman's paternal grandparents were exiled to Siberia from Tauragė, Lithuania by the Soviets after the occupation of Lithuania in 1940. His mother Irina Vasilevna was a musician and his father worked as a supplier at a construction trust in Syktyvkar. His mother, Irina Ostrowski Abramovich, died from bacteremia as a result of a back-alley abortion when Roman was one year old. His father Arkady Abramovich was killed in an incident on a construction site when Roman was three years old. Abramovich grew up in his uncle's family in Ukhta and with his grandmother, Tatyana Semenovna, in Moscow. Before moving to Moscow he and his sister lived in Syktyvkar, the capital city of the Komi Republic.

In 1973, Abramovich went to first grade at Ukhta School No. 2. In 1974, Abramovich and his grandmother moved in with his second uncle Abram Nakhimovich in Moscow. Abramovich studied at School No. 232, which stressed the performing arts. After graduating from school and botching his university studies, he moved to his relatives in Komi. In 1984, Abramovich went to the army (artillery regiment in Kirach in the Vladimirsk region).

Abramovich attended the Industrial Institute in Ukhta before being drafted into the Soviet Army in 1984. After military service in an artillery regiment in Kirach, Vladimirsk region, he studied briefly at the Moscow State Auto Transport Institute before taking a leave of absence from academics to go into business. He later earned a correspondence degree from the Moscow State Law Academy.

The Times has reported that he was a market trader selling black market toys before his association with Boris Berezovsky.

Business career

A 2,000-rouble wedding present from Olga's (Abramovich's first wife) parents (about £1,000) was invested by Abramovich in black-market goods such as perfume, deodorants, tights and toothpaste to sell on in Moscow in or around December 1987. Abramovich soon doubled, then tripled, the investment, his confidence growing with each business success. "I think he enjoyed the thrill of it," says Olga. "When he returned from trips selling the goods, he was flushed with joy. In 1988, as Perestroika opened up opportunities for entrepreneurs in the Soviet Union, he and Olga set up a company making dolls. "It brought success almost immediately," says Olga, "but I don't think Roman ever imagined that he would become as rich as he is now. Abramovich started his commercial activity in the late 1980s when Soviet president Mikhail Gorbachev's reforms permitted the opening of small private businesses, known as co-operatives. Mr Abramovich began his business career selling plastic ducks from a Moscow apartment, but within a few years his wealth spread from oil conglomerates to pig farms. In 1992 to 1995 Abramovich founded five companies that conducted resale and acted as intermediaries, eventually specializing in the trading of oil and oil products. In 1992 he was arrested in a case of theft of government property - AVEKS-Komi sent a train containing 55 cisterns of diesel fuel, worth 3.8 million roubles, from the Ukhtinsk Oil Production Factory; Abramovich met the train in Moscow and resent the shipment to the Kaliningrad military base under a fake agreement, but the fuel arrived in Riga. Abramovich co-operated with the investigation, and the case was closed after the oil production factory was compensated by the diesel's buyer, the Latvian-US concern, Chikora International. In 1995 Abramovich and Boris Berezovsky, an associate of President Boris Yeltsin acquired the controlling interest in the large oil company Sibneft. The deal was within the controversial loans-for-shares program and each partner paid $100 million for half of the company, below the stake's stock market value of $150 million at the time. The fast-rising value of the company led many observers, in hindsight, to suggest that the real cost of the company should have been in the billions of dollars.

Vouchers acquisition

The Guardian quotes Vladimir Ramazanov, a Siberian oil driller::
"We didn't understand the concept of owning shares, and there wasn't even a Russian word for 'privatisation'. More educated people took the opportunity." While most Russians grappled with what to do with their vouchers, Roman Abramovich relished the challenge set down by Moscow. By 1992, the 25-year-old was already familiar with the notion of a free market, having taken advantage of the legalisation of private businesses introduced by Gorbachev in 1987 to set up an oil trading company. For five years, he had bought cheap Russian oil for a few roubles a barrel and sold it abroad for a considerable profit. Now Abramovich allegedly bought up blocks of vouchers from oil workers, converting them into shares in western Siberian energy companies - there was nothing to stop him, it was perfectly legal.

