By Philip Jacobson
February 29, 2004
Thousands of Russians have brought their fortunes and business acumen to London - and have made the city swing again. But are a corrupt few giving them a bad name?
Midnight at the Aquarium club in London, and the Creme de la Kremlin party is warming up nicely as scores of alcohol-fuelled young Russians sway and sing along to cheesy pop tunes from back home. The bar has been under siege since the doors opened and guests passed through a body search so thorough that the target might have been concealed weapons rather than controlled substances. The indoor swimming pool is open, though nobody has yet followed the club's tradition of stripping off to take the plunge.
Among the exuberant crowd are a startling number of drop-dead gorgeous girls, mostly leggy blondes in microscopic skirts, some dancing together to the slinky Russian pop duo Tatu.
Well-groomed youths in razor-creased blue jeans, crisp white shirts and shiny black leather jackets loiter nervously on the sidelines, as if this were a school disco. One pauses between ferrying a wallet-busting round of alcopops with neat vodka chasers to the women at his table to confide, unprompted, that 'Russian girls consider it their duty to have lesbian sex to please their boyfriends'.
To wild applause, a black rapper in gold threads and gangsta accoutrements bounds onto the stage and delivers a blazing set in word- perfect Russian. It is hardly a scene of outrageous decadence, but then, as a cheerful drunk points out: 'In the early 1990s there was nowhere to go in Moscow for coke and hookers, so everyone came to London. Now you can get whatever you want back there, so why come over here for it?'
According to the original promoter of the Aquarium nights, Andrei Fomin, those who make it past the bouncers administering a ruthless 'face-control' policy include students, bankers, brokers, IT wizards and diplomats from former USSR embassies. 'There must be at least 200,000 people from the old Soviet Union living in or around London; they love getting it together to drink too much and make a bit of noise.'
Formerly married to a British accountant whom he met in Moscow, Fomin acknowledges that among the guests there are plenty who have money to burn and think nothing of standing drinks all night. 'But you've got to understand, there's all sorts of bullsh** talked about these so-called New Russians in London, who supposedly spend all their time shopping or in fashionable restaurants.
When Roman Abramovich bought Chelsea football club, the media went mad about this strange tribe called oligarchs, with their billions, their Mayfair houses and country estates. Okay, there are some mega-rich Russians living over here, and you get the stories about them giving their kids platinum credit cards as birthday presents. But most of the expatriates that I know work or study just as hard as their British counterparts to get ahead, and they would never dream of throwing their money around for show.'
Prior to the collapse of communism in 1991, the resident community in London was composed of a few thousand elderly White Russians plus a motley collection of exiled political activists. 'It was so rare to hear people speaking Russian that I used to rush up to them in the street,' says Aliona Muchinskaya, who arrived that same year, aged 19, as correspondent for a Moscow newspaper. 'British friends would ask me things like, do you have fridges at home? I said, 'No, we use snow,' and they actually believed it!'
Now running an events and public-relations business, Red Square, Muchinskaya remembers the first wave of post-Soviet Russian visitors to hit town, raring to splash out with their precious hard currency. 'They were not always the perfect ambassadors; nyekulturny [uncultured], as we say. The guys loved flaunting their wealth: gold Rolexes, gold cuff links, shiny suits that were always too tight.
Most of their women looked like hookers, all hairspray and blue eye shadow, with really tiny skirts.' She occasionally overheard people sneering at these brash newcomers comparing designer labels over boisterous meals in London's top restaurants. 'I felt like telling them, 'Just because a pretty Russian girl is wearing Versace, that doesn't automatically make her a prostitute.'' But she concedes: 'You couldn't help suspecting a lot of this new money came from the Organizatsiya, the big crime rings.'
The same thought had occurred to Scotland Yard, where a small team was already monitoring the steady expansion of Russian gangs into the soft underbelly of western Europe. 'Interpol regularly circulated bulletins about criminals from the ex-USSR,' says one former police intelligence officer. 'Some of the guys were Gulag veterans, covered in jail tattoos, and there were also former KGB people with pretty heavy records.'
There was particular concern about gangsters from Chechnya, whose reputation for violence scared even rival mobsters. In 1991, two notorious Chechen brothers had arrived in London on tourist visas, lugging a suitcase stuffed with $1m. The cash was used to buy a penthouse apartment on Baker Street; they installed a Jacuzzi, sauna, mirrored bedroom ceilings and, neighbours complained, a stable of prostitutes. A year later, the brothers were executed by Armenian hitmen, who stuffed their corpses into a crate. Investigators concluded that the killings were the fallout from an arms deal that went wrong. A Scotland Yard spokesman acknowledged later that there had been 'considerable expansion of Chechen illicit business in London and southeast Britain'.
