Russia's Wealthy Hit Hard By Financial Turmoil

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We seem to be always hearing about super-wealthy Russians, those guys who made vast fortunes in oil and other natural resources and then spent millions on luxury homes, works of art and lavish lifestyles. It seems, though, that the party might be over. Russia's rich have lost billions of dollars in the recent financial turmoil. NPR's Gregory Feifer reports from Moscow.

(Soundbite of Porsche starting up)

GREGORY FEIFER: An old Porsche engine fires up at a classic car fair at one of Moscow's most upscale shopping centers. Well-heeled visitors here admire antique Rolls-Royces and 1960s Jaguars, toys costing hundreds of thousands of dollars. Russia's oil wealth has enabled the country's new rich to splash out on designer clothes, giant mansions and extravagant parties. That may now have to change. There are only a small handful of potential buyers here. Organizer Ilya Sorokin says there's a simple explanation.

Mr. ILYA SOROKIN (Organizer, Russian Car Fair): (Russian spoken)

FEIFER: The price of oil, he says, which has plummeted in recent months along with prices on the Russian stock markets. Values of shares have fallen by two-thirds since last May. In recent years, Russian companies borrowed huge sums of money to expand. Now, some have seen up to 80 percent of their value wiped out. Some of Russia's wealthiest tycoons are heavily in debt and losing billions, including metals magnate Oleg Deripaska, Russia's richest man, who's been forced to sell his stakes in German and Canadian companies.

Moscow's exclusive watering holes, such as this expensive fusion restaurant near the Kremlin, are still hosting so-called minigarchs and the merely wealthy further down the scale. But Russia's businessmen are very nervous. Boris Titov, who heads the prominent Delovaya Rossia business association, says what's really ailing the Russian economy is separate from the global financial crisis.

Mr. BORIS TITOV (Head, Delovaya Rossia Business Association): The Russian economy is still very much dependent on oil. And unfortunately, during four years since we came out of crisis, since 2004, we didn't do anything to diversify our economy.

FEIFER: Titov says the world's financial turmoil merely accelerated an industrial downturn that was already under way, and that's resulting in one of the blackest chapters in Russia's economic history. But not everyone's losing out. Lucky oligarchs with cash are snapping up cheap stocks. But the biggest winner will probably be the state. The government is sitting on piles of cash from Russia's vast energy resources, and it's promised to distribute financial-rescue packages worth hundreds of billions through large, state-controlled banks. Titov says much of that money isn't getting to the smaller banks and companies in the so-called real economy.

Mr. TITOV: We've seen that some banks use the cash to realize their programs of acquisitions. Instead of refinancing other smaller banks, they were using it to swallow these banks.

FEIFER: In the 1990s, Boris Yeltsin's cash-strapped government was ridiculed for giving away some of the state's most lucrative oil and other assets to a small handful of oligarchs in return for loans. Now it's the other way around. It's the oligarchs who are lining up for funds from the state, which could decide exactly how the current financial crisis changes the face of Russian business. Gregory Feifer, NPR News, Moscow.

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