Friendship with Boris Berezovsky

In 1993, Abramovich founded Mekong. He began selling oil from Noyabrsk. He met Boris Berezovsky.

He first met Berezovsky at a meeting of Russian businessmen in the Caribbean in 1993. Berezovsky introduced Abramovich to "the family", the close circle around the then president, Boris Yeltsin, which included his daughter Tatyana Dyachenko and chief security adviser, Alexander Korzhakov.

Together with Berezovsky, Abramovich founded the offshore company Gibraltar-registered Runicom Ltd. and five Western European subsidiaries. Abramovich headed the Moscow affiliate of the Swiss firm, Runicom S.A. In August 1995, Sibneft was created by Boris Yeltsin’s presidential decree. It was rumored that Abramovich was the chief of the organization with Berezovsky promoting the business at higher circles.

Sibneft-acquisition, Aluminium wars, and loans-for-shares

In 1995, Abramovich and Berezovsky acquired the controlling interest in the giant Soviet oil company Sibneft. They paid £50 million (about US$100 million) for half of the company and rapidly turned it into billions.. The Times claimed that he was assisted by Badri Patarkatsishvili.. This acquisition was under the controversial loans-for-shares programme initiated by then (now late) President Boris Yeltsin. After Sibneft, Abramovich's next target was the aluminium industry. After privatisation, smelter managers, metals traders and journalists were reported to have been killed as groups battled for control. Mr Abramovich now admits that he owed his success to the late Georgian, Badri Patarkatsishvili, who helped him acquire and take over the state's (Russia's) aluminium-assets in the aluminium-wars "in which more than 100 people believed to have been killed in gangland feuds over control of the lucrative smelters. He avoided the fate of a rival oligarch who annoyed the Kremlin and ended up being transported to jail in Siberia for ten years."

Relationship with Boris Berezovsky and Badri Patarkatsishvili

The Times also quotes:

Mr Abramovich discloses that there was a showdown at St Moritz airport in Switzerland in 2001 when Mr [Badri] Patarkatsishvili asked him to pay $1.3 billion to Mr Berezovsky. “The defendant agreed to pay this amount on the basis that it would be the final request for payment by Mr Berezovsky and that he and Mr Patarkatsishvili would cease to associate themselves publicly with him and his business interests.” The payment was duly made.

Mr Abramovich was also willing to pay off Mr Patarkatsishvili. He states that he agreed to pay $585 million “by way of final payment”.

Mr Abramovich denies that he helped himself to Mr Berezovsky's interests in Sibneft and aluminium or that he threatened a friend of the exile. “It is denied that Mr Abramovich made or was party to the alleged explicit or implicit coercive threats or intimidation,” he states.

According to court-papers submitted by Abramovich and seen by The Times (UK), Abramovich mentions in the court-papers:

Prior to the August 1995 decree [of Sibneft's creation], the defendant [Abramovich] informed Mr Berezovsky that he wished to acquire a controlling interest in Sibneft on its creation. In return for the defendant [Abramovich] agreeing to provide Mr Berezovsky with funds he required in connection with the cash flow of [his TV company] ORT, Mr Berezovsky agreed he would use his personal and political influence to support the project and assist in the passage of the necessary legislative steps leading to the creation of Sibneft.

Mr Patarkatsishvili did ... provide assistance to the defendant in the defendant's acquisition of assets in the Russian aluminium industry.

The Guardian described Abramovich's career as follows:

However, by 1996, at the age of 30, Abramovich had become so rich and politically well-connected that he had become close to President Boris Yeltsin, and had moved into an apartment in the Kremlin at the invitation of the Yeltsin family. In 1999, and now a tycoon, Abramovich was elected governor of Russia's remote, far eastern province of Chukotka, and has since lavished £112m on charity to rebuild the impoverished region. The identikit image being pieced together for us was of a self-made man who was not only powerful and wealthy, but acutely aware of those who had done less well in the tumultuous 1990s, when the Soviet Union fell.

