Engineer, Billionaire and
Governor of Chukotka Region
Meet The Second Richest Man In Russia
Who is Roman Abramovich? And what's he up to in Chukotka, a desolate province in Russia's far north?
Amguema is a sorry sight. A village of 600 native Chukchi people in Russia's far north, some 100 km above the Arctic Circle, it looks like a handful of undersized building blocks tossed across the featureless tundra. Most people in Amguema herd reindeer for a living, most houses do not have hot water or indoor plumbing, and until very recently the electricity supply has been sporadic at best. Other than vodka, radio is the only source of entertainment. But amid the desolation, several dozen brand- new two-bedroom wooden houses are now under construction, complete with hot and cold running water, a bathtub and even an indoor toilet. How did they get here?
Thank Roman Abramovich, the 36-year-old Governor of Chukotka, the Russian province just across the Bering Strait from Alaska in which Amguema lies. Olga Kymytyul certainly does. The middle-aged nurse nearly weeps as she bows to the Governor during a recent visit. "Thank you for everything you have done for us," she gushes. Abramovich, a tall, slightly stooped man with a short, carefully trimmed beard, accepts her thanks with a peculiar mix of bashfulness and indifference. He flashes a shy smile, but seems to be looking through the woman rather than at her.
What Abramovich has done for Amguema over the past three years is remarkable. He has paid for the construction of 46 new homes, at $50,000 a piece; he has financed the village's first-ever guesthouse and public bath-barbershop; he has overhauled the district's only boarding school; and he has spent an additional $200 to $300 million of his own money - "I can't really tell how much exactly," he shrugs; "I wouldn't know myself" - all across Chukotka to build everything from hotels to cinemas to supermarkets. He has even made sure the salaries of public sector workers are paid on time. "It's a revolution!" enthuses Alexander Maximov, a local Amguema official.
So who is Roman Abramovich, and why is he throwing so much money at a frozen province of just 73,000 souls? He is "probably the most politically influential" of Russia's new tycoons, says Anatoli Chubais, former chief of staff to President Boris Yeltsin and now CEO of RAO UES, Russia's electricity monopoly. Not content to be hugely rich but largely unknown outside Russia's political and business elite, Abramovich decided to become a public figure by adopting Chukotka as his personal project. Critics say he wants to control the region's natural resources, or perhaps use Chukotka as a springboard to a political career in Moscow. But Abramovich offers a simpler explanation: "It's a new endeavour for me. I've never run a territory. I've never talked publicly to people. I've got to try it just to see whether I like it."
Saratov on the Volga River in southern Russia, Abramovich lost his mother to illness when he was 18 months old and his father to a construction accident when he was not yet four. Adopted by his father's brother, Abram, he first lived with his uncle's family in Moscow, then spent most of his adolescence in the northern region of Komi with his maternal grandparents. Abramovich attended the Industrial Institute in the city of Ukhta in Komi, but his education was interrupted when he was drafted into the Soviet army.
Abramovich's big break
came in 1992 when Boris Berezovsky, then the most powerful of the moguls,
befriended the promising young man and brought him into the Yeltsin coterie.
Nine years later, when Berezovsky fell out of favour with the new Putin regime,
Abramovich took over his erstwhile patron's assets in the oil industry. Now
Abramovich controls more than 80% of Sibneft, the fifth-largest Russian oil
giant; 50% of Rusal, the Russian aluminum monopoly; and 26% of Aeroflot, Russia's
national airline, among other holdings, through Millhouse Capital, registered
in Britain. Earlier this year, Forbes magazine listed Abramovich as the second-richest
man in Russia, worth about $3 billion.
"Abramovich is the real financial genius of the bandit-capitalism epoch," says Mikhail Krutikhin, an oil and gas analyst with RusEnergy.
Abramovich clearly knows something about capitalism. He's now fighting to acquire a controlling influence in TVS Television, one of four national channels in Russia and one of the few broadcasters that still dares deviate from the government line. The Kremlin is keen to snap up the station as part of its effort to control the media. Abramovich also looks set to extend his holdings in the oil industry. Sibneft is now poised to bid in the upcoming privatization of Slavneft, one of the two oil companies that are still state-controlled. The Slavneft privatization, scheduled for next month at a starting price of $1.7 billion, will be the largest in Russian history, with some 5% of the country's oil production at stake.