In his favourite off-duty uniform of blue jeans, denim jacket and scruffy running shoes, Roman Abramovich hardly looked the part of a Russian tycoon - he is reported to be worth ?5 billion - as he watched 'Chelski' training at a stadium in Rome before a vital Champions League match in November. Hunched on a wooden bench, relaxed and unshaven, he could have been any other football fan were it not for the bodyguards hovering nearby, muttering into walkie-talkies. Reputed to be rather shy, he rarely mixes with the players whom he pays out of his own pockets.
As usual, Abramovich had brought a posse of friends and business associates over for the game in his private jet, but although the champagne and vodka were flowing after the club he had paid ?140m for in the summer thrashed Lazio, the 36-year-old billionaire stuck to the soft stuff. And if he appeared preoccupied amid the celebrations on the flight back to London, it was with good cause: in Moscow, a member of the Russian parliament had asked state prosecutors to investigate Abramovich's past business dealings.
It was an open secret that the politician Vladimir Yudin had close links to the Kremlin's siloviki, the so-called 'men of power' who surround President Putin, many, like him, former KGB agents. The Moscow grapevine buzzed with rumours about Abramovich being targeted in a crackdown intended to boost Putin's chances of securing a second term in next month's election.
As opinion polls have repeatedly demonstrated, an overwhelming majority of Russians loathe the 'oligarkhi', who amassed enormous fortunes by snapping up privatised state industries on the cheap following the collapse of the Soviet Union. With millions of Russians now living below the poverty line, reports of the super-rich paying up to ?750,000 for a status-symbol Bentley have fuelled popular pressure to cut the 'robber barons' down to size. The Jewish origins of several of the most prominent, Abramovich included, further sharpened the resentment of a public still riddled with anti-semitism.
The deal that Yudin referred to the prosecutors involved Abramovich's 1992 purchase of Sibneft, a Siberian oil producer, for around ?67m, which landed him assets worth many times more; 'a naked scam' was one financial expert's assessment. Abramovich's mentor in the takeover was another Jewish wheeler-dealer, Boris Berezovsky, who had brought him into 'the Family', a tightknit group surrounding the then Russian president, Boris Yeltsin. Abramovich became known as its 'cashier', allegedly acting as the bagman for conveying funds to Yeltsin's avaricious daughter.
Abramovich must have felt vulnerable: a few weeks earlier, a similar request by Yudin to the prosecutors' office led to the arrest of Russia's richest man, the oil baron Mikhail Khodorkovsky. His giant Yukos corporation had been under investigation for months, with officers of the Federal Service Bureau (successor to the KGB) raiding its offices. In October, armed commandos in ski masks dragged Khodorkovsky from his private jet and frog-marched him onto a flight back to Moscow, during which he was apparently roughed up.
Like Abramovich, the dapper 40-year-old Khodorkovsky had originally filled his pockets by grabbing valuable tracts of Russia's oilfields at knockdown prices. Estimates of his fortune start around ?6.5 billion. Barely a month before his arrest, Yukos bought control of Sibneft through a ?20-billion merger that netted Abramovich more than ?2 billion in cash; 'Roman bought Chelsea with the small change,' joked one Moscow insider.
Held in a filthy cell at the Matrosskaya Tishina prison, Khodorkovsky was charged with tax evasion, fraud, forgery and embezzlement to the tune of some ?600m. He denies the allegations, but despite complaints about his treatment from influential figures whom he has cultivated in the West - Henry Kissinger and Lord Rothschild are associated with his charitable foundation and Lord (David) Owen is his front man in Europe - Putin was unmoved. Asked by journalists about Khodorkovsky's arrest, he observed that Russian citizens 'must obey the law at all times, not just when they've got you by the balls'.
By any measure, Yukos's affairs had merited close scrutiny. Apart from the charges against Khodorkovsky himself, prosecutors are investigating five murders allegedly linked to the company. Violence was a common business tool during the early years of Russia's 'cowboy capitalism', when mobsters would threaten entrepreneurs with mayhem unless they paid up for krysha - literally, a roof, or protection. Around 20 murders occurred during a particularly vicious struggle for control of one aluminium producer.
Among the most sensitive of the investigations involving Yukos is the 1998 murder of Vladimir Petukhov, the mayor of an oil-rich Siberian town where the company's main production centre was located. Petukhov had long been a thorn in Yukos's side, accusing its management of dodging municipal taxes and having connections with the local mafia. He was shot in the head at point-blank range and his bodyguard seriously wounded in what bore all the hallmarks of a contract killing. Not long ago, Khodorkovsky recalled how he had been celebrating his 35th birthday when someone telephoned with news of the killing. 'I asked, 'Is he alive?' 'How could he be?' said the caller. 'A whole glassful of his brains has spilt out.''