Political career

Duma member

In 1999, Abramovich was elected to the State Duma as the representative for the Chukotka Autonomous Okrug, an impoverished region in the Russian Far East. He started the charity Pole of Hope to help the people of Chukotka, especially children, and in December 2000 was elected governor of Chukotka, replacing Alexander Nazarov.

Governor

Abramovich was the governor of Chukotka from 2000 to 2008. It has been estimated that he spent over $1.3 billion of his own money on the region, which now has one of the highest birth rates in Russia. Under Abramovich, living standards improved, schools and housing were restored and new investors were being drawn to the region.

Abramovich said that he would not run for governor again after his term of office expired in 2005, as it is "too expensive", and he rarely visits the region. However, Russian President Vladimir Putin changed the law to abolish elections for regional governors, and on 21 October 2005 Abramovich was reappointed governor for another term.

Abramovich was awarded the Order of Honor for his "huge contribution to the economic development of the autonomous district [of Chukotka]", by a decree signed by the President of Russia.

Resignation

In early July 2008 it was announced that President Dmitri Medvedev had accepted Abramovich's latest request to resign as governor of Chukotka, although his various charitable activities in the region would continue. In the period 2000-2006 the average salaries in Chukotha increased from about £100 per month in 2000 to £500 per month in 2006.

Alleged crimes and wrongdoing

Boris Berezovsky allegations

Allegation of blackmail

Boris Berezovsky (his one-time business partner) alleged in 2008 that Abramovich harassed him with "threats and intimidation" to cheat him to sell his valuable shares at less than their true worth. Abramovich has been sued for £2 billion.

Berezovsky is said to have sold his stake in Sibneft for $650 million, or £326 million at today's prices. He received $450 million, or £225 million, for the Rusal shares. He claims the price should have been much higher - £1.2 billion more for the Sibneft shares, and £900 million for Rusal. The former forestry engineer and used car salesman is bringing a total claim of £2.03 billion, a significant part of Abramovich's estimated £10.8 billion fortune. Berezovsky is believed to be worth around £500 million.

Claims of dishonest "business-partnership" with Vladimir Putin

Berezovsky has claimed that Abramovich and Vladimir Putin are “business partners” and this allegedly allowed Abramovich to pursue some of his less known but illegal business- and other- practices at the cost of the Russian people and their assets. New York Times quotes:
To support his claim that Mr. Abramovich and Mr. Putin are “business partners,” he cites an encounter with Mr. Abramovich in 1999 where he was asked to split the cost of a $50 million yacht for Mr. Putin — an offer Mr. Berezovsky says he refused.

Bribes

On July 5, 2008, The Times reported that Abramovich admitted he paid billions of dollars for political favours and protection fees to obtain a big share of Russia's oil and aluminium assets as was shown by court papers The Times obtained.

Allegations of illegal share-dilution

Yugraneft, an affiliate of Sibir Energy, is seeking billions of dollars in damages in a lawsuit in London against Roman Abramovich and his investment company Millhouse Capital, alleging that it was cheated out of its Russian assets. It alleges that another of Roman Abramovich's companies, Sibneft, illegally diluted Yugraneft's interest in their joint-company that had oil fields in Russia to 1% from 50%. The proceedings "involve substantial claims to recover the proceeds of the diluted interest", said Sibir Energy, a company co-owned by the billionaire Shalva Chigirinsky.

Arrest for theft

In 1992 he was arrested in a case of theft of government property: AVEKS-Komi sent a train containing 55 cisterns (tankers) of diesel fuel, worth 3.8 million roubles, from the Ukhtinsk Oil Production Factory (Case No. 79067 for the large-scale theft of state property); Abramovich met the train in Moscow and resent the shipment to the Kaliningrad military base under a fake agreement, but the fuel arrived in Riga. Abramovich co-operated with the investigation, and the charges were dropped after the oil production factory was compensated by the diesel's buyer, the Latvian-US concern, Chikora International.