With so many businesses to look after, Abramovich could easily remain at his 42-hectare country estate near Moscow with his wife and four children. Instead, he spends several days a month shivering in desolate Chukotka. His foray into Chukotka may be part of a pattern of top oligarchs taking control of Russia's territories. Regional Governors wield enormous power both locally and nationally, and they control the exploitation of their territory's natural resources. In January Khazret Sovmen, a key player in the goldmining industry, became President of the Republic of Adygea in the Russian North Caucasus; and in September Alexander Khloponin, owner of the Norilsk Nickel company, gave up his position as Governor of Taimyr to become Governor of the Krasnoyarsk Kray region, the industrial powerhouse of Siberia.
Abramovich seems to be enjoying politics so far, and he may actually be good at it. When he arrived in 1999 as Chukotka's Deputy to the State Duma, the province's mining industry had collapsed, unemployment was rampant, and fuel and food supplies were scarce. The Moscow rumour mill attributed his sudden interest in politics to a Russian law that shields Duma members from criminal prosecution. But his interest didn't wane even when a similar law, shielding regional Governors, was rescinded in 2000 just as Abramovich was campaigning in Chukotka. Simply by moving to the province, he added some $30 million in tax revenues to Chukotka's meager budget of $65 million. Then he started doling out cash: he footed the bill to send 8,500 children from Chukotka to the Black Sea for a holiday; he brought urgent supplies of sugar, rice and butter to starving families in native Chukchi villages; he partially financed holidays for Chukotka residents in mainland Russia. But when Abramovich realised that more of his money ended up lining the pockets of local officials than was acceptable even by Russian standards, his aides say, he decided to run for Governor.
In December 2000, Abramovich won 92% of the popular vote as his main rival, then Governor and former Soviet-era boss of Chukotka Alexander Nazarov, withdrew one week before election day. The other two candidates couldn't compete with all the benefits Abramovich was offering. As important as the food, fuel and free vacations was the hope residents of Chukotka had that some of his entrepreneurial flair would rub off on them. Once elected, Abramovich nominated Nazarov Senator from Chukotka to the Federation Council (the Russian parliament's upper house), thus giving credence to the theory that they had cut a deal.
When he became Governor,
Abramovich brought in about 80 aides from Sibneft to run Chukotka. These bright
young things toil in Anadyr for three weeks a month, then spend a week back
home in Moscow. They have proved capable administrators, but aren't quite
sure what they're doing here.
"I never told them what the master plan is," Abramovich admits. "They are just following the leader." They may not follow much longer. According to one aide, dejection is replacing the team's original gung-ho spirit because "we don't see the end purpose of all this." They do not know how long Abramovich plans to stay on as Governor, or whether he'll continue to foot the bill for Chukotka when he decides to move on.
There is also tension between
Abramovich's crew and the locals. "All these barber shops, cinemas and
restaurants, we do just for ourselves," says one aide. "The locals
simply do not need it; it's not their way of life." Longtime residents
are put off by what they perceive as arrogance. "I was so encouraged
when they moved in and started doing things," says Galina Lenskaya, 50,
"I wanted so much to be a part of this new effort. But they turned me down, because they don't want any of us. We're grateful for the good things they're bringing, but we feel brushed off."
There are signs that Abramovich
may be contemplating such a career. Twice in recent months Sibneft has clashed
with Yuri Luzhkov, the city's current mayor, over control of the Moscow oil
refinery. On both occasions, when municipal authorities refused to recognize
Sibneft's right to the refinery, Sibneft cut its supplies of crude - leaving
the Russian capital close to paralysis.
Each time, Abramovich resolved the conflict through personal talks with Luzhkov. Given Abramovich's close links with the Putin government - and Putin's distaste for Luzhkov - a move to Moscow seems logical. But Abramovich is reticent about his political ambitions and influence, insisting that he just has "friends among the people who have been or are in the Kremlin."
On his last night in Anadyr before returning to Moscow, Abramovich attended a concert by Mashina Vremeni, a popular band he had brought by charter plane all the way from Moscow to perform at an indoor skating rink he paid to build. Tapping his feet to the rhythm, the Governor sang along with the lyrics to one tune about a puppeteer who controls his "so-human-like dolls." Given Abramovich's wealth and influence - not to mention his evasiveness about his plans - one can't help wondering what strings he'll be pulling in years to come.