Although Khodorkovsky and spokesmen for Yukos deny rumours that the hit was a 'present' from some overzealous minion, the company's head of security has been detained and reportedly interrogated with the aid of mind-altering psychotropic drugs. Yet, for all these allegations, everyone in Russian political and business circles understood that power politics rather than corporate wrongdoing were really behind Khodorkovsky's arrest. Like Abramovich, he had been among the front-rank oligarchs summoned by Putin to a secret meeting a few months after his election in March 2000. An unwritten agreement was hammered out: in return for retaining their dubiously acquired fortunes and being shielded from judicial pursuit, the oligarchs would stay out of politics. 'The president was betting on these guys being more concerned with making money than farting around in the Duma [parliament],' observes one Russian commentator. But within a few months, Berezovsky, widely credited with engineering Putin's rise to power, and a fellow TV mogul, Vladimir Gusinsky, had broken ranks.
Alarmed by the growing concentration of power in the president's hands, they launched media campaigns accusing him of undermining democratic freedoms introduced by Yeltsin.
Putin responded by instructing the hard men of the siloviki to turn the pair's business empires inside out. Before the end of 2000, with all the assets that they'd not already moved out of Russia frozen, Berezovsky and Gusinsky had fled into exile, pursued by arrest warrants alleging tax evasion and systematic fraud. Both succeeded in fighting off extradition requests: in September, the British government granted Berezovsky political asylum, freeing him to resume hostilities with Putin from his luxurious London apartment and a mansion in Surrey's stockbroker belt.
The collision between Khodorkovsky and the Kremlin was inevitable from the moment last spring when he revealed he was funding two opposition parties in the Duma and began dropping broad hints about his own presidential ambitions. He may have felt his wealth and high-level business contacts in the West - British and American financial institutions had invested heavily in Yukos - would protect him. 'If so, Putin called his bluff,' says one observer in Moscow. 'Right now he's looking at a 10-year stretch.'
That does not appear to alarm Khodorkovsky, who has said more than once that he understands why ordinary Russians so detest the oligarchs. 'I don't like them much myself,' he told a British journalist shortly before his arrest, 'though I kind of like the guy I see in the mirror every morning.' In November, just days after Putin's government shook international financial markets by freezing a controlling block of Yukos shares, he announced that although he was quitting as head of the company, 'I don't regret anything I have done'.
Back in London, many in the Russian community worry that this heavyweight contest could provoke wider social conflict, perhaps even a meltdown of the fledgling capitalist economy. You could feel the tension in the streets, says Natasha Chouvaeva, recalling her latest visit to Moscow. 'Friends kept telling me how lucky I was to live in Britain, because Russians are now facing so much crime and corruption that they wake up every morning not knowing what will happen next. More and more people were making plans to move wives and children out of the country.'
Chouvaeva has never regretted leaving her homeland in 1991. With her husband, Eugeni, she founded the London Courier, a Russian-language paper that sells around 15,000 copies a fortnight. 'We were sure that once travel restrictions were lifted, plenty of ambitious people would follow us to Britain.' Now British citizens, the Chouvaevas own a big house in Hertfordshire with a swimming pool. Their daughter, Marie, is heading for a fee-paying secondary school.
Many of the Courier's readers attend the Russian Orthodox Cathedral in Knightsbridge, whose congregations have increased sharply in the past few years. On Sundays, the more prosperous roll up in sleek Mercedes, swapping gossip as incense wafts from the ornate interior.
The new arrivals enjoy showing older worshippers how to kiss the icons. A polite notice requests: 'No stilettos or spike heels, please.'
For up-market estate agents in London and the home counties, any serious trouble in Russia could spark off another boom in business from what the trade privately calls the 'new Arabs'. 'Britain has become a favourite haven for Russians with money, because the mafia can't reach them and the tax man here sends you a letter instead of kicking your door down,' says one Mayfair agent, who keeps a bottle of vodka in the office fridge for clients. 'The people I deal with know exactly what they want, never haggle and have absolutely no need for a mortgage.'
Personal security is almost always a key factor for such buyers. Natasha Chouvaeva sees this as 'the baggage of being rich in a country where violence has become so common'. Apartment buildings must have CCTV and manned front desks: a gadget-packed three-bedroom flat in Berkeley Square that sold for almost ?3m has fingerprint entry access. Abramovich never travels without protection, while heavies guard his home on London's Eaton Square and the country house set in 420 acres of prime real estate in Surrey.
Another priority for Russians settling here is providing their children with the best British education money can buy. Applications to public schools have shot up in recent years, boosted by publicity missions to Russia in which Roedean, Dulwich College, Millfield and several others have participated. The British Airways service between London and Moscow now flies so many Russian children to and from boarding establishments that crews joke about it as 'the school bus run'.