Aluminium wars

The Times said that Mr Abramovich "famously emerged triumphant after the “aluminium wars”, in which more than 100 people believed to have been killed in gangland feuds over control of the lucrative smelters. He avoided the fate of a rival oligarch who annoyed the Kremlin and ended up being transported to jail in Siberia for ten years," and "Numerous officials and executives are said to have lost their lives".

Antitrust law violations

International Herald Tribune said:
Russia's antitrust body said Wednesday that Evraz Holding — part-owned by Kremlin-friendly businessman Roman Abramovich — has breached anti-monopoly rules, overcharging customers for coking coal.

Abramovich and European football

Chelsea F.C.

In June 2003, he became the owner of the companies that control Chelsea Football Club in the United Kingdom.

The club also embarked on an ambitious programme of commercial development, with the aim of making it a worldwide brand, and announced plans to build a new state-of-the-art training complex in Cobham, Surrey. Chelsea finished their first season after the takeover in second place in the Premiership, from fourth the previous year, and reached the semi-finals of the Champions League. A new manager, José Mourinho, was recruited, and Chelsea ended the following season as league champions. In the four years since the takeover the club have won five major trophies, more than any other English club in the same period.

It is argued that Abramovich's involvement with Chelsea has distorted the football transfer market throughout Europe, as his wealth often allows the club to purchase players virtually at will (frequently at inflated prices), without regard for the effects on the club's financial outturn, as was seen in the year 2005 when Abramovich allegedly offered AC Milan a world record fee of £89.8 million for the then European Footballer of the Year, striker Andriy Shevchenko. Shevchenko did eventually join Chelsea in 2006 for a British record transfer fee of around £30 million.

The spending has, to some extent, seen wealth re-distributed throughout the game, with the combined fee of £12.5 million paid to West Ham United for Glen Johnson and Joe Cole helping to avert administration. In the year ending June 2005, Chelsea posted record losses of £140 million and the club is not expected to record a trading profit before 2010, though this did decrease to reported losses of £80.2 million year ending June 2006.

In a December 2006 interview Abramovich stated that he expected Chelsea's transfer spending to fall in years to come, although he subsequently seemed to move away from this position. He is also present at almost every game Chelsea play and shows visible emotion during matches, a sign taken by supporters to indicate a love for the sport, and usually visits the players in the dressing room following each match, although this stopped for a time in early 2007 as rumours of a feud between Abramovich and Chelsea manager Jose Mourinho appeared in the press which was due to various arguments between the two men regarding the appearances of certain players, notably Andriy Shevchenko. In the early hours of 20 September 2007, Jose Mourinho announced his exit as Chelsea manager by mutual consent with the club following a meeting with the board. Former Israel coach and Chelsea's director of football, Avram Grant, was named as his replacement. Ever since Grant had joined Chelsea (in the summer of 2007) there had been friction between him and Mourinho. Mourinho reportedly told Grant not to interfere in team affairs but with Abramovich's backing, Grant's profile at the club rose after he was made a member of the board. This event apparently did not go down well with Mourinho and may have contributed to his surprise exit. On 24 May Avram Grant was sacked as manager by Abramovich. On 11 June 2008, it was announced that Luiz Felipe Scolari would be taking over as manager on 1 July 2008. As of May 2008, Abramovich has spent approximately £600 million on the club since arriving in 2003.

CSKA Moscow

In March 2004, Sibneft agreed to a three-year sponsorship deal worth $58 million with the Russian team CSKA Moscow. Although the company explained that the decision was made at management level, some viewed the deal as an attempt by Abramovich to counter accusations of being unpatriotic which were made at the time of the Chelsea purchase. Union of European Football Associations (UEFA) rules prevent one person owning more than one team participating in UEFA competitions, so Abramovich has no equity interest in CSKA. A lawyer, Alexandre Garese, is one of his partners in CSKA. Following an investigation, he was cleared by UEFA of having a conflict of interest. Nevertheless, he was named most influential person in Russian football in the Russian magazine Pro Sport at the end of June 2004. In May 2005, CSKA won the UEFA Cup, becoming the first Russian club ever to win a major European football competition. However, in October 2005, Abramovich sold his interest in Sibneft and the company's new owner Gazprom, which sponsors FC Zenit Saint Petersburg, cancelled the sponsorship deal.

