Economy Brings Down Russian Oligarchs

Russia's once-mighty oligarchs have been brought low by the global financial crisis. How low? They're begging the Kremlin for loans

By Matthias Schepp

Judging by the furnishings, you would never guess that this office is where plans were made to launch Russia's economy into the modern age. The room is dominated by heavy furniture made of dark wood. Antique books are displayed in glass bookcases. Working from this office, Vladimir Yevtushenkov, intends to reduce his huge country's dependence on raw materials exports. To achieve this objective, his subsidiary Sitronics (SITR.RTS) has built a cutting-edge semiconductor production plant on the outskirts of Moscow.

"That's the last thing that I would give up," says Yevtushenkov. He doesn't want his company to become an ominous symbol of the downturn in Russia's economy. After 10 euphoric years and a recent growth rate of 7 percent, the world's largest country is now in danger of economic collapse.

Yevtushenkov has just reshuffled his Sitronics debts and secured a €182 million ($248 million) loan for his showpiece company from the state development bank Vnesheconombank. The oligarch will use this money to service debts at Germany's Dresdner Bank. But right now that is the least of his problems.

A recent conference call had three times as many investors on the line as was normally the case before the financial crisis. And all of them were anxious, because Yevtushenkov's holding company Sistema (AFKS.RTS), which includes a colorful hodgepodge of companies ranging from construction and telecommunications firms to children's fashions, is over €7 billion in debt.

Yevtushenkov is a member of a class of super-rich who are coming under pressure, and whose wealth has regularly made headlines at home and abroad. Their international reputation stems partly from their many spectacular takeover plans—and Yevtushenkov is a man who has always done his best to come up with high-profile deals. Only two years ago, he tried to buy a major stake in German telecommunications giant Deutsche Telekom (DT).

When it comes to throwing money around, the oligarchs have always had a knack for raising eyebrows. For instance, banker and art collector Pyotr Aven equipped his villa in England with a nuclear bunker. In late 2006, financial high-flyer Suleyman Kerimov, who was reportedly interested in a stake in Deutsche Bank (DB), totaled his astronomically expensive Ferrari Enzo in a crash in Nice. The passenger was a beautiful Moscow female TV presenter—who happened to be married to somebody else.

Finally, there is Roman Abramovich, who has been competing with Arabian princes to see who can build the longest yacht in the world. He has invested the incredible sum of €600 million in the English football club Chelsea—enough cash to purchase the German retail giant Arcandor (AROG.DE).