Bloomberg News

Russia’s Buffett-Gates Follower Charts a Path to Charity

August 11, 2013

Charity Manager Elena Timchenko

The wife of billionaire Gennady Timchenko says he may eventually participate in the Buffett-Gates initiative, which she says takes the idea of philanthropy to a new level. Photographer: Max Sher/Bloomberg Markets Magazine

In his suite at the Four Seasons hotel in New York shortly before Christmas 2010, Bill Gates, now the world’s richest person, got some advice from the world’s No. 82.

Russian billionaire Vladimir Potanin says he told Gates how the Microsoft Corp. (MSFT:US) co-founder could persuade the wealthiest people on the planet to hand over much of their fortunes to charity under the Giving Pledge program organized by Gates and Warren Buffett, Bloomberg Markets will report in its October issue.

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“I advised him to try and move this initiative from American soil,” Potanin says during an interview in the offices of his Interros Holding Co. across the Moscow River from the Kremlin. “I said, ‘Bill, make it a real international initiative.’”

Potanin is now leading the way in his home country. In February, the 52-year-old nickel magnate became the first Russian billionaire to sign up for the Giving Pledge, promising at least half of his wealth to philanthropic causes. Potanin was worth $12.3 billion as of Aug. 8, according to the Bloomberg Billionaires Index.

Interest in charitable giving is growing among the richest Russians, according to data compiled by Bloomberg from 15 of the wealthiest of the country’s billionaires and from annual reports issued by their companies and charitable foundations.

Profligate Spenders

Many of these Russians prospered on assets they purchased in the post-Soviet era of the 1990s. Some are now seeking to throw off their reputations as profligate spenders more interested in yachts than philanthropy, especially because, as Potanin says, “The gap between the poor and the rich is so huge.”

From Jan. 1, 2010, to Dec. 31, 2012, 15 Russian billionaires who provided documentation to Bloomberg News donated a total of $1.64 billion to philanthropic projects, according to their submissions.

In acquiring data on 15 of Russia’s richest men -- and they are all men -- Bloomberg News submitted surveys to 23 billionaires; eight declined to provide information. The combined worth of the 15 was $155 billion as of Aug. 8, or about 8 percent of the Russian economy. The 15 philanthropists who provided data gave away about 1 percent of their aggregated fortunes during the three-year period.

Russian Largesse

On average, according to their submissions, they donated 40 percent more in 2012 than they did in 2010. Their monetary gifts went to a variety of charitable efforts, including education, sports, culture and health care.

The Russians’ largesse is small compared with the philanthropy of Gates and Buffett. The Bill & Melinda Gates Foundation, which is funded by Gates, his wife and Buffett, gave away almost twice as much money in a single year as all 15 Russians did over three years.

The Gates Foundation gave $3.2 billion in grants in 2011, according to its annual report. Gates and Buffett, the two richest people in the U.S., have a combined net worth of $133.3 billion, or just $21.7 billion less than that of all 15 Russians.

Charitable giving in Russia remains among the least developed in the world, according to the West Malling, England-based Charities Aid Foundation.

In December, a 2012 CAF survey ranked Russia 127th out of 145 countries assessed on the basis of their citizens’ charitable contributions and volunteer work. Russian philanthropy is at least moving in the right direction, says Maria Chertok, head of the CAF’s Moscow office.

‘Radical Change’

“Potanin’s promise puts Russian philanthropy on the world stage,” she says. “It may not lead to a radical change of attitude in Russia, but it will definitely encourage others.” So will planned tax breaks for individuals and corporations, she says.

Russia’s most munificent billionaire is Roman Abramovich. The bulk of his $12.6 billion fortune is derived from his 1996 purchase of a controlling interest in oil company OAO Sibneft, which is now part of state-run natural gas company OAO Gazprom.

During the three-year period examined, Abramovich, 46, owner of the English Premier League’s Chelsea Football Club and the 77th-richest person in the world, donated about $310 million to philanthropic causes ranging from a nationwide program to advance soccer in Russia to the art foundation run by his partner and mother of their two children, Darya Zhukova.

State Assets

Abramovich’s trajectory from post-Soviet businessman to charitable billionaire is in many ways typical of the other 14 in the Bloomberg ranking. With few exceptions, the billionaires acquired some of Russia’s biggest enterprises at bargain prices during Boris Yeltsin’s presidency following the collapse of the Soviet Union in 1991.

Under a loans-for-shares arrangement, as it came to be known, leading Russian businessmen lent the cash-strapped government money in exchange for the right to buy state assets cheaply when Yeltsin’s administration failed to repay the loans. Abramovich purchased his share of Sibneft for $100 million and sold it to Gazprom for almost $10 billion in 2005.

Potanin, the sixth-largest donor among the 15 billionaires, was one of the architects of the loans-for-shares practice.

In 1997, together with Mikhail Prokhorov, his then-business partner, he acquired 38 percent of OAO GMK Norilsk Nickel (GMKN), the world’s largest producer of the metal, for $270 million; his stake, now reduced to 27.9 percent, was worth $6 billion as of Aug. 8.

Two Helipads

Potanin, who gave away $110 million during the survey period, defends loans-for-shares as a salutary mechanism that allowed for the privatization of an economy that was plagued by inefficiencies and was in the grip of the Soviet-era nomenklatura, or elite.

Ever since the stubble-bearded Abramovich bought Chelsea FC a decade ago for 142 million pounds ($217 million), the U.K. tabloids have focused on him less for his philanthropy than for a lifestyle that contrasted starkly with the living standards of the general population in Russia, where the average monthly income is about $900.

Abramovich has residences in London, in Cap d’Antibes on the French Riviera, on the Caribbean island of St. Barts and in Aspen, Colorado. Equipped with two helipads, a minisubmarine and two swimming pools, his yacht Eclipse was until earlier this year the longest in the world.

The wealthiest Russians, including Abramovich, have frequently made civic -- as opposed to charitable -- contributions.

Brooklyn Nets

The superrich, for example, have been called upon by the government of President Vladimir Putin to help build facilities for soccer’s 2018 World Cup and next year’s Winter Olympics in Sochi on the Black Sea. These expenditures, which aren’t so much donations to charity as investments that may or may not pay off, aren’t counted in the Bloomberg ranking.

Russia needs to change the culture of philanthropic giving from a government-led, top-down system to one driven by rich Russians making their own decisions, Irina Prokhorova says. She runs the charitable foundation set up by her brother, Prokhorov, 48, the ninth-largest giver in the survey and an owner of the Brooklyn Nets basketball team.

“It is important to let people of wealth support what they want to support and not what they are obliged to do,” she says. “We know of quite a lot of cases where rich people have to donate money to institutions because they are asked to do it.”

Patriotic Giving

The changes that Prokhorova endorses seem to be under way. During the survey period, Alisher Usmanov, who, with a fortune of $19.9 billion, is Russia’s richest man and the second-largest benefactor, gave away $247 million to institutions such as the Moscow State Institute of International Relations and the capital’s Pushkin Museum of Fine Arts.

Usmanov, 59, is the majority shareholder in OAO Metalloinvest Holding Co., Russia’s largest iron ore producer.

Suleiman Kerimov, 47, the third-largest giver, whose assets include a stake in Polyus Gold International Ltd. (PLZLY:US), says he will plow all profits from companies he owns into his Lucerne, Switzerland-based Suleyman Kerimov Foundation, which has built schools in Russia and funded medical operations for indigent Russians.

Some of the giving is markedly patriotic. Fifth-largest giver Andrey Skoch, 47, a partner of Usmanov’s, donated $117 million; some of the money went into restoring monuments to Russia’s war dead.

Cultural Relics

Potanin gave away $110 million, mainly to educational and cultural institutions, including the State Hermitage Museum in St. Petersburg.

Fourth-ranked Viktor Vekselberg, 56, has spent some of his $14.9 billion fortune to repatriate cultural relics, including 18 pre-revolutionary Russian Orthodox church bells and a collection of bejeweled Faberge eggs. Vekselberg gave away $160 million to support, among other things, a high school basketball championship and the Jewish Museum and Tolerance Center in Moscow.

The charity impulse is spreading to wealthy individuals who made their fortunes more recently than during the spate of post-Soviet privatization.

Gennady Timchenko, 60, a longtime Putin associate who is the 12th-largest giver, acquired much of his wealth through oil trading during the 2000s. During the three years surveyed, he spent $48 million on projects such as free housing for 36 Russian families who had adopted 110 orphaned children.

‘New Level’

Timchenko’s wife, Elena, says he may eventually sign up for the Gates-Buffett pledge. She manages her husband’s philanthropic activities from her 41st-floor office in the Moscow building that houses Gunvor Group Ltd., Timchenko’s oil-trading firm.

“We, of course, are following this initiative closely,” she says, wearing a diamond bracelet. “It takes the idea of philanthropy to a new level.”

Usmanov says he believes it’s better to give the money away now than to pass it along to future generations.

“It may happen that I won’t leave any bequest at all,” says Usmanov, who has no children. “I would prefer to do everything I can to make this world better myself and right now, rather than someone else doing it after me, as I don’t know whether he will do it better than me.”

Potanin, who has a daughter and two sons, shares that view. Looking relaxed in a blue sweater, Potanin says the realization that he could give large sums to charity first came to him about a decade ago, when he saw that his children didn’t need a lot of his money to achieve success.

‘Without Me’

At the time, his daughter, Anastasia, now 29, and son Ivan, 24, started to win medals at home and abroad in a Jet Ski sport called aquabike.

“They became champions,” Potanin says. “I understood they can do something without me.”

Potanin, the son of a high-ranking Soviet trade official, says his heirs may get as little as $10 million each. He says he will transfer the bulk of his wealth to charitable purposes in seven years.

In a February 2010 interview with the Russian newspaper Komsomolskaya Pravda, Anastasia Potanina said she supports her father’s decision.

“My dad brought me up so that I wanted to achieve something myself, to prove to myself and others that I can also do a lot, so that I am not only seen as the daughter of an oligarch,” she said. “My father believes that the society which enabled him to achieve a lot has the right to expect something in return.”

Potanin Scholars

The Vladimir Potanin Foundation dispenses $150-per-month scholarships to 1,200 students a year to help cover living costs at their tuition-free universities. Twice a year, it also donates up to $6,600 apiece for student-run projects that have social, educational or scientific value.

For a few days in July, Sergey Pereverzev and Olga Sabylinskaya, who are enrolled at Belgorod State University near the Ukraine border, joined about 350 scholarship winners from 28 universities across Russia at a summer symposium for Potanin Foundation scholars outside Moscow.

Last winter, Pereverzev, 23, and Sabylinskaya, 21, got $1,200 from the foundation to set up a blood bank at their university. Having signed up 220 blood donors, the pair came to Moscow to brief their colleagues on the project’s progress.

Suspicious Russians

“These schools give an opportunity to meet with clever and interesting people,” Pereverzev, a law student, says. For Sabylinskaya, a journalism student, the get-together was a reminder of what counts in life:

“I understood that my diploma means nothing. Only my ability to think matters.”

Pereverzev and Sabylinskaya say they’re grateful to Potanin. Whether the rest of Russian society will ever come to appreciate his and other billionaires’ generosity remains an open question, Potanin says. Russians are suspicious of the men they see as oligarchs.

“The problem in Russia is that philanthropy is not well perceived by society,” Potanin says. “Many people think that it’s not coming from the heart.”

It’s up to the richest Russians to prove their comrades wrong.

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To contact the reporters on this story: Alex Sazonov in Moscow at asazonov@bloomberg.net; Henry Meyer in Moscow at hmeyer4@bloomberg.net

To contact the editor responsible for this story: Stryker McGuire at smcguire12@bloomberg.net


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