Media accounts of annual fees being settled with wads of cash from the car boot may be apocryphal, but there have been real problems with pupils from Organizatsiya families. 'Some schools experienced mini-mafia infighting between students from certain backgrounds,' said a knowledgeable insider. One in Surrey disciplined a Russian boy for squandering ?1,000 of 'pocket money' over a single weekend. A head teacher in East Anglia asked police to investigate whether two Russian teenagers had been enrolled as part of a larger money-laundering operation.
It is unclear how much dirty money from Russia still flows through London, but records in Moscow show that at least ?4.5 billion left the country between last July and September. On past form, says a veteran financial investigator, plenty of this would be mafia 'flight capital', looking for a safer home abroad. During the late 1990s, he recalls, many City institutions happily recycled such hot money into property in London's 'golden postcode' districts or fronted companies set up in loosely regulated offshore locations; the Pacific island of Vanuatu was briefly popular. According to Whitehall sources, Russians applying to settle in Britain are now subjected to far more stringent background checks than was previously the case. 'I was basically told, you'll be on the next plane home if you ever step out of line over here,' one recent applicant remembers. Boris Berezovsky boasts that 'nobody has ever been checked out as thoroughly as me', though when his Mercedes was stolen last summer, a spokesman warned whoever was responsible about the risk of mistaken identity, claiming that 'Boris lives under constant death threats'.
Forget Berezovsky, he's history, says Aliona Muchinskaya of Red Square: the shady oligarchs and gold-toothed wide boys of the Yeltsin era have given way to a far more worldly and sophisticated breed of Russians. Conspicuous excess is out, she insists. 'In Moscow you expect friends to ask how much a new jacket or bag cost, but over here the trend is towards typically British understatement.' One wealthy banker is said to have considered hanging his Chagall in the lavatory to avoid being thought ostentatious.
So was an outbreak of good taste behind the abrupt cancellation of two heavily publicised concerts in London and Manchester by Muchinskaya's clients Tatu, who trade on their steamy lesbian image? 'I'm sure they would have thrilled the fans,' she says demurely, 'but it was quite impossible for us to accept their management's demand for 300 girls under the age of 16 to back them up wearing school uniforms.'
Surveying the early diners at her London restaurant, Potemkin, Elena Getman explains why she gave up a flourishing career organising Anglo-Russian business conferences to provide a grateful clientele with such back-home fare as borscht, blinis, pickled herrings and Siberian pork dumplings. 'We Russians love to impress other people, especially the British, and I wanted to open a classy place where you could take friends or clients without a drunk falling into your soup. My Russian guests are mostly highly paid professionals, working in finance or the oil and natural-gas business. They know how to behave in public - though that never stops them having a good time.' Potemkin's growing band of regulars think nothing of spending ?100 per head on dinner, Getman observes, 'and most of that goes on vodka'. On special occasions, the Jewel of Russia is passed around at ?280 a bottle.
Getman recalls a 19-year-old Russian who enjoyed standing lavish rounds of drink on his father's credit card. 'Then one day he came in with a distinguished-looking older gentleman, and I was just about to set up the vodkas when he muttered in English, 'Elena, that's my dad, please don't mention the bar bills.''
In December the Russian public's visceral dislike of the oligarchs found full expression in the crushing victory of Putin's party in parliamentary elections. Putin is now considered certain to secure another presidential term.
If that worries Abramovich, he conceals it well as he awaits the prosecutors' decision on whether to charge him. Perhaps Chelsea's fine form sustains him - he reportedly spent ?800,000 to bring some 500 guests to watch them triumph over Manchester United. Or perhaps he has forgotten the response he gave when asked what would be his advice to a thrusting young entrepreneur making his way in Russia today: 'Do not think that you will never go to jail.'
It is still unclear whether Abramovich will eventually face charges in Russia. Despite being the governor of a remote Siberian province, he has always shunned the political limelight, and some observers believe he remains close to Putin. In any case, he has been cashing up in a big way on his holdings in Russia: although the Yukos deal has now fallen through, he pocketed an estimated ?2 billion from selling his stake in the privatised aluminium industry. 'Roman's always singing the praises of Britain as a place to settle, educate the kids, spend more quality time at home,' another insider points out, 'so how surprising would it be if he decides that Russian oligarchs are becoming an endangered species and gets out while he can?'
The future looks less rosy for Khodorkovsky, who has repeatedly been denied bail and, one senior judicial official hints, may have to wait for up to two years before standing trial.
One Kremlin-watcher thinks that Putin may eventually dispatch him into permanent exile. Another disagrees: 'The nation wants the president to start skinning the fat cats.'