APRIL 2, 2007
Kim Murphy is a London correspondent for the Los Angeles Times.
One night last June, 400 A-list guests and several packs of wolvesdescended upon Althorp, the ancestral home of the late PrincessDiana. The guests--who included Orlando Bloom, Elle MacPherson, andSalman Rushdie--had been invited to attend a fund-raiser for theRaisa Gorbachev Foundation, which helps childhood cancer victims inRussia. The wolves, who were led about the estate on leashes, hadbeen hired to provide ambiance--specifically, that of a "Russianmidsummer fantasy." Creating a tableau that, according to theLondon Times, not even "Keith Richards at the creative summit ofhis hallucinogenic powers could have conjured up," the wolves andcelebrities were joined by a bejeweled camel, Cossacks on dancinghorses, people in eighteenth-century costumes sitting in trees likea "scene from a Watteau painting," and--for a touch of contemporaryflavor--U2's Bono, via video link from Dublin, and the hip-hopgroup the Black Eyed Peas. After a dinner that included jelliedborsch with smoked sturgeon and golden Osetra caviar, the gueststook part in a charity auction, bidding for prizes: a privatedinner with co-host Mikhail Gorbachev in Moscow; a flight in a MiGfighter jet; and, for those yearning to experience the tough loveof the Putin regime, a night in a Russian maximum- securityprison.
This extraordinary party, wolves and all, was underwritten to thetune of $2. 3 million by Alexander Lebedev, a former KGB spy whonow owns one-third of Aeroflot-Russian Airlines. The elder Lebedevmaintains his primary residence in Moscow, but his 26-year-old sonEvgeny went to British schools and now lives in the upscaleneighborhood of Knightsbridge. The Lebedevs are part of a newgeneration of Russians who have invaded London, rippling Britain'saristocratic classes more than any group since the Arab sheiksarrived in opec-fueled limousines in the 1970s. These days, themain dining rooms at the Ivy and Cipriani are as likely to betinkling with Russian as English. London real estate agents haveestimated that 20 percent of all houses sold for over $10 millionare sold to Russians. Of those sold for over $30 million, thefigure climbs to 50 percent. "Today, effectively, the Russians arethe richest buyers we've got," says Trevor Abrahamson of GlentreeEstates.
But, while London is awash in Russian oligarchs, the party atAlthorp wasn't. Among those missing was 40-year-old RomanAbramovich, Britain's second- wealthiest resident, who bought theChelsea football club for $233 million in 2003 and is underwritingits $200 million-a-year payroll. The perpetually unshaven collegedropout, known as "Roma" among his fellow Russians, shuttlesbetween Moscow and a $54 million townhouse in Belgravia, a $10million townhouse in Knightsbridge, and a 440-acre estate in WestSussex that once belonged to the late King Hussein of Jordan,complete with two polo fields, a rifle range, and a go-kart track.
Also absent was Abramovich's former business partner, BorisBerezovsky, who presided over a vast automobile and media empireuntil President Vladimir Putin charged him with fraud andembezzlement and he fled the country for political asylum in GreatBritain. Berezovsky's own list of posh properties--which include an$8 million flat in Belgravia (registered to his daughter); two morein Kensington Gardens; an eight-bedroom, seventeenth-century StanleyHouse in Chelsea; and another estate in Surrey--puts him in thesame rarefied billionaires' club as Abramovich. But the two areunlikely to appear together at a party. In 2005, Berezovsky accusedthe younger oligarch of buying out his shares too cheaply inSibneft, the Siberian oil company, after he was forced to leave thecountry. These days, they communicate mainly through their lawyers.There is also a political subtext to their feud--one that highlightsthe astonishing degree to which these Russians remain intimatelyinvolved in life back home. Abramovich remains, on Putin'snomination, governor of the northeastern Russian region ofChukotka, and he is on cordial terms with the Russian leader.Berezovsky, on the other hand, has morphed into Putin's biggestnightmare: a sworn enemy with a big mouth, wads of cash, and aliberal agenda.