Russian national team

Abramovich also played a large role in bringing Guus Hiddink to Russia to coach the Russia national football team. Piet de Visser, a former head scout of Hiddink's club PSV Eindhoven and now a personal assistant to Abramovich at Chelsea, recommended Hiddink to the Chelsea owner.

National Academy of Football

In addition to his involvement in professional football, Abramovich sponsors a foundation in Russia called the National Academy of Football. The organization sponsors youth sports programs throughout the country and has constructed more than fifty football pitches in various cities and towns. It also funds training programs for coaches, prints instruction materials, renovates sports facilities and takes top coaches and students on trips to visit professional football clubs in England, Holland and Spain. In 2006 the Academy of Football took over the administration of the football academy at Primorksy, near Togliatti, Samara Oblast, where over 1000 youths are in residence, following the death at 38 of its founder, Yuri Konoplev.

Relationship with Kremlin

Boris Yeltsin

Abramovich's close relationship with Boris Yeltsin and his family was well known. At first he was described as an aide to the powerful tycoon Boris Berezovsky: "At every stage of Berezovsky's rise, Abramovich was there, watching and learning.

The proposed merger of Sibneft with Yukos was seen by most as a move to distance himself from Russia, at a time when the Kremlin appears to have decided to bring at least some of the oligarchs to account for their colourful past business practices. Abramovich was a close associate of controversial Boris Berezovsky who sold him his stake in Sibneft, although in July 2005 Berezovsky announced his intention to sue Abramovich in the British courts for pressuring him into selling most of his Russian assets cheaply to Abramovich after Berezovsky fled the country.

The Kremlin press service reported that Abramovich's name had been sent for approval as governor for another term to Chukotka's local parliament, which confirmed his appointment on 21 October 2005.

Vladimir Putin

Chris Hutchins, a biographer of Russian Prime Minister Vladimir Putin, claims that the relationship between the former Russian president and Abramovich is like that between a father and a favourite son; when rumours began about the latter's relationship with Zhukova, Putin reportedly told him "to clean up his act". Reports of such a conversation are hearsay and have never been verified. Abramovich himself has stated that his relationship with Putin is professional, as signified by his use of the Russian language's formal "вы" in addressing Putin, as opposed to the informal "ты".

Personal life

Family

Abramovich has been married twice, to Olga Yurevna Lysova in December 1987 (divorced 1990), and to Irina Vyacheslavovna Malandina in October 1991 (divorced 2007). He and Irina have five children.

On 15 October 2006, the News of the World reported that Irina had hired two top UK divorce lawyers, following reports of Abramovich's close relationship with the 26-year old Daria Zhukova, the former girlfriend of tennis player Marat Safin and daughter of a prominent Russian oligarch based in London. It was speculated that a future divorce settlement (amounting to a conjectured £5.5 billion) might be the highest ever on record. The Abramoviches replied that neither had consulted attorneys at that point. However, they later divorced in Russia in March 2007, with a settlement reported as being $300 million.

"Private army"

Abramovich has recently boosted his security staff to a 40-person "private army", making him one of the best protected businessmen in the world.

Other interests and activities

Art

Roman Abramovich sponsored an exhibition of photographs of Uzbekistan by renowned Soviet photographer Max Penson (1893–1959) which opened on 29 November 2006 at the Gilbert Collection at Somerset House in London. He previously funded the exhibition "Quiet Resistance: Russian Pictorial Photography 1900s-1930s" at the same gallery in 2005. Both exhibits were organized by the Moscow House of Photography.

In May 2008 Abramovich emerged as a major buyer in the international art auction market. He purchased Francis Bacon's Triptych for US$86.3 million (a record price for a post-war work of art) and Lucian Freud's Benefits Supervisor Sleeping for $33.6 million (a record price for a work by a living artist).

His partner Daria Zhukova is managing a gallery of modern art in Moscow that occupies a historical Bakhmetevsky Bus Garage building by Konstantin Melnikov. The building, neglected for decades and partially taken apart by previous tenants, was restored in 2007–2008 and reopened to the public in September 2008. Speed and expense of restoration is credited to sponsorship by Abramovich.

Homes

Despite maintaining that his primary residence is Moscow, Abramovich qualified for the Sunday Times Rich List 2008, with an estimated fortune of £11.7 billion, by virtue of retaining a property in Knightsbridge, London on Lowndes Square.

In May 2008, Abramovich bought the 200 acre former Wildcat Ridge near Aspen, Colorado estate of American businessman Leon Hirsch, founder of United States Surgical Corporation, for £18 million.

Boats and planes

Abramovich has become the world's greatest spender on luxury yachts, and had been linked to five boats in what the media have called "Abramovich's Navy":

  • Eclipse - Initially known as project M147 (length 147 metres) it was designed by Hermidas Atabeyki with an interior by Terrence Disdale. Eclipse is being built in Germany by Blohm + Voss and when completed late in 2008 is expected to be 160 metres long - around 13 metres longer than the initial designs. It is believed to cost Abramovich around $300 million and will be the world's third largest yacht with at least two swimming pools, two helipads, several on board tenders and a submarine. Its ultra modern design is similar to Pelorus with even more aggressive lines and tri-colour scheme.
  • Ecstasea (282 feet / 85 meter long) - Largest Feadship built to date. It has a gas turbine alongside the conventional diesels which gives it high cruising speed.
  • Pelorus (377 feet/115 metre long) - Built by Lurssen for another client who received six offers to sell it before it was even completed and accepted Abramovich's bid. The interior is very contemporary designed by Terence Disdale and images can be found on their website. Pelorus was refitted by Blohm + Voss in 2005 adding a second helipad and zero speed stabilisers. It was refitted once again by Blohn + Voss in 2007 - 2008.
  • Le Grand Bleu (370 feet/112 metre long expedition yacht)  – formerly owned by Paul Allen of Microsoft, Abramovich bought her in 2002 and had her completely refitted including a swim platform and sports dock. He presented her to his associate and friend Eugene Shvidler in June 2006.
  • Sussurro (163 feet/50 metre long) - built by Feadship in 1998 with the interior designed by Terence Disdale. Abramovich bought it from the same person who sold him Pelorus. It is permanently moored in Port Vauban, Antibes and is used as a tag-along to one of the larger yachts.

He owns a private Boeing 767-33A/ER (registration P4-MES, registered in Aruba), known as "The Bandit" due to its cockpit paint detail. Originally the aircraft was ordered by Hawaiian Airlines but the order was cancelled and Abramovich bought it from Boeing and refitted it to his own requirements. Interior details or images are not available anywhere. P4-MES is frequently parked at the Harrods Aviation facility at Stansted Airport, UK.

In September 2008 Airbus completed his new private aircraft - A340-313X. The quad jet with line number 955 and registration M-ABUS (ex-F-WWJM) will have the name "Bourkhan" and a modern brown, white and beige livery. Abramovich also owns three Eurocopter helicopters (EC-145, registration P4-LGB, EC-135T1, registration P4-XTC and EC-155B, registration P4-HEC) based on his yachts, Blackbushe airport or at his estate Fyning Hill near Rogate in West Sussex, UK.

In 2004 Abramovich bought two Maybach 62 limousines. He had these customized to be bomb proof and have bullet-proof glass. They were reported to have cost him £1 million. Abramovich also owns a Ferrari FXX, a $2.2 million dollar race-only car, of which only 30 were built. He also owns a Bugatti Veyron (blue on black), Maserati MC12 Corsa, Ferrari 360 and a modified Porsche Carrera GT.

Famous quotations

  • Investors have very short memories.
  • The goal is to win. It's not about making money. I have many much less risky ways of making money than this (buying Chelsea football club). I don't want to throw my money away, but it's really about having fun and that means success and trophies..

See also

References

External links

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