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By John Helmer, Moscow
  @bears_with

On March 15 the British Government announced it is imposing a ban on exports to Russia of “high-end luxury goods”.

According to the official press release, “the measures will cause maximum harm to Putin’s war machine while minimising the impact on UK businesses as G7 leaders unite to unleash a fresh wave of economic sanctions on Moscow. The export ban will come into force shortly and will make sure oligarchs and other members of the elite, who have grown rich under President Putin’s reign and support his illegal invasion, are deprived of access to luxury goods.”

Exactly what counts as “luxury goods” was loosely defined in the government’s statement as “luxury vehicles, high-end fashion and works of art” and “antiques”.

But the regulation issued to enforce the policy is much more comprehensive.  Section 11 of this regulation identifies “pearls, precious and semi-precious stones, articles of pearls, jewellery, gold or silversmith articles”. Section 21 covers “Works of art, collectors’ pieces and antiques”; that’s  the kybosh for oligarch luxury —  the Russia warfighters in London say they believe — to “cause maximum harm to Putin’s war machine”.

The official regulation defines this to cover goods higher in price than £250 (before VAT). They have been listed to include horses, caviar, wrist watches, xylophones, vacuum cleaners, ski boots, saddles, perfumes, and pottery. Russian women buying lingerie, Russian men buying pyjamas, Russian children buying rollerskates, and Russian housekeepers buying toasters have all been hit with “maximum harm”. Russian spies have been banned from buying British-made false beards and wigs.

Compression stockings for varicose veins will be stripped off Russian legs at the airport, and confiscated under the new rule.  Bathing suits, however, if worn instead of underwear, are exempted from the ban.

The impact on London’s fine art auction houses has been immediate. The semi-annual Russia art week sales by Sotheby’s, Christie’s, MacDougall’s, and Bonhams have been cancelled for this month.   Except for MacDougall’s, the houses have also announced closure of their Moscow offices. The measures are reported to be temporary; no one is discussing the work-arounds and the winter auctions scheduled in November-December.

Except for MacDougall’s which specializes in Russian art, the drive to stop sanctioned, as well as unsanctioned  Russians from buying through the London houses is estimated to be costing no more than 1% of their annual global revenues.  “Sotheby’s, Christie’s and Bonhams announced the suspension of Russian sales not long after the invasion of Ukraine,” a European art market analyst comments. “As the Russian market is negligible for these firms,  that was an easy enough decision. I would be loath to predict what might happen with the Russian market. The Russian economy hit rock bottom in 1997 but by 2004 Russia was regarded as a booming mecca by Western dealers and brands.”

For the time being, Sotheby’s and Christie’s are trying to restrict their losses to the Russians. They realize that the US Government targeting manual they are being pressured into following will sooner or later force them into cutting their much more valuable Chinese market. This manual, now two years old, began as an attack by staff of the US Senate investigations subcommittee on the Rotenberg family.    But the sums traced to art purchasing by the Rotenbergs were small – $18 million worth of paintings out of $211 million worth of cash movements – 8.5%. The Senate staff also discovered the Rotenbergs had paid one of their agents and art buyers fees of $1.12 million; that’s just 6.2%. For the archive on where the money comes from in the Rotenberg businesses – unresearched by the Senate staff — read this.  

Source: https://www.hsgac.senate.gov/

Not a single art work identified in the US report was a Russian one.  But now there is a drive by the warfighters in London to do much more “maximum harm to Putin’s war machine”.  Their proposal is for the British and European Union governments to confiscate all Russian art on display in public museums – not only works owned and loaned by Russians on the sanctions lists, but also works owned by Russian state museums and galleries.

“A few days ago,” the Financial Times arts editor wrote,  “the fabulous Morozov collection, some 200 Impressionist and modern masterpieces which were lent from a number of Russian museums to the Fondation Louis Vuitton in Paris for a spectacular show, arrived back in Russia. A disgrace, in the view of one of my colleagues — this is clearly morally wrong; they should have been held. No, no, say I — these works are in public collections in Moscow and St Petersburg and to hold them would only be to punish the ordinary people of Russia. The west’s policy is to punish them, cries my colleague. It’s war. And their leaders are punishing them already — maybe eventually they’ll do something about it.”  