The strained relationship between Abramovich and Berezovsky is notunique. In fact, according to Alexander Terentyev, a former RussianTV editor who is researching the Russian migration phenomenon atthe London School of Economics, the oligarchs move in separate,often secretive circles. They can frequently be seen traveling thecity in blacked-out Mercedes, surrounded by coteries of ex- SASbodyguards. Because of this factionalism, Evgeny Lebedev, who chairsthe Raisa Gorbachev Foundation and co-hosted the party at Althorp,said he didn't succeed in persuading a single Russian oligarch toattend the benefit. "Russian wealthy people seem to be quiteinterested in their own causes, and not very helpful towardothers," the younger Lebedev explained to me after returning fromOscar-night partying in Los Angeles. "That seems to be a problemwith Russian society as a whole, not just philanthropy. People, atbest, don't help each other; and, at worst, they make it worse foreach other. They compete with each other."
But, as with Abramovich and Berezovsky, the reasons why London'sRussian oligarchs tend to go their own ways range deeper thandisputes over cheaply purchased oil shares or divergent preferencesfor charities. In many ways, they are competing to shape Russia'sfuture.
Eight months ago, I arrived in London after three years of livingand working as a reporter in Moscow. I was lonely for pelmenidumplings with sour cream, for the soul-scorching folk songs ofZhanna Bichevskaya, and for long winter nights drinking and smokingand arguing at kitchen tables till dawn. Although cool Britanniaseemed like an unlikely setting for these emotion- filled Russianpastimes, I had heard that perhaps 300,000 Russians now livedthere, at least part-time, and so I held out hope. But what Iquickly realized was that London's Russians eagerly blended in withthe culture of their British hosts. They had created no ethnicenclaves (unlike, say, the Pakistanis or Somalis), gravitatedtoward quintessentially British, upscale areas like Bond Street orAscot Park or neighborhood financial pubs in the City, and weremore likely to be eating sushi than borsch. In fact, it was easy toforget they were even there until last November, when former KGBagent Alexander Litvinenko died after ingesting, apparently at apiano bar in Mayfair, a colossal dose of radioactive Polonium-210.
Suddenly, the biggest Russian news story of the past several years,one that shined a harsh new international spotlight on thecharacter of the Putin government, was taking place not in Russia,but in London. London's hidden Russian community began to come outof the woodwork: The newspapers were filled with quotes fromresident ex-KGB spies like Oleg Gordievsky, and there wasspeculation that Litvinenko had been killed because of hisassociations with Berezovsky or because he had been involved indealings with London's Chechens. The Litvinenko murder revealedthat Britain has quietly become not only the single greatest centerof Russian capital outside Moscow, but a turbulent seat of Russianopposition.
This isn't the first time London has played host to Russiansdreaming of a new political era. On a winter day, I went to visitHighgate Cemetery, where Litvinenko's grave lies in a locked,fenced-off quarter. Highgate's winding byways, with their mossytombstones and spooky Gothic mausoleums, seem destined to act aspaths of pilgrimage for those with a point to make in farawayRussia. First, there is the towering monument to Karl Marx, whospent the latter years of his life in London, penning therevolutionary tomes that eventually helped bring down the czaristgovernment. Vladimir Lenin would have paid his respects here as ayoung revolutionary; the office where he briefly edited the RussianSocial Democratic Labor Party journal was only a few miles away. Nowin a slightly less imposing locale, but already greening under therelentless drizzle of a London winter, there is the grave ofLitvinenko with its lead- lined coffin, attracting its own sporadicstream of family and friends.
Litvinenko was no Marx; the Kapital that the communist ideologuewarned about is thriving in today's Russia. Thanks to the boomingoil market, last year Russia had the largest state budget surplusof any nation in the world, and it is sitting on gold and currencyreserves that have now reached $303 billion. But by last year,according to the Bank for International Settlements, Russiancitizens had stashed $220 billion in banks abroad, particularly inGreat Britain--more, in fact, than all the money on deposit insideRussia itself. The fact that so many are heading for the exits--or,at least, setting up their children or spouses abroad and puttingtheir capital in British banks-- says much about the level ofconfidence among those whose billions Russia needs for rebuildingits disastrously crumbling infrastructure, building new productionin less oil-dependent sectors, and maintaining a robust tax base.
Looked at another way, though, it may be that the growing linksbetween the Russian power elite and one of the most liberal,international cities on earth will ultimately lead to a moredemocratic Russia. "So many people now have this double lifebetween Britain and Russia," explains Terentyev. "This experiencecan't help but influence the Russian development, and in a Westerndirection."
In 2004, not long after the Russian government arrested MikhailKhodorkovsky, the CEO of Yukos, then Russia's biggest private oilcompany, London was treated to the spectacle of 100 silverlimousines parading past the Russian Embassy. Timed to coincidewith the preliminary hearings in Khodorkovsky's case, they tied uptraffic in the central city for an hour. The only man with enoughmoney to spend hundreds of thousands of dollars to annoy the Russiangovernment, and the motive to do so, was the original limousineliberal, Boris Berezovsky.
Berezovsky has used the elegant confines of his office in Mayfair asa platform for waging war on Putin's government. And it is a war.In an interview with Russia's Echo of Moscow radio station inJanuary, the tycoon announced he had been working on a coup planfor the past 18 months to replace the "anti- constitutional regime"in Russia with "a coup, a forced seizure of power." (Later, hebacktracked, saying he was talking about a bloodless seizure ofpower like the Rose and Orange revolutions in Georgia and Ukraine,which, of course, the Kremlin fears even more than a militarycoup.)
On a recent afternoon, I went to Berezovsky's heavily guardedoffice. Traces of Polonium-210 had been discovered there, and,after the clean-up, his staff had reupholstered two deep, pillowedchairs in front of his desk. I avoided the chairs and sat on thesofa instead, next to a statue of a small bronze panther leaping atthree terrified horses.
Berezovsky is a dark, intense, balding man with a seemingly endlesssupply of murky conspiracies up his sleeve. He speaks in brokenEnglish, fractured partly by his heavy accent and partly by thecell phones and urgent knocks on the office door that continuallydistract him. During our visit, he told me he is convinced theKremlin is behind Litvinenko's murder.
Berezovsky isn't the only one who subscribes to this theory. Putinhas created a state so intolerant of opposition that it is possibleto imagine that a dissident was murdered by his government in theheart of London with a radioactive isotope. He has presided overthe greatest rollback of human rights since the communist era. Hisgovernment has sanctioned the arrest, torture, and murder ofcountless Chechens, while leveling their capital virtually to theground; it has rolled over the press and failed to convict anyonefor the murders of at least 13 journalists since Putin came topower in 2000. He has installed KGB veterans at nearly everysignificant level of government and allowed the security servicesto become a massive, corporate empire. And, in doing so, he hasmade himself and his government a target for reform-minded Londonoligarchs like Berezovsky.
But Putin's motives--and missteps--are more complicated than theirportrayal in the Western press. Often forgotten in theinternational outcry over Khodorkovsky's arrest is the fact thatthe former Yukos executive, like some of the oligarchs currentlyliving in Britain, made his billions by plundering the nation'sindustry after the collapse of the Soviet Union. In 1995,Khodorkovsky's Menatep Bank acquired Yukos from the state for a mere$350 million; two years later, the company was valued at $9billion. Putin had the support of many ordinary Russians, livingsubsistence-level existences, when he rose up against the oligarchsand reasserted state control over key sectors of the Russianeconomy. He also rebuilt much of the nation's tax base andcheckmated Khodorkovsky's plan to sell off Yukos, and possiblySibneft, to Western oil companies.
Putin's attempts, however, to keep Russian capital in thecountry--and in state hands--backfired. The government takeover ofYukos was just one in a series of rollbacks on private investmentthat made foreign banks and London real estate look likecomparatively safe cocoons for Russian capital. In addition, theruinous $27.5 billion tax bill imposed on Yukos--and the shady saleof its main production facility to state-controlled Rosneft--senttroubling signs to Western investors. In the end, the government'sacross-the- board moves against private property rights had theopposite of their intended effect, nearly quadrupling capitalflight in 2004. (In 2005, the trend had reversed and Russia had anet positive capital inflow for the first time in years.) GreatBritain became an especially attractive destination because itallows foreign residents to structure their accounts so that theycan ferment offshore, unmolested by British taxes.
Russia is currently a rich country, with oil at $60 per barrel. Theoil stabilization fund alone stands at $103 billion, and Russia haspaid off its $22 billion foreign debt on a stepped-up schedule. Afew oligarch billions in Britain represent barely a speck of duston Putin's lapel. But, if oil prices fall to $25 or $30 a barrel,Russia's geopolitical heft could evaporate overnight--and thebillions parked in Russian oligarchs' London real estate, yachts,Boeings, and helicopters, and in their bank accounts andinvestments around the world, could leave the country without thetax base or productive capacity to dig itself out of a calamitoushole.