One British state institution has already acted.  “The V&A [Victoria & Albert Museum] in London is also in difficulties over treasures in its recent wonderful exhibition of Fabergé eggs, which ended some weeks ago. Some of the Fabergé objects were lent by the Moscow Kremlin Museums, and have been returned. But one of the jewelled eggs was bought in 2004 by the now sanctioned oil and gas mogul Viktor Vekselberg, who later passed its ownership to a company registered in Panama, Lamesa Arts Inc.; it is usually housed in his private Fabergé Museum in the glorious Shuvalov Palace in St Petersburg, which is open to the public. The same collection also lent the V&A a gold and enamel box, and both have been retained in Britain.”

For the V&A action, read this.  For the story of how the London bank Cynergy has used the US sanctions and the High Court to evade repaying its £34 million debt to Vekselberg, read more.  

“You see how perfidious Albion is”, a Moscow art market source commented. “This isn’t Nazi book-burning – nothing as primitive as that.  It took the Germans five years after the book-burnings to start the theft of Jewish assets.  The British have already reached that point.” Click for background.   

Source: https://www.ft.com/ 

A leading London art dealer warns that if confiscation of art becomes British policy, it will be the end of London for art from any source — Russian, Chinese, Persian, Arab, Turkish.  “Any such move would be a death sentence for lending art for art exhibitions, and not just from Russia, which is why it hasn’t happened yet.  The death sentence for the London Russian art market, if anything, is sanctions affecting sales to and by private individuals who happen to live in the ‘wrong’ countries.”

Russian classical music, ballet,  and opera, as well as their performers and conductors, are also being banned in the UK,   Germany,   Spain, The Netherlands,  and the US.   In Italy, exceptionally, there has been a counter-reaction.

Source: https://twitter.com/

The impact on Russian art in Russia has also been to make works more affordable for a potentially larger domestic audience. The ARTIMX index of Russian art prices, compiled and published regularly by Artinvestment.ru in Moscow, reveals that since 2014 there has been a steady decline in prices. A recovery began in 2020 and continued through last year. This year, however, the chart lines all turn downwards.  

THE ARTIMX INDEX OF RUSSIAN ART PRICES, 2001-2022

KEY: red=all works; blue=paintings; black=graphics.
Source: https://artinvestment.ru/ For the last London and Moscow art market report for June 2021 read this.

A detailed art market analysis published by Maria Onuchina for Art Investment at the end of January was optimistic.    “In 2021, both the domestic and international Russian art markets have almost returned to the indicators of the pre-pandemic year 2019. The Russian art market in 2021 reached a turnover of $11.65 million; in 2019 it was $ 11.8 million; and at foreign auctions Russian art brought in a little more than $350 million — in 2019, $409 million.  The market players have adapted to the new business environment — more and more expensive lots are being sold and bought online. At the same time, London’s Russia Week auctions where everything that is most expensive and carefully selected is usually on offer, have almost completely restored the usual schedule of face-to-face auctions in early June and in late November-early December. So those who wanted to buy lots in person and the rest were offered several options for remote participation.”

Source: https://artinvestment.ru/

Source: https://artinvestment.ru/

In 2021, Onuchina reports, there were three more auction houses selling Russian fine art, and together they held 190 auctions over the year — 17% more than in 2020. “At the same time, market players paid more attention to the quality of the proposed works than to their quantity. The total number of lots put up decreased by 22% compared to 2020 and by 34% compared to 2019. The share of lots sold also decreased — from 57% in 2020 to 51% in 2021. However, as a result, there is a more attentive approach to the selection of lots by the art sellers. This greater selectivity of buyers not only increased the total turnover of the Russian art market, but also raised the average price of lots sold by 71% — from $1,070 to $1,830.  According to this indicator, 2021 surpassed even 2019 when the average price of the lots sold was $1,160.”

In 2021, Art Investment (AI) became the leader of the domestic art dealers in terms of sales: its share in the total turnover of the Russian art market reached 38%. The Vladey auction house took second place. Together, the two generate 59% of the turnover of the registered dealers in the public market; they sold 15% of the total number of works on auction in the market last year.

Website: https://auction.artinvestment.ru/ 

Website: https://vladey.net/en/auctions

What will happen to the large volume and value of Russian art sold in London until now? Will these works move into the Moscow market instead, and Russian demand find a way around the British sanctions? According to a leading dealer, “I’ve just returned from Moscow, and I can confirm the market is alive and kicking.” A Geneva market analyst adds:  “as always, what matters is the vendors. There are always buyers.”

British warfighters aren’t daunted. They regard every Russian transaction, including the buying and selling of Russian art, to be a criminal enterprise. According to a report by Private Eye in April, “as the financial squeeze tightens, parts of the art world look set to provide the usual relief. Its wares make the perfect asset for hiding wealth from sanctions enforcers and bank compliance officers, especially when parked in freeports of the kind the UK government thinks such a great idea.”**

In Moscow Konstantin Babulin (right), the former head of ArtInvestment.ru and now general director of ArtSale.Info, says the closure of the London auctions is affecting the domestic market in stages.  “The cancellation of the Russian auctions by Christie’s and Sotheby’s, as well as the enormous difficulties in importing paintings to Russia from abroad, did not have the significant impact on the domestic market that was predicted.  For now, that’s for sure. Yes, the import of Russian paintings from foreign auctions has been the main channel for filling up the domestic market for many years. And even after Russian buyers had already paid for paintings abroad, it was assumed this business was over. However, this is not the case. Amateurs and ‘weekend dealers’ are likely to fall away sharply, and refrain from shopping abroad for a long time. But the professional participants have already rebuilt logistics in three months; somehow they manage to import works of art. So there is no need to fear a shortage of Russian paintings.”

Left, website for ArtSale.Info --  https://artsale.info/ru ; right, Konstantin Babulin.

“To understand how much it hurts, you need to remember the Covid but otherwise peaceful year of 2021: then prices for high-quality paintings increased by about 50%, and for individual artists  by 150%. And now, after twelve months of a price rally, the drop in prices in rubles for the period, March through May 2022,  has amounted to about 30% to 40%. That’s to say, a picture on offer of strong investment quality, which until February 24, 2022 was sold in the region of Rb1,500,000  now finds its buyer for Rb900,000 rubles. That’s for now. After all, the initial phase of inertia is coming to end right now. And so far we are only beginning to move into the next phase of adaptation – without giving thought to a future phase of depression in the market.”

“Since the beginning of the February crisis we have seen an unexpected jump in the quality of the offer. As if on command, masterpiece after masterpiece began to arrive at public auction. Why would one do that? According to science it should have been the opposite. Speaking hypothetically, it is possible to assume it’s a coincidence — the long-planned sale of several important collections have run into the crisis simply by chance. There is some evidence of that. For example, in April-May the market received a batch of outstanding paintings from the famous collection of unofficial art by Alberto Sandretti.  If they had gone on sale two months earlier, they would have been sold out one and a half times more expensively.”

“But coincidence of timing between the unexpected crisis and the planned sale of collections is only one of the possible explanations. A second explanation is much more likely. We know for sure that some art owners regarded the new crisis not just as a deep one, but as transformative.  In consequence many suspended their habit of waiting for better times. It became clear that they should not delay — if there were plans to sell, then it was necessary to sell. On top of everything, a noticeable number of collectors in March decided to go to warmer climes urgently and for a long time. These people needed to make deals as quickly as possible. And the fastest way to sell is to put it up for auction. It turned out that our auction and other regular ones have attracted some works from private dealers and from galleries where more time should have been spent for sale. This increased pace of activity at the public auctions was quite striking.”

Watch the most recent weekly ArtSale.Info auction on June 15, as Babulin presents a painting by Alexei Bazanov.   

“Summer is going along; people are bringing paintings to sell; business continues…No news is good news in the present situation”.   

“In terms of prices and liquidity, the market of expensive, investment-class paintings with a price of 3,000,000 rubles [$52,700] suffered the least. This, by the way, is a sure sign of all the previous crises — in difficult times masterpieces suffer the least.  The main activity of collectors is concentrated in this segment. This does not mean the prices here are nothing. But compared to the economy segment, where you need to prepare for a stop in sales and a drop in prices, masterpieces are a safe haven.”

“The market of paintings at the low and average price levels has suffered the most, but that’s to be expected.  In difficult times the first thing people do is to stop emotional purchases. They completely stop buying little-known artists and suspend the principle of ‘I like it, I buy it’. And so it has happened this time round.  Paintings priced up to 150,000 rubles [$2,700] have begun to sell three to five times worse than before.”

“By the start of the summer the market has moved to the new phase of adaptation. And what is typical for this? Some of the buyers have temporarily dropped out of the process. It is clear —  they are solving problems with ‘relocation’, transferring accounts to other jurisdictions, acquiring new businesses which have fallen in value and saving old ones, as well as resolving hundreds of minor problems that have dropped from the sky. There is no doubt these buyers will return. But during their brief absence competition for the top lots has decreased, and the remaining collectors have been able to make decisions without undue pressure from competitors — prudently, pointwise, profitably. Sometimes they have even begun to move to hard bargaining, which was not the practice in the masterpiece segment quite recently.”

“It has long been noticed that the success of the art market is never equal to the achievements of the economy as a whole. For example, it may be bad in the economy, but in the art market there is plenty of momentum. The fact is that the art market in Russia relies on an extremely small club of wealthy collectors from big business. Of the regular, noteworthy customers — those who make ten to twenty large purchases a year — there are only three hundred.  Of these, fifty people make the main sailing at the moment at all. That is, the well-being of the entire small Russian art market depends on their buying activity, mood, risk appetite, and the current situation in their businesses. And taking into consideration how these people are able to mobilize in crises, we look at the future moderately positively.”

Dmitry Khankin, co-founder of the 16-year Triumph Gallery in Moscow, is also optimistic. “In Russia in difficult times of crisis, when all masks are stripped off and conventions are rejected, a wonderful, strong, dashing, and very attractive art is born. I hope for it —   and I don’t want to miss it.”

Left, Triumph Gallery on Ilyinka, in the old city.  Right, Dmitry Khankin.

[*]  Lead images, left to right: Zinaida Serebriakova’s “Nude” (1910),  sold by Christie’s for  £682,500; Saskiah Playsuit sold by Agent Provocateur, Grosvenor Street, for sale at  £1,250;  Slickwillies rollerskates, price £299.99.

[**] Private Eye claims to be the leading investigative publication in the UK; it has been one of the strongest advocates of war against Russia in the British media, keener on some issues than the Murdoch media. In the April report, the always anonymous Eye reporter claimed “the one industry that may have gained proportionately more from the oligarchs than any other – the art trade – is stubbornly staying put.” The line that the art trade  proportionately better out of the Russian oligarchs sounds, not only investigative journalism but also mathematically precise. Unless you are Private Eye’s anonymous mathematician. Although the US Senate staff report was cited in substantiation, the evidence that the Rotenberg art dealings were disproportionately small was ignored.

Disproportionality has proved much more lucrative for Private Eye. In 2013, before the US putsch in Kiev started the Ukrainian civil war and the war against Russia, the readership of the fortnightly magazine was dropping. At the end of 2012, the audited reader total was down to 222, 880; the Eye’s readers were disappearing proportionately faster than its British media rivals.   By 2019 the Eye was still dropping in audited sales and circulation, but proportionately less than its rivals in the market.  By the end of 2021, however, the reader number was up to 237,754 – an increase of 7% on the pre-war level, and up 1% on the year before.   The Eye was also increasing its audience advantage over The Economist, whose appeal has been dwindling fast in the UK (while keeping its US readers).  

In other words, compared to its competition in the British media market, Private Eye has been doing proportionately better out of the oligarchs and Russia hating than anyone else in the media industry. So much better in fact that it has delayed filing its financial statements for the year,  concealing thereby its revenues and profits, and also the financial operations of its control shareholder, the audit-exempt Private Eye Trust.   



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