Abramovich, the reigning czar of London's emigre community, istrying to prevent this scenario by continuing to invest in Russia.And, while he spends an increasing amount of time in Great Britainand has installed his children in British schools, he says heconsiders Moscow his primary residence. Although most of his oiland aluminum holdings have been sold off, last year his London-based Millhouse Capital acquired a 41 percent stake in the Russiansteel smelting conglomerate Evraz Group, effectively returning $3.1billion in capital to Russia and setting the stage for assembling amajor new Russian metals conglomerate with the Kremlin. Abramovich,unlike Berezovsky and Khodorkovsky, has been careful not to stepover the clear line Putin drew for Russia's oligarchs shortly afterhis election: Keep your illgotten gains, but stay out of politics.In his rare public statements, he is careful not to criticize thestate of Russia's democracy. When Putin early this year signaledhis desire for the oligarch to continue pouring millions of dollarsof his own money into the impoverished Chukotka province as itsgovernor--an effective social tax of mammothproportions--Abramovich did just that. His skillfully managedrelationship with the Kremlin has allowed Abramovich to not onlycontinue investing in Russia but to magnify his holdings bystunning proportions.
For Berezovsky, on the other hand, Great Britain serves as asecure--and even inspirational--launching pad for his reformmovement. "This country is the greatest world democracy today,where you feel really independent of the executive and courtsystem," he tells me. "It's completely different from Russia. Somany businesspeople in Russia are under pressure of the state,under pressure of security services, and so on."
Like Abramovich's position, Berezovsky's is not without a largeelement of self-interest. As illustrated by a photo on his officewall of himself talking confidentially into Boris Yeltsin's ear,Berezovsky was once the godfather of the oligarchic family thathelped launch Yeltsin and select Putin as his heir apparent. Thoughhe clearly has come to believe in the importance of democraticreform, he also stands to regain much of his lost financial empireif he succeeds in undermining Putin's powerful grip.
The Litvinenko murder has provided Berezovsky with the perfect shivto attack his former protege. During our interview, he advanced thetheory that Andrei Lugovoy, the former Russian KGB agent who hadtea with Litvinenko on November 1, poisoned him at the Kremlin'sbehest. (Lugovoy claims he is a fellow victim, not a perpetrator.)"One day before the first of November, on the thirty-first ofOctober, Mr. Lugovoy--who now is suspected to be the killer- -hewas sitting in this room in front of me, and we drank wine with him.And he had no less chances to poison me in this office where we arepresent now than to do the same in the hotel, putting polonium to acup of tea of my friend Alexander," Berezovsky says, leaningforward intensely and nodding toward the poisonous chairs.
Why then, I ask, didn't Lugovoy try to kill him? Wasn't he a meatiertarget? "It's very good question," Berezovsky says, lapsing intocharacteristic mystery. "I have more or less clear answer ...myself to this question. But I can't tell you what it is rightnow."
Berezovsky has very real reasons to fear the Putin government. Notleast among them is that extraditing him and forcing him to facetrial on charges of fraud and embezzlement has held one of the topplaces on Russia's diplomatic agenda with Great Britain. Putin'srush to get Berezovsky back to Russia may also have something to dowith the zeal of his reform movement activities. From GreatBritain, Berezovsky has funded a series of human rights groups,soldiers' mothers groups, and press-freedom organizations insideRussia. He adopted the name of the nineteenth-century dissidentAlexander Herzen's newsletter, Kolokol, or Bell, for the Internetnewsletter he published until recently through his New York-basedInternational Foundation for Civil Liberties, though he claims it'snot a direct reference to Herzen. In March, a major oppositionprotest broke out in St. Petersburg, with several thousanddemonstrators chanting "Shame!" as they marched through thestreets, before many were clubbed and dragged away to jail by thepolice. Some were carrying banners in support of Berezovsky, newsagencies reported.
Berezovsky claims his biggest project was pouring as much as $50million into the Orange Revolution to counter the Kremlin'scampaign to keep Ukraine within Russia's orbit. (President ViktorYushchenko denied getting any money from the London tycoon--itwould have been illegal under Ukrainian law--but Berezovsky'speople say the Kremlin was spending "billions" on the other side.)His support for the Orange Revolution was directed not at Ukraine,he says, but to inspire Russian activists "to help Russia move todemocracy."
Berezovsky is one of a trio of figures--Litvinenko was another,along with Chechen resistance leader Akhmad Zakayev--who haveformed the backbone of the London-based opposition to Putin'sgovernment that seeks to discredit the Kremlin and mobilizeinternational support against the war in Chechnya. "People say thatwe're out to make trouble for Putin. But we're saying that ofcourse we're here to promote democracy and human rights. And whatthat means is in the eye of the beholder," says Alex Goldfarb, alongtime Berezovsky aide and friend of Litvinenko who is co-writinga book about the former KGB agent's death with his widow, Marina.
Litvinenko supplied the names, birthdates, and photographs of theskeletons in Moscow's closets to Berezovsky and others, thanks tohis contacts with former colleagues at the FSB. He made his firstbig splash in London with a book claiming that the FSB hadengineered a series of deadly apartment bombings in Russia duringthe run-up to the 2000 elections, an allegation Kremlin spokesmanDmitri Peskov has said was "a product of an ill brain." Lately,however, his revelations about corruption and violence in theRussian halls of power had become so frequent, and often sooutrageous, they had begun to fade into background noise. LastJuly, Litvinenko amazed even his friends when he riffed off themuch-photographed kiss Putin had planted on the bare belly of afive-year-old boy, publishing an article on a website linked to theChechen rebels claiming that videotapes existed within the FSB'sinternal security directorate of Putin having sex with underageboys. No hint of documentation supported the claim. Most peopleignored it. But Goldfarb believes it could have been the laststraw, the one final irritation out of London that, only a littlemore than a year before Russia's crucial 2008 presidentialelections, put a teacup full of polonium in Litvinenko's hands.
The Litvinenko episode may have done more than just thrust London'sshy Russian community into the spotlight. Berezovsky, for one,believes that it's contributed to a newfound sympathy for hisgospel of undermining Putin and making sure he isn't able to holdonto power, or handpick a successor, in 2008. "When I came toLondon in 2001 and made a lot of public presentations, trying toexplain that Putin was starting to destroy Russia, ninety-fivepercent of the audience didn't believe me," he says. "And, now, Ipresent the same arguments, the same understanding, for sure basedon new facts, and ninety-nine percent of the audience accepts nowmy position."
But Berezovsky tends to play much better in London than he does inRussia-- or even, for that matter, among the rest of the Russianexpatriates, many of whom see his campaign for "reform" as a boldfront for rehabilitating his financial empire and big businessdomination of the government back in Russia. Putin encourages thisview. When asked recently about the Litvinenko case, he turnedalmost immediately to the London oligarchs. "They are people hidingfrom Russian justice for crimes they committed on the territory ofthe Russian Federation--first and foremost, economic crimes," hetold reporters. Many in Russia likewise see the forays ofBerezovsky and other businessmen into Great Britain (and the UnitedStates and Israel) as leaving home with the household icons intheir suitcase. "Tell me this. Is it good for Nigeria whether itsmillionaires are all in London? Is it? Then why do you ask me if itis good for Russia that its millionaires are in London?" says BorisKagarlitsky, director of the Institute of Globalization Studies inMoscow. "This is an excellent liberal idea--that what is good forthe money is good, full stop, even if people have to die for it.They keep saying, 'There is no good way to use this money inRussia.' And that's exactly right: Let people die and not spend apenny, because it is more profitable [to spend it] somewhere else,"he said. "What we need in Russia is we need to rebuild the entireinfrastructure of this country, which was totally neglected fortwenty years. The electricity systems are falling apart, even theelevators in the apartment houses are falling apart. Will you makea lot of profit out of rebuilding that? Of course not. Where if yougo to the London stock exchange, you will make millions."
What Kagarlitsky has put his finger on is not all that surprising:The oligarchs are ultimately less interested in shaping Russia'sfuture than their own. London has become a place where they canplay out their fantasies, preferring to run with the wolves onEnglish estates rather than from Putin back at home. But they'renot the only ones. Many of those who no longer have the Kremlin'sear, including even former members of Putin's own administration,are quietly stashing their nest eggs in London. "Most Russians don'twant to be identified as having a safe haven," said one bankerfamiliar with the Russian community. "They all want to be seen ashappy patriots in their own country. But ... they're all scared.Because, in Russia, one day you're in, and the next day you're out.There's no rule of law. Anything could happen."
By Kim